Solar panel imports frozen

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.nytimes.com/2022/04/29/climate/solar-industry-im…

**Solar Industry ‘Frozen’ as Biden Administration Investigates China**

**More than 300 solar projects in the United States have been canceled or delayed in recent weeks because of an investigation by the Commerce Department.**

**By David Gelles, The New York Times, April 29, 2022**

**...**
**Around the country, solar companies are delaying projects, scrambling for supplies, shutting down construction sites and warning that tens of billions of dollars — and tens of thousands of jobs — are at risk.**

**The tumult is the result of a decision by the Commerce Department to investigate whether Chinese companies are circumventing U.S. tariffs by moving components for solar panels through four Southeast Asian countries. Though officials have not yet found any evidence of trade violations, the threat of retroactive tariffs has effectively stopped imports of crystalline silicon panels and components from Cambodia, Malaysia, Thailand, and Vietnam. These four countries provide 82 percent of the most popular type of solar modules used in the United States....**

**The industry is essentially frozen...** [end quote]

The U.S. has had tariffs on Chinese solar panels since 2012. Everyone looked the other way as China shipped solar cells to the four non-tariff countries that finished them into panels and finished modules then shipped them to the U.S.

The Commerce Department initiated its investigation on March 25 after Auxin Solar, a small solar panel manufacturer based in California, filed a petition requesting an inquiry into whether China was circumventing rules intended to prevent state-subsidized solar parts from flooding the U.S. market. Once the petition was filed, the Commerce Department was required by law to investigate whether the imports are circumventing the tariffs.

Only about one-fifth of solar panels are manufactured domestically. There’s no way that they can ramp up production quickly enough to meet the needs of installers. Not to mention price and quality.

If the Commerce Department found that the four non-tariff countries were manufacturing to evade the tariffs, they would be slammed with tariffs in the future, raising the price of all solar panels.

Yesterday, a METAR asked how the U.S. could allow strategic products to be manufactured abroad. I answered that the U.S. is a free market capitalist economy where companies maximize profit by minimizing manufacturing costs. Globalization is driven by low labor costs and lax environmental and worker protection laws. This benefits consumers by keeping prices lower.

Any government intervention in the optimization process will raise prices for consumers and drive inflation higher.

Is it worth benefiting a few domestic companies at the expense of an entire nation of consumers? For solar panels, steel, lumber and so many other products.

What is a strategic product that is important for national security? Is it worth the immense cost of maintaining less-competitive companies to provide this?

Wendy

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Any government intervention in the optimization process will raise prices for consumers and drive inflation higher.

Is it worth benefiting a few domestic companies at the expense of an entire nation of consumers? For solar panels, steel, lumber and so many other products.

That is the rope seller argument “the stuff you want will cost more if “big gummit” doesn’t let us use Chinese slave labor, and, in the process, finance Chinese territorial ambition”.

Steve…survived one cold war, not intimidated by another one

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What is a strategic product that is important for national security? Is it worth the immense cost of maintaining less-competitive companies to provide this?

Wendy

We may be about to find out the answer to your question when/if we try to convince/coerce China from supporting Vlad in the rapes and murders in Ukraine.

If China holds all the cards to our supply of critical (strategic) materials, not to mention pharmaceuticals, our strength of position will be poor. It is a mess.

China has done a great job over the past four decades to create a dependency on their cheap, below market production costs to wrap their tentacles well into the most important aspects of our (and our allies’) manufacturing.

Some might say “Houston, we have a problem.”

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<Some might say “Houston, we have a problem.” >

How right you are.

What will the American consumer say when prices start spiking because domestic production is so much more expensive than globalized production? A whole generation grew up with low inflation. Do you think they will understand the geopolitical Macroeconomic situation when the price of their clothing and furniture doubles?

Wendy

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What will the American consumer say when prices start spiking because domestic production is so much more expensive than globalized production?

Depends on the items involved, but, if they live near either the Canadian or Mexican border, they can shop outside the US. Depending on US pricing and tariffs, some items could be ordered over the Internet and delivered at a total lower cost from overseas. We see this now with some drugs. Bringing drugs into the US for personal use is permitted–as long as there is a valid US prescription and the quantity is no more than a 90-day supply.

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What will the American consumer say when prices start spiking because domestic production is so much more expensive than globalized production?

The American public for quite some time has been 1) wanting more local jobs and more local manufacturing, but 2) complaining about prices. As you know it’s simply not possible to have local production and low cost at the same time.

