paulamspv: Recent Episodes
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Reshoring The US and India have implemented incentives to encourage domestic solar manufacturing. The EU and European countries have less defined plans but well-defined intentions for domestic solar manufacturing. With all the hoped for new solar manufacturing capacity in Europe, India, and the US, most seem to have forgotten that China makes most of the […]
Responding to pressure from solar developers, on June 6, President Biden used his executive order powers to pause the Commerce investigation into Southeast Asian suppliers for 24 months and evoked the Defense Production Act to spur domestic manufacturing. Both FERC and the North American Electric Reliability Corporation recently warned of likely unreliability in electricity supply. […]
In a move that could affect multi-gigawatts of residential, commercial, and utility-scale installations in 2022, in March, the US Commerce Department announced that Auxin had presented sufficient evidence for an investigation into transshipments from China through Southeast Asia. The order is region-wide and not manufacturer-specific; for example, Hanwha Q-Cells, a South Korean manufacturer with cell […]
China’s photovoltaic manufacturing sector dominates global PV manufacturing. It is well past time to stop disputing the reality and for other governments to consider the opportunity cost of not following suit by supporting domestic manufacturing with incentives and subsidies. Aiko Solar recently announced that it had received RMB 300-Billion from the government for expansion purposes, […]
In February, the solar industry took another step closer to having one supplier (China) when LG announced it would exit solar manufacturing by mid-year. The company will reportedly attempt to find work within the corporation for approximately 900 employees worldwide or offer severance packages. Citing higher prices for materials and shipping, supply chain difficulties due […]
How cheap will modules be this year? For years the solar industry was used to rapidly falling module prices – no way would price ever increase. Nope. Buyer business models evolved around the expectation that there was always a lower price right around the corner. Design a system for one manufacturer’s modules, find a lower […]
Expect prices to stay high through at least the first half of 2022 as the supply chain continues working itself out AND Expect prices to drop for all markets sometime during the second half of the year as the industry as supply chains recover and overcapacity asserts – except for US buyers as the Senate […]
The CPUC is set to vote NEM 3.0 into law, changing the math for prospective residential solar customers. Commissioners will hold a hearing on December 20 and vote in January 2022. Once NEM 3.0 is adopted, the commission will choose a date to sunset NEM 2.0 and transition solar system owners to NEM 3.0. Currently, […]
Shipment Progress 1997, 2004, 2009, 2020 1997 was the first year shipments topped 100 MWp and manufacturers looked to 100-MWp of capacity to provide economies of scale In 2004, the industry topped 1-GWp in shipments and manufacturers pointed to 1-GWp of capacity as the economies of scale benchmark In the mid-2000s, manufacturers in Taiwan and […]
1997 was the first year that global shipments broke the 100-MWp mark, and the US had a 42% share. After breaking the 100-MWp mark, manufacturers began pointing to the economies of scale that 100-MWp manufacturing capacity would bring. Back in the day, US solar cell and module manufacturing was primarily supported by oil or energy […]
In 2021 a combination of disruptions in coal production, higher-priced imports of coal, and low availability of hydroelectric due to drought have led the country’s generators to ration electricity and to impose blackouts to preserve the grid. Two-thirds of China’s electricity comes from coal, the rest from a combination of natural gas and renewables. China […]
The simplest way to describe pilot-scale production is as an experiment, the point of which is to replicate a result and establish a consistent average.
Assumptions based on little data do not count. Until it is proven by methodically repeating the experiment, the guess remains a guess.
Traditionally, pilot-scale production has taken ten, shrinking to five years, to produce commercial technology. However, with accelerating demand, particularly for multi-megawatt installations, the timeline for establishing repeatability and assessing reliability has decreased, and reliance on rapid tests and the assumptions based on them has increased. Meanwhile, compressed margins have pushed manufacturers to streamline quality control measures, assuming rapid tests would pick up the slack.
Outsourcing, always a factor in the PV industry, has compounded problems, as module buyers cannot be sure whose cells are inside the module, no matter the brand, or, in some cases, know what manufacturer assembled the cells into the module.
As the time from pilot scale to commercial production has shortened, quality in the field has decreased, and failures have increased.
Pilot-scale production is a process undertaken to find a cell or module technology’s average performance in terms of reliability and efficiency. The process involves repeated testing to arrive at a stable average. As indicated earlier, pilot production takes two to five years for new technologies. New manufacturing facilities, even module assemblers, require a period of pilot-scale production. The addition of new equipment in an already functioning facility involves a period of pilot scale. Pilot-scale production includes tuning equipment and adjusting flow rates, adjusting consumable formulas (adhesives, for example),
For example, research and development into SunPower’s crystalline IBC (Interdigitated Back Contact) crystalline cell began in the 1970s at Stanford University. In 1975 research was published on IBC cells. In 1987 Ron Sinton of Sinton Instruments, winner of the 2014 Cherry Award, and a team at Stanford developed a 3 mm x 5 mm IBC cell with 28.3% conversion efficiency. This cell, which could not be soldered and was not stable, was a research step on the long innovative timeline from idea through commercialization.
