Trump’s Homegrown Solar Push Risks Widening Green Energy Divide

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In the solar supply chain, ultra-refined polysilicon is shaped into rectangular ingots, which are in turn sliced into ultra-thin squares known as wafers. Those wafers are wired into cells and pieced together to form solar panels.

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Building a complete chain from the ground up could have enormous benefits for the US, JPMorgan analysts including Mark Strouse said in a research note. It could “reduce pricing, reduce geopolitical risks, and improve long-term investor sentiment for the space.”

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Green technology has been at the heart of global efforts to boost industrialization, including in the US. But the clean-energy race, accelerating along with the scramble for computing power, has increased the divide between the US and economies open to using Chinese technology — with one side benefiting from rock-bottom prices and existing, advanced technology, and the other seeking to build its own.

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As recently as 2012, the US was the world’s largest producer of polysilicon. That year, President Barack Obama kicked off a tariff war over solar products that saw Beijing slap duties on US production. China revved up its domestic industry in response and now controls more than 95% of global output of the material.

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The US has made some strides in recent years, and the country now has the world’s third-largest capacity for assembling solar modules. Still, it remains reliant on overseas suppliers for cells, wafers and polysilicon, meaning it could struggle to catch up even if US solar manufacturing gains a foothold, according to Youru Tan, a BloombergNEF solar analyst in Hong Kong.

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“US production is much more expensive than China,” Tan said. “Plus, most US factories rely on equipment from China.”

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Investors in new factories will have to weigh the support offered from Trump’s new directive against messages that have created uncertainty around long-term appetite for clean energy. 

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So far in his second term, Trump’s policy moves also including ending tax credits for solar installations, eroding federal policies encouraging emission-free power and green energy permitting delays have done more to hold back the deployment of US renewables. 

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And if the manufacturing boom fails to materialize, US solar developers will be hit by a steep hike in module prices, which will amount to about a 12% hike to the overall cost of solar systems, according to Guggenheim Securities analysts. The question of who ends up absorbing the increased costs, whether it’s developer profit margins or higher power tariffs, remains open. 

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The AI boom should help users cope with short-term risks. Rising demand and higher-than-normal prices for competing sources of power will counter the extra cost, according to JPMorgan. Even while paying more than the rest of the world, solar remains among the cheapest options for electricity in the US, according to BloombergNEF data.

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That doesn’t account for the opportunity cost of not embracing cut-price modules. Countries from Nigeria to Pakistan have taken advantage to radically reshape their undersupplied power grids in a matter of months. Sales of solar panels to the Philippines are booming. Even Europe, which is battling Chinese trade negotiators over other areas of clean tech like EVs and wind power, has all but waved the white flag when it comes to solar.

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“Solar is arguably the fastest energy you can deploy, and in a free and open market it’s one of cheapest power sources,” said Asia Society Policy Institute’s Li. “The US is not going to enjoy those two advantages.”

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