My dad, 5-6 years ago, was talking to me about the problem of not locally producing and I told him that very thing. “Do you want to pay more?”. Crickets. I then told him jobs will come back to America when they are able to be automated. We’re seeing that now. Robots to make french fries and flip burgers. Robots to work farm fields. Autonomous warehouse robots. 3D printed homes, if people ever learn to love concrete walls, are made with a TON less labor than a normal home.

I’m about to head off to a new job at Nvidia. Take a look at some of the stuff they are actively working on in this field. It is both amazing and scary at the same time.

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What is a strategic product that is important for national security? Is it worth the immense cost of maintaining less-competitive companies to provide this?

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Well that is the argument Germany and EU used for buying massive amounts of Russian coal, gas and oil.

Do we want to be dependent on China for everything that is of strategic importance to America? Here is what we import from China:
Rare earth metals
Electric and electronics products
Industrial machinery, tools and machine parts
Electrical equipment and iron/steel products for power, chemical, oil, and refinery industry
And many other products

Jaak

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My dad, 5-6 years ago, was talking to me about the problem of not locally producing and I told him that very thing. “Do you want to pay more?”. Crickets. I then told him jobs will come back to America when they are able to be automated. We’re seeing that now. Robots to make french fries and flip burgers.

I doubt that french fries and burger flippers were being done not locally before the robots came in.

I’m about to head off to a new job at Nvidia.

Good luck!

Mike

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The American public for quite some time has been 1) wanting more local jobs and more local manufacturing, but 2) complaining about prices.

USians are spoiled children. They want everything they see, and they don’t want to pay anything.

Wish I had a nickle for every person who walked into my RS and the first thing out of his mouth was “what’s your cheapest…”

Steve

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“what’s your cheapest…”

My customers! LOL

The Captain

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<I’m about to head off to a new job at Nvidia. Take a look at some of the stuff they are actively working on in this field. It is both amazing and scary at the same time. >

Please post when you find out more.
Wendy

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Please post when you find out more.

https://www.youtube.com/watch?v=39ubNuxnrK8

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Globalization is driven by low labor costs and lax environmental and worker protection laws. This benefits consumers by keeping prices lower.

Is it worth benefiting a few domestic companies at the expense of an entire nation of consumers?

As a nation, we’ve decided that we want to protect our domestic workers from various unsafe and exploitive working conditions. We have decided to protect our citizens from certain environmental hazards and pollution. These decisions raise the cost of domestic production.

But we have also decided to allow companies to import goods produced under these conditions in other countries. That keeps the cost of these imported goods lower than is possible with domestic production.

We are trying to have our cake and eat it, too. We try to claim a moral high ground with our worker and environmental protections, but we’re willing to abandon that high ground to allow other countries to exploit their workers and pollute the environment so we can have cheap goods.

We have some tough decisions to make as a nation. A little soul searching wouldn’t hurt, either.

—Peter

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We are trying to have our cake and eat it, too. We try to claim a moral high ground with our worker and environmental protections, but we’re willing to abandon that high ground to allow other countries to exploit their workers and pollute the environment so we can have cheap goods.

We have some tough decisions to make as a nation. A little soul searching wouldn’t hurt, either.

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Very well said.

The EU does not abandon their high moral ground with their worker and environmental protections when they allow other countries to produce goods for them. The EU requires the same EU worker and environmental protections for the goods produced in other countries and to be imported into the EU.

That is why some in England wanted Brexit so that they could produce goods that did not meet the high EU standards. Now they are still stuck with following EU rules in order to export
their goods to the EU.

Personally, I try to buy EU products whenever possible. I am tired of poor quality goods made in low standards countries. But some Americans are happy with cheap, shoddy and sometimes dangerous.

Jaak

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Globalization is driven by low labor costs and lax environmental and worker protection laws. This benefits consumers by keeping prices lower.

Is it worth benefiting a few domestic companies at the expense of an entire nation of consumers?

That is an outdated supply side mantra that has only ever been quasi true.

Low cost labor will continue to produce our textiles in China, Vietnam etc…but industry is moving back to the US. We produce high value goods with more skilled labor. The cost of labor is less important per unit.

There are efficiencies in a well paid labor force. Pay creates demand. A comparison if you like, any super market with a lot of customers has a better produce section. People go to super markets with better produce. The more produce a market sells the easier it is to keep fresh produce on the shelves as it sells out faster and is replenished with fresh produce.

In the US we got cheaper production from abroad, but it meant losing our efficiencies of scale. We are gaining them back now.

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<We are trying to have our cake and eat it, too. … We have some tough decisions to make as a nation.>

Peter, you are a very smart man. I agree with everything you wrote, as usual.