During the early 2000s, US-based Applied Materials and Switzerland-based Oerlikon used their experience in manufacturing and flat-screen television production to develop multijunction, thin-film silicon-based solar panels (micromorph) manufacturing lines. Both companies assumed that turnkey manufacturing would shorten the time from pilot scale to commercial production. Neither company succeeded, and both abandoned their efforts.
Pilot-scale production is expensive and as margins have shrunk, so have pilot-scale timelines.
Pilot-scale production remains crucial to the future of the photovoltaic industry. Shortening the process and using engineering models and testing to estimate reliability and conversion efficiency leaves open the likelihood of poor quality modules and failures in the field.
In August, an anonymous coalition, American Solar Manufacturers Against Chinese Circumvention or A-SMACC, filed a petition asking for an investigation into manufacturers accused of avoiding antidumping and countervailing duties against China via expansions into Southeast Asia. The companies named in the petition are Jinko Solar (Malaysia and Vietnam), LONGi (Malaysia and Vietnam), JA Solar (Malaysia), Canadian Solar (Thailand and Vietnam), Trina Solar (Thailand and Vietnam), Talesun (Thailand), Astroenrgy (Thailand), Sunergy (Vietnam), Boviet Solar (Vietnam), and GCL (Vietnam). Wiley, a DC-based law firm, filed the petition. A-SMACC released the following statement:
“For too long, obvious circumvention of antidumping and countervailing duties on Chinese solar products has hobbled the US industry, eviscerated our supply chains, and put our clean energy future at risk. It is time for America to lead in this critical sector.
While Chinese companies now almost exclusively export to the United States from Southeast Asia, the vast majority of manufacturing, research and development, and capital investment remain in China. In cases like this, the law is clear; the duties on Chinese solar products should be extended to circumventing entities.”
SEIA, the US solar industry’s lobbying organization, responded by stating that the proposed tariffs and resulting price increases would devastate US solar industry demand causing developers to pause plans and manufacturers in Southeast Asia to cease importing products.
On Thursday, September 30, the US Commerce Department will consider whether to investigate or dismiss the petition. At that point, the members of A-SMACC may be made public.
Who is behind A-SMACC? The question solar industry participants should be asking is – who has something to gain from the petition? The US has no crystalline cell manufacturing. First Solar (CdTe) is the country’s only major cell manufacturer. The US has ~6-GWp of module assemble capacity available for crystalline cells and imports cells primarily from Southeast Asia and South Korea.
If First Solar and module assemblers buying from South Korea (primarily Hanwha Q-Cells and LG) are behind the petition, there is no good reason they should keep this a secret – other than avoiding an unflattering spotlight and many questions concerning their agenda.
There is always an agenda behind actions such as the one before Commerce. When (if) the petitions are made public, their agenda will be clear.
Are China’s manufacturers shipping through Southeast Asia to avoid tariffs? A-SMACC claims that manufacturers in China are using Southeast Asia as a passthrough to avoid tariffs — meaning that some value is added to the product before shipping it to its destination as a new product.
Manufacturers in Southeast Asia have 19%, 57.3-GWp, of global capacity to produce cells and 23%, or 82.3-GWp, of global capacity to produce modules. The manufacturers named in the petition have 39.6-GWp of cell capacity in Southeast Asia, leaving other manufacturers with 17.7-GWp of cell capacity in the region.
Manufacturers expand to other countries for a variety of reasons. The most important reason for expansion off-shore is cost – lower manufacturing costs. Typically, a combination of incentives including low tax rates, grants, loans, favorable leases, and low-cost inputs including energy and labor are traditional reasons to locate manufacturing in a country. Other reasons to expand in other countries include favorable labor laws, more benevolent laws in general, nearness to supply lines or markets, and, of course, avoiding tariffs. Decisions about locating manufacturing are always complex.
A-SMACC’s claim that China’s manufacturers are using Southeast Asia as a passthrough to avoid tariffs would likely be challenging to prove.
Would Additional Tariffs have a Catastrophic Impact on the US Solar Market? The US has no crystalline cell manufacturing to protect, one major thin-film manufacturer, and about 6-GWp of module assembly capacity. The module assembly capacity relies on imported cells. Maxeon announced plans for cell manufacturing in the US– but announcements are not actions. It will take several years for the US to establish crystalline cell manufacturing and a combination of manufacturing and buyer incentives. Module assembly can be established faster but relies on imported cells.
