A flood of foreign solar components threatens efforts to build a domestic manufacturing base in the U.S. to support the clean energy transition, according to First Solar CEO Mark Widmar.
In an interview with CNBC, Widmar said the U.S. should close tariff exemptions that allow cheap components into the U.S. market. First Solar is the largest manufacturer of solar panels in the U.S., focused on large, utility-scale projects.
“All we want is to be able to compete on our own merits and to the extent there is dumping happening in the U.S. market, it should be addressed,” Widmar said. “Once it is addressed, we want it to be enforced.”
A common type of solar panel used in the U.S. is excluded from Section 201 tariffs designed to protect domestic solar manufacturing, and a moratorium on tariffs against solar components imported from several Southeast Asian nations is in place. While some industry stakeholders have supported these exemptions to help scale up solar power capacity in the U.S., Widmar said the carveouts are undermining the goals of the Inflation Reduction Act.
Exploiting a loophole
“The intent of what we’re trying to do – to create this domestic industry that can enable long-term energy independence and security to achieve climate change goals and to enable cycles of innovation by having domestic capabilities – is all at risk,” Widmar said. “It’s unfortunate but that’s largely what’s happening.”
The Biden administration in 2022 extended Section 201 tariffs originally imposed by the Trump administration, but imported bifacial solar panels, which absorb light on both sides, are excluded from the duties.
In an investigation concluded last August, the U.S. Commerce Department found that some Chinese companies were skirting anti-dumping protections in the U.S. by shipping solar cells and modules through countries such as Cambodia, Malaysia, Thailand and Vietnam.
But a decision by President Joe Biden in June 2022 to exempt those same Southeast Asian nations from solar tariffs for two years means penalties are not being enforced against some Chinese producers despite the Commerce Department’s conclusions.
Biden vetoed legislation last spring that would have imposed tariffs on solar components from Cambodia, Malaysia and Thailand. In his veto message, the president described the exemption as a “temporary bridge” that is needed to help expand solar capacity in the U.S.
Though the exemption expires this June, Widmar said 30 to 40 gigawatts of excess product has made its way in to the U.S. market, which is equivalent to almost a full year of consumption.
“What this is doing is it’s not allowing these domestic companies to scale,” Widmar said.
The First Solar CEO said he is also worried that Chinese companies will exploit IRA tax credits, particularly the 7 cents per watt for solar modules, to set up assembly plants in the U.S. that do not move the ball forward in terms of technological innovation.
“What you’ve done is you’ve given the Chinese the opportunity to exploit the Inflation Reduction Act,” Widmar said.
A White House spokesperson wasn’t immediately available to comment.
A buffer against volatility
First Solar is largely insulated from the current market dynamics because the company is booked solid through at least 2026, Widmar said. The company has intentionally overbooked to provide a buffer against the volatility in the solar market, he said.
While the residential solar sector has been walloped by high interest rates, First Solar has outperformed with its focus on utility-scale projects. The Invesco Solar ETF (TAN) has fallen than 18% this year, while First Solar’s stock is down just over 6%.
Electricity demand growth on the grid was largely flat up until 2020, but has now hit an inflection point with power needs expected to grow substantially through the end of this decade, Widmar said. Large data centers are using more power due to the emergence of artificial intelligence, and other factors such as cryptocurrencies, the electrification of vehicles, and the onshoring of manufacturing in the U.S. are contributing to demand growth, he said.
“That drives need for hundreds of megawatts for solar power plants,” Widmar said. “That means you need more utility-scale generation and you couple that with the continued ramp down of fossil fuels, coal power plants and even nuclear.”
First Solar operates three factories in Ohio with two more plants slated to open in Louisiana and Alabama. The company sources its material in the U.S. and is not dependent on Chinese supply chains, Widmar said.
The CEO said domestic manufacturing provides certainty in a world where supply chains are being disrupted by geopolitical tensions, such as those in the Red Sea, and uncertain trade policies.
“The best way I can provide them certainty is to manufacture in the U.S. with a U.S. supply chain,” he said.
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