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Will solar energy’s challenges finally ease in ’23? 

Will solar energy’s challenges finally ease in ’23? 

Solar market analyst Paula Mints joined Episode 29 of the Factor This! podcast to break down everything from the Auxin Solar petition to the Inflation Reduction Act and to discuss the industry’s path forward amid mounting headwinds. The episode is available wherever you get your podcasts.

Paula Mints has seen this movie before.

She has tracked the solar industry for more than two decades as a market analyst. And whether in reference to tariffs or tax credits, the industry always seems to find itself in a similar position: vulnerable.

So when the Department of Commerce issued a preliminary determination that signaled tariffs could be added to solar modules imported from Southeast Asia, she wasn't surprised.

"Would I have assumed that at some point this would happen? Yeah," Mints said on the Factor This! podcast. "Everything that is happening has happened before in one way or another. We keep repeating ourselves."

The Commerce decision caps a year that the solar industry will remember for its highs and lows.

What's in store in 2023?

What Commerce said

The preliminary determination in the Auxin Solar tariff case identified the Thailand operations of Canadian Solar and Trina Solar, as well as BYD Cambodia and Vina Solar Vietnam, for violating AD/CVD rules.

Other companies also under investigation — New East Solar Cambodia, Hanwha Q CELLS Malaysia, Jinko Solar Malaysia and the Vietnam operations of Boviet Solar — were cleared as part of the investigation.

Commerce said its circumvention inquiries covered crystalline silicon photovoltaic cells whether or not they were partially or fully assembled into other products that were produced in the four Southeast Asian countries from wafers produced in China.

The scope also included modules, laminates, and panels consisting of crystalline silicon photovoltaic cells and where more than two of the following components in the module/laminate/panel were produced in China: silver paste; aluminum frames; glass; backsheets; ethylene vinyl acetate sheets; and junction boxes.

Mints said she believes the investigation was flawed from the start for focusing on the dollars spent at each stage of the production process instead of the value added. Additionally, she believes a sample size of just eight manufacturers is too small to judge the behavior of the entire region, which supplies 80% of solar modules used in the U.S.

Commerce is expected to share its final determination on May 1. And new tariffs could take effect as soon as President Biden's moratorium ends in 18 months.

Solar industry reckons with forced labor

On top of the Auxin Solar case, the U.S. solar industry faces a "gigawatt-level" supply problem due to forced labor concerns.

Passed by Congress and signed by President Biden on December 23, the Uyghur Forced Labor Prevention Act (UFLPA) is intended to reinforce U.S. policy to curb the importation of goods made with forced labor. 

Credible evidence has circulated since 2020 that ethnic Uyghars living in the Xinjiang region of China are being forced to work in extracting and refining raw materials that go into the production of polysilicon that then is used to produce solar cells and modules.

Customs and Border Protection officials reportedly targeted some 838 entries valued at more than $266.5 million as recently as August. Enforcement of the UFLPA has depressed near-term solar installation forecasts and delayed the impact of the Inflation Reduction Act, according to a recent market report from the Solar Energy Industries Association and Wood Mackenzie.

While it's clear that enforcement of the UFLPA is negatively impacting the U.S. solar market, Mints is quick to point out that what's happening to the Uyghars is far more important.

"If you are essentially a modern slave in China, do you really care that a few modules are being held up in the port? Who is suffering?" Mints said.

Can the Inflation Reduction Act save the day?

Many of the solar industry's biggest challenges could be solved by a robust domestic manufacturing base.

And while the Inflation Reduction Act stands to boost U.S. production capacity, Mints said the solar industry is in for a shock when it comes to manufacturing costs. 

"We don't know the cost of anything" produced in China, Mints said, because prices throughout the solar value chain are supported by forced labor and subsidies. "We haven't had a healthy reckoning on what things should cost in the industry."

The U.S. added 4.6 GW of new solar capacity in the third quarter, a 17% decrease from the same quarter last year. 

The findings from the U.S. Solar Market Insight Q4 2022 report released by the Solar Energy Industries Association (SEIA) and Wood Mackenzie blamed trade barriers and ongoing supply chain constraints for slowing America’s clean energy progress.

Distributed solar takes a hit

The distributed solar market has taken its fare share of hits this year too.

The California Public Utilities Commission voted on Dec. 15 to revise the state’s net energy metering tariff in a bid to improve price signals by better aligning them with the electric grid’s conditions, both day and night. 

The new policy aims to incentivize the co-location of solar and battery storage systems. But it is also expected to slash compensation for solar customers by 75 percent, according to the California Solar and Storage Association.

Solar panels are on 1.5 million California homes, creating by far the nation’s largest home solar market. As a result, the CPUC decision is expected to impact the solar industry nationwide.