The Rise of US Solar and the Future of the Global Photovoltaic Industry
2024-05-16 17:17

On May 14th, the United States announced a new tariff on goods imported from China, targeting key industries such as electric vehicles, lithium batteries, and solar photovoltaics, with the latter being particularly hit hard. The tariff on photovoltaic cells has doubled to 50%.

The Chinese internet community often perceives this action as a sign of America's inability to compete, overlooking an important industrial backdrop: the U.S. solar industry is growing stronger.

Capacity Ramping Up Fiercely

According to calculations by Bloomberg New Energy Finance, the IRA's subsidies for the entire U.S. solar industry could theoretically reach 17 cents per watt, a figure already close to the production costs of Chinese companies. Even if American companies have much higher costs than Chinese ones and lack market competitiveness, they would still profit significantly after subsidies. High-intensity subsidies have fully activated the production enthusiasm of American solar companies. Since 2022, domestic solar capacity in the U.S. has been surging.

In 2022, the U.S. had only about 8GW of local module capacity, which rapidly increased to over 13GW in 2023. According to Wood Mackenzie, based on the announced plans, U.S. module capacity will exceed 120GW by 2026, three times the current domestic installation demand.

Before 2022, the U.S. had virtually no silicon wafer and cell capacity. However, by 2025, the U.S. will reach capacities of 25GW for silicon material, 11GW for wafers, and 24GW for cells.

The U.S. Solar Energy Industries Association (SEIA) proudly stated in a report: We once thought it would be impossible for the U.S. to achieve a 50GW solar module capacity by 2030, but now, this goal has essentially been met. One potential consequence is the gradual decoupling of the U.S. from Chinese solar energy. In the past, when the U.S. could not be self-sufficient in solar energy, despite feeling uneasy about China's rapid progress in the industry, it would still leave some leeway in its suppression measures. Now that it has grown stronger, China's solar industry has inevitably gone from "sweetheart" to "bitter enemy," and it can be expected that the U.S. will continue to crack down on Chinese solar companies without following the usual practice of fair play. The recent increase in tariffs is just the appetizer; greater risks may lie ahead. After the "double reverse" trade actions in 2011, the proportion of photovoltaic modules imported from China into the U.S. dropped from a peak of 50% to below 3%, but subsequently, imports from Vietnam, Malaysia, Cambodia, and Thailand surged, accounting for over 70% by 2022.

The U.S. Department of Commerce determined that these four countries were exporting photovoltaic products made by Chinese companies to evade tariffs. Considering that the U.S. was not yet self-sufficient at the time, Biden issued an exemption policy in June 2022, allowing these four countries to continue exporting freely to the U.S. This exemption policy is set to expire this June, and given the current development of the U.S. solar industry and recent statements by American politicians, the future of the exemption policy seems pessimistic.

For a long time, there has been a mainstream view that the U.S. cannot do without Chinese solar energy, but now, the sustainability of this view clearly needs to be reevaluated. On one hand, the U.S. is increasing subsidies, and on the other, it is suppressing Chinese companies. The ultimate intention of the U.S. is very clear: it hopes that its own solar industry will catch up and not become a mere bystander in this energy revolution.

Beware of Overtaking on a Bend

Looking vertically through the history of photovoltaics, the industry's center of gravity has shifted multiple times over the past 30 years, with Japan, Germany, and China each holding the highest ground. Exploring the underlying reasons, two factors are crucial: state intervention and technological shifts. In 1993, Japan's Industrial Technology Research Institute launched the massive "Sunshine Project," which included amorphous silicon photovoltaic technology as a major development project, with an investment of approximately 500 billion yen to support its growth. With substantial rewards, Japan's photovoltaic industry started to grow rapidly from 1996, and by 2003, just four Japanese companies—Sharp, Panasonic, Sanyo, and Mitsubishi—accounted for nearly half of the global photovoltaic cell market share.

In 2004, Germany revised the "Renewable Energy Act," offering 40-50 euro cents per kilowatt-hour of electricity generated by photovoltaic use, which completely ignited the German photovoltaic industry and quickly replaced Japan as the new center of the world's photovoltaics. The explosion of the German photovoltaic market also helped Chinese companies like Yingli, Harmony Sino-Tech, and TBEA complete their initial accumulation. After the financial crisis in 2008, European and American subsidies were reduced, while China countered by strongly supporting photovoltaics, and the baton of global photovoltaic rights was handed over to China.

Today, as the U.S. launches unprecedented solar subsidy plans, it naturally hopes to replicate history and overtake on a bend, while the development of technology routes indeed gives this possibility a reality. The decline of the U.S. solar industry is largely due to the diminishing role of thin-film cells. The competition between thin-film and crystalline silicon routes has always been a seesaw battle, with thin-film having two moments of glory in 1988 and 2009, reaching market shares of 30% and 17%, respectively.