But let me point out that making decisions “as a nation” is inherently political. The rules, regulations, tariffs, etc. are formulated by politicians who are often swayed by special interest groups, from environmentalists to industry lobbyists. These same politicians are voted in and out of power by the consumers who mark a ballot based on a combinations of factors, often pocketbook and often emotional.

Our nation has made many decisions that are illogical. For example, entitlement programs that will blow up into impossible numbers. But voters love them and heaven help the politician who tries to cancel Social Security and Medicare. (Although they tinker around the edges, e.g. making the rich pay more.)

https://www.cbo.gov/publication/56970
https://www.cbo.gov/publication/56977

Voters are consumers first and foremost. If the husband is outraged by the price of gas in his SUV and the wife is outraged at the cost of her shopping basket, politicians will have hell to pay. Politicians know this.

That’s why the government frequently writes rules to have their cake and eat it, too. The politicians will put off making decisions that will hurt their re-election chances as long as humanly possible.

That’s why so many issues get worse gradually until they turn into a crisis.

Wendy

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I am tired of poor quality goods made in low standards countries.

Not everything produced in these foreign countries is poor quality. The iPhone I’m typing on [and struggling mightily in the process] is hardly low quality. Many good clothes and other textiles are made with labor that is close to slave conditions. Computer chips are often produced by highly skilled but poorly paid labor.

That is what makes decision making in this arena difficult.

Those who are well off can afford to pay a higher price for goods produced under better labor conditions. But many in the US cannot afford that choice. And some who could so choose won’t.

There are no easy solutions here.

—Peter

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ptheland

<>

Not everything produced in these foreign countries is poor quality.

Concur. The “tired of poor quality goods” implies that something is made ‘over there’, and brought here for sale without the contracting company’s oversight.

If something is made ‘over there’ and brought for sale here, you may rest assured that the US company that contracted for it made a decision that this is what I can sell in the US market.

All that said, there ARE some short cuts that are taken in basic underlying quality of materials used for fabrication that get thru. From metals (‘STAINless steel’ that isn’t) to fabrics to chemicals. Many are easily obscured, at least at first sight. A whole other longer topic.

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Not everything produced in these foreign countries is poor quality. The iPhone I’m typing on [and struggling mightily in the process] is hardly low quality. Many good clothes and other textiles are made with labor that is close to slave conditions. Computer chips are often produced by highly skilled but poorly paid labor.

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Of course some products in these countries have to meet requirements and rules dictated by companies that contracted for the products. US companies are poor at monitoring slave labor, but EU countries do a much better job at monitoring labor conditions.

EU seems to have better solutions, but higher costs for the products. I’ll go with the high moral ground companies whenever possible.

Jaak

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The U.S. has had tariffs on Chinese solar panels since 2012. Everyone looked the other way as China shipped solar cells to the four non-tariff countries that finished them into panels and finished modules then shipped them to the U.S.

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JULY 23, 2020

https://www.greentechmedia.com/articles/read/why-us-solar-ta…

In January 2018, the U.S. government implemented Section 201 solar tariffs on imported cells and modules. Although some initial successes were achieved, WoodMac’s analysis shows that the effectiveness of this approach is now declining.

The trade barriers, composed of multiple layers of tariffs and import quotas, had a material impact in 2018 and early 2019. The 2.5-gigawatt solar cell import cap was enough to support domestic solar module manufacturing, and tariffs on imported modules were high enough to level the playing field.

However, the effectiveness of the trade barriers started to erode in 2019 due to strong demand in the U.S. solar market. We expect that the market will grow by 33 percent in 2020 and 48 percent in 2021 from the 2019 level. This will require domestic manufacturers to procure more solar cells from overseas suppliers than the tariff-free import quota supports. They stand to miss out on market opportunities if the quota is not increased to match demand.

The effectiveness of the U.S. solar trade barriers depends on one’s vantage point. From the perspective of domestic solar manufacturers, the policy partially achieved its purpose: It increased U.S. production capacity and carved out a sizable market for domestic modules.

However, if the purpose of the policy is to protect and grow the entire solar industry, then the added cost and supply constraints have been counterproductive.

Tariffs have artificially made solar modules more expensive in the U.S. The cost is approximately 79 percent higher than in major European markets, 75 percent higher than Japan and 85 percent higher than in China. Without the tariffs, U.S. solar system prices could be nearly 30 percent lower. Utility-scale solar with high-efficiency modules and trackers in the U.S. would cost less than $1.00/W to build in 2020, two years earlier than the current cost trajectory will allow.

Jaak