The US is an import market. Meeting the country’s solar deployment goals requires imports.
If the Commerce Department investigates and rules in favor of the A-SMACC petition, it would have no choice under the law and would have to impose tariffs
Tariffs act as a tax on buyers. The proposed tariffs would hit US market participants already reeling from higher shipping costs and delays, higher costs for inputs, proposed changes to the ITC that add complexity and cost, and the WRO, which is currently stalling cells and modules at the ports. Additional costs would not shut the market down, but it probably would lead some developers to rethink plans.
Since 2015 average module prices reliably decreased – year, after year – convincing buyers, and the industry as a whole, that an increase not just unlikely but impossible.
From 2015 through 2020, average module prices decreased by a compound average of 9%. Figure 1 presents average module prices from 2015 through 2020.
Figure 1: Average Module Prices 2015 through 2020
Manufacturing in the solar industry has been low margin for decades, yet average prices either decreased or remained flat for over ten years. Manufacturers in China and Southeast Asia seemed to accept low margins, thus creating an uncompetitive landscape for manufacturers in other regions and countries.
In 2021, buyers find themselves faced with module price increases. The current pricing situation has some aspects in common with the mid-2000s. During these years, Germany’s Feed-in-Tariff law encouraged demand in the country to accelerate. Other countries in Europe rapidly followed suit, creating, almost overnight, a gigawatt level market for solar deployment.
The feed-in tariffs were intended to drive demand – and they worked even better than envisioned. Though proponents expected accelerated demand, sufficient thought was not given to how the speed of market acceleration would impact upstream participants such as polysilicon suppliers.
Previous to the FiT, the photovoltaic industry had primarily survived on scrap. The polysilicon industry’s largest customer was the semiconductor industry. Feed-in-tariffs marked the end of this paradigm and beginning in 2004, polysilicon prices spiked, rising in some cases to $400/kilogram on the spot market with contracts spiking almost overnight from $20 to $30/kilogram to >$60/kilogram. Wafer, cell, and module prices also increased with buyers captive to the increase. Polysilicon, ingot, wafer, and cell producers funded capacity growth via long-term contracts. New cell and module manufacturers sprang up almost overnight, each believing that prices would not decrease. Then, in 2009 PV manufacturers in China had sufficient capacity to enter and, using aggressive pricing strategies, rapidly drove manufacturers in other countries out of business.
Figure 2 presents average module prices from 2000 through 2010.
Figure 2: Average Module Prices 2000 through 2010
As with the earlier period, demand for solar is accelerating, driving a need for more polysilicon. Unfortunately, in 2020 accidents in several facilities in China took significant capacity off-line. Repairs took time because of the pandemic and because, well, repairs take time.
Glass supplies were also impacted. Due to overcapacity, China’s government has controlled glass supply for years, allowing additional capacity, only replacement capacity. As the demand for bifacial modules accelerated, the available supply of solar glass was unable to keep up, and prices rose. Mid-2021, glass supply constraints have eased, but prices have stayed high.
China has also been experiencing a coal shortage, which has driven the price of energy up in the country. Much of China’s solar production is powered by coal, and the shortage has led to higher energy prices for manufactures from polysilicon downstream to modules.
Back to polysilicon, capacity additions take over a year. Though additional capacity is planned and being constructed, it will not come online rapidly nor – for the sake of quality – should it. And, as wafer and cell manufacturers are adding n-type capacity, a higher grade of polysilicon is required.
Also, 45% of China’s polysilicon capacity is in Xinjiang. The US has banned materials from Xinjiang and will see supply constraints. If other countries and regions take similar actions, the industry would see a down year in shipments and construction activity. Finally, China’s manufacturers may have discovered that healthy margins are a good thing and may be unwilling to offer premium products at low margins in the future.
Figure 3 offers average polysilicon costs and prices from 2018 through 2023, along with the current price.
Figure 3: Polysilicon Prices 2018 through 2023
Module pricing is likely to be volatile in 2021, with potential spikes and little relief for buyers. As prices for wood, steel, and aluminum are also high, there is high potential for construction delays, with some developers choosing to wait out the situation.
Buyers should be aware that prices may not decrease for some time – then again, all it takes is for one multi-gigawatt manufacturer to break ranks and drop prices. It’s a pricing game of chicken. Developers worldwide can only delay projects so long while manufacturers concentrated in China and Southeast Asia hold all of the supply cards.
Figure 4 presents average module prices.
Figure 4: Average Module Prices