However, the good times did not last long. Polysilicon prices plummeted due to oversupply after the financial crisis, and thin-film cells lost their cost advantage. Subsequently, China pushed the efficiency and cost reduction of crystalline silicon routes to the limit through the entire industry chain effort, while American companies' bet on thin-film technology gradually became a marginal route, now accounting for less than 5% of the industry market share. Looking back, if it weren't for the sharp drop in polysilicon prices, thin-film cells might not have been defeated so thoroughly. In the past few years, although commercially overwhelmed by China, the U.S. has never given up on technology, with First Solar's CdTe (cadmium telluride) technology remaining the most mature thin-film cell route, and now it has also seen some development opportunities.

Building-integrated photovoltaics (BIPV) is a highly promising and imaginative field where cadmium telluride cells have significant advantages over crystalline silicon cells. For example, crystalline silicon cell modules are thicker and relatively independent from the glass packaging materials, making them less flexible and difficult to process into curved shapes. Thin-film cells are relatively lighter and more malleable, able to bend freely and easily processed into smaller radius curved shapes, making them more widely used in BIPV; furthermore, buildings have natural light requirements, so there is a certain demand for the transparency of BIPV modules, and thin-film cells have better transparency compared to crystalline silicon cells.

The long-term installed capacity potential of BIPV is between 1500-2000GW, corresponding to a market size of 7.5-10 trillion yuan. According to data from the China Photovoltaic Association, the global photovoltaic installed capacity in 2023 is expected to be only 345-390GW. In other words, BIPV could create several photovoltaic industries on top of the current market size, giving thin-film cells a second life. Looking further ahead, perovskite is currently considered the most promising next-generation cell technology. From its proposal in 1954 to the breakthrough of 26% efficiency with heterojunction technology in 2016, crystalline silicon cells took 60 years of research, while perovskite took only 10 years to surpass 26% laboratory efficiency from proposal to technology. At this rate of iteration, commercialization could be achieved in just a few years.

Perovskite itself is a type of thin-film cell, and the U.S. has not been completely left behind in this field either. First Solar recently completed the acquisition of Swedish perovskite company Evolar AB, which has developed a unique perovskite solar cell technology that offers 25% more conversion efficiency than traditional cells. Whether it's policy subsidies, tariff barriers, or technology route shifts, all are positive news for the U.S. solar industry. And for China, which is defending its position, there is only one choice: to fully prepare and embrace the challenge.

Unity and Forward Thinking

Over the past few years, China's photovoltaic industry has witnessed some discordant and irrational behavior.

From 2020 to 2023, across core segments such as polysilicon, wafers, cells, and modules, to ancillary materials like photovoltaic glass, films, and steel wires, the industry has seen an investment of approximately 3 trillion yuan. This includes not only the expansion of existing photovoltaic companies but also a significant number of businesses from unrelated sectors entering the photovoltaic field. According to statistics from the China Photovoltaic Industry Association, in 2023, China's production of polysilicon, wafers, cells, and modules reached 1.43 million tons, 622GW, 545GW, and 499GW respectively, with year-on-year growth rates of 66.9%, 67.5%, 64.9%, and 69.3%. The rapid expansion within a short period has led directly to low-price competition within the industry. In the first quarter of 2024, the operating income of 120 listed photovoltaic companies totaled 314.369 billion yuan, a year-on-year decrease of 15.47%, while net profits attributable to the parent company amounted to 13.5 billion yuan, down 71.98% year-on-year. Some leading companies have even reported substantial losses—Tongwei Co., Ltd. incurred a net loss of 787 million yuan in the first quarter, LONGi Green Energy Technology reported a net loss of 2.35 billion yuan, and TCL Zhonghuan suffered a net loss of 880 million yuan attributable to the first quarter.

On the other hand, First Solar from the United States reported first-quarter revenues of $794 million this year, up 44.83% year-on-year, with profits of $237 million, a staggering increase of 455.95% compared to the previous year. As of Q1 2024, the company had orders worth 78.3GW and a total order value of $23.4 billion. Just a few days ago, First Solar successfully surpassed LONGi Green Energy Technology in market value, becoming the largest enterprise in the global photovoltaic field by market capitalization. Against the backdrop of China's dominant control over the global photovoltaic industry, such a situation was completely unexpected and likely hard to accept.

Today, global industrial competition is no longer just about the contest between enterprises but is measured at the national level. The ineffective internal competition among domestic photovoltaic companies has to some extent hindered their own development, ultimately harming our own strength and resources. We should quickly break free from the trap of internal strife, unite and look forward collectively, and invest more human, financial, and material resources into planning and building for the future, rather than merely focusing on immediate gains.

Tags:cell , lithium battery