Washington - China's global dominance in the solar industry is a supply chain and national security risk, according to some industry observers, and one of the reasons that the United States has been trying to boost domestic solar manufacturing capacity.
U.S. President Joe Biden Tuesday signed into law the sweeping Inflation Reduction Act, which includes tax incentives for the development of a more robust solar industry. The White House aims to triple domestic solar manufacturing by 2024.
The law responds to longstanding calls by some in the solar industry for U.S. action to boost domestic manufacturing and to level the playing field between the United States and China. Many U.S. firms complain that China can manufacture solar panels and other hardware more cheaply than they can.
China has been expanding solar panel production and innovation that has helped drive down global manufacturing costs, according to a July International Energy Agency (IEA) report.
Another industry observer, the National Renewable Energy Laboratory, said it saw prices drop sharply over a 10-year period starting in 2010.
However, the risks of a global dependence on China have become apparent during the pandemic. The high cost of shipping from China has led to price increases. The price of polysilicon, the material used to make solar cells, quadrupled in the last year because an oversupply caused manufacturers to slow down production, which then led to a shortage when demand for the product increased. Forty percent of the global polysilicon manufacturing comes from China's Xinjiang region.
"This level of concentration in any global supply chain would represent a considerable vulnerability; solar PV (photovoltaics) is no exception," stated the IEA report's executive summary.
China dominates manufacturing
China is involved in manufacturing more than 80% of solar components, according to the IEA.
"If we don't have the supply chain here in the U.S., we look at it as a national security concern," said Mamun Rashid, chief executive officer of California-based Auxin Solar, one of the few U.S. manufacturers of solar panels.
"If you have a renewable energy grid and it is powered by solar and the solar equipment is being deployed and you don't have the ability to supply it yourself at any moment, the faucet can be turned off," explained Rashid.
Beijing dismissed the concerns and accused the U.S. of thinly veiled protectionism that will harm Chinese businesses.
"China urges the U.S. to stop hobbling Chinese enterprises, quit the erroneous practice of disrupting the supply chain and industrial chain, and create favorable conditions for China-U.S. cooperation on clean energy and climate change," Chinese embassy spokesperson Liu Pengyu told VOA.
This year, a succession of actions in Washington has directly or indirectly impacted the solar industry in China and the U.S.
In February, the U.S. extended tariffs on solar products containing crystalline silicon from China. Additionally, the Uyghur Forced Labor Prevention Act, banning products including solar components from China's Xinjiang region, went into effect in June.
China has been criticized over its treatment of its Muslim Uyghur minority and others in Xinjiang province by rights organizations and Western governments. The U.S. accuses Beijing of forced labor practices among its Uyghur minority in the Xinjiang region, which China has denied, saying its employment programs have helped improve the financial situation for Uyghurs.
China reacts to US action
China has taken issue with Uyghur-related legislation enacted by Washington.
"Having implemented the so-called 'Uyghur Forced Labor Prevention Act' on the pretext of 'forced Labor' in Xinjiang, the U.S. is illegally suppressing and unilaterally sanctioning China's PV industry without justification," Liu said in an emailed response to VOA.
"This is seriously against the law of the market and WTO (World Trade Organization) rules and detrimental to the international trade order and the stability of global PV industrial and supply chains and global climate response," the Chinese embassy's Liu told VOA, adding, "The U.S. needs to immediately stop spreading lies and stop enforcing this malicious legislation."
Trade law investigation
Separately, while the Inflation Reduction Act provides tax credits to further develop the U.S. solar industry, Rashid is pushing for the U.S. to enforce its trade laws.
"You're dealing with China. It's not a free market economy. You can never out-subsidize China, so that won't be enough," said Rashid.
Auxin Solar's concerns about the pricing of Chinese products prompted a U.S. Department of Commerce investigation earlier this year into whether some solar panels coming to the U.S. from Cambodia, Malaysia, Thailand and Vietnam were actually Chinese products and that Beijing was attempting to dodge U.S. anti-dumping tariffs.
US to Investigate Use of Chinese Materials in Imported Solar Panels
Many U.S. solar projects were halted, fearing the impact of retroactive tariffs. In response, Biden announced a two-year tariff freeze on solar components from the four Southeast Asian countries.
"When you have product that's selling in the market that's lower than (what) your bill of materials cost, something is wrong there. The U.S. worker hasn't even had a chance to enter the race and they've lost the race," Rashid said.
In a press release, U.S. Commerce officials said their findings will be applied when the two-year period ends in 2024.
In the coming years, "based on current manufacturing capacity under construction," the IEA predicts China will account for some 95% of solar components made for the global supply chain.
Steven Gute contributed to this report.