To perceive the possibilities that the US will succeed, MIT Technology Review spoke to Shawn Qu. As the founder and chairman of Canadian Solar, one of many largest and longest-standing photo voltaic manufacturing corporations on this planet, Qu has noticed cycle after cycle of adjusting demand for photo voltaic panels during the last 28 years.
CANADIAN SOLAR
After many years of principally manufacturing in Asia, Canadian Solar is pivoting again to the US as a result of it sees an actual probability for a photo voltaic business revival, principally due to the Inflation Reduction Act (IRA) handed in 2022. The incentives offered within the invoice are simply sufficient to offset the upper manufacturing prices within the US, Qu says. He believes that US photo voltaic manufacturing capability may develop considerably in two to a few years, if the commercial coverage seems to be steady sufficient to maintain bringing corporations in.
How tariffs pressured manufacturing capability to maneuver out of China
There are a number of essential steps to creating a photo voltaic panel. First silicon is purified; then the ensuing polysilicon is formed and sliced into wafers. Wafers are handled with methods like etching and coating to grow to be photo voltaic cells, and ultimately these cells are related and assembled into photo voltaic modules.
For the previous decade, China has dominated nearly all of those steps, for a number of causes: low labor prices, ample provide of proficient staff, and quick access to the mandatory uncooked supplies. All these elements make made-in-China photo voltaic modules extraordinarily price-competitive. By the tip of 2024, a US-made photo voltaic panel will nonetheless price nearly thrice as a lot as one produced in China, in keeping with researchers at BloombergNEF.
The query for the US, then, is how you can compete. One device the federal government has used since 2012 is tariffs. If a photo voltaic module containing cells made in China is imported to the US, it’s topic to as a lot as a 250% tariff. To keep away from these tariffs, many corporations, together with Canadian Solar, have moved photo voltaic cell manufacturing and the downstream provide chain to Southeast Asia. Labor prices and the provision of labor forces are “the number one reason” for that transfer, Qu says.
When Canadian Solar was based in 2001, it made all its photo voltaic merchandise in China. By early 2023, the corporate had factories in 4 international locations: China, Thailand, Vietnam, and Canada. (Qu says it used to fabricate in Brazil and Taiwan too, however later scaled again manufacturing in response to contracting native demand.)
But that equilibrium is altering once more as additional tariffs imposed by the US authorities goal to drive provide chains to maneuver out of China. Starting in June 2024, corporations importing silicon wafers from China to make cells exterior the nation may also be topic to tariffs. The most definitely answer for photo voltaic corporations can be to “set up wafer capacity or set up partnerships with wafer makers in Southeast Asia,” says Jenny Chase, the lead photo voltaic analyst at BloombergNEF.
Qu says he’s assured the corporate will meet the brand new necessities for tariff exemption after June. “They gave the industry about two years to adapt, so I believe most of the companies, at least the tier-one companies, will be able to adapt,” he says.