Biden’s solar plans hit a wall in China

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A new, unexpected obstacle to President Joe Biden’s green ambitions has emerged: a small San Jose-based solar energy company.

Auxin Solar Inc., which accounts for the entire 2% of solar module manufacturing in the United States, recently persuaded the Commerce Department to initiate a potentially devastating trade investigation. After the United States imposed anti-dumping measures against Chinese solar cell and module manufacturers just over a decade ago, alternative suppliers have emerged in South Korea and Southeast Asia. Auxin now argues that these other Asian suppliers are indeed being used by Chinese companies to circumvent anti-dumping measures.

If Commerce finally agrees, then more than four-fifths of solar module imports into the United States and half of all cells could suddenly face high tariffs, possibly levied retroactively. The Solar Energy Industries Association warns of dire consequences for the development of solar energy in the United States – essential to Biden’s decarbonization goals – saying some suppliers are already backing down due to the risk. Heavyweight NextEra Energy Inc. warns the investigation could delay 2.8 gigawatts of projects planned for this year. Timothy Fox of ClearView Energy Partners, a Washington-based analyst firm, says Commerce’s “structural” tilt toward protectionism could lead him to agree with Auxin.

Auxin, like many Western solar equipment manufacturers, is struggling to compete with China. The US share of the global solar module market has plummeted to around 1%. The vast majority of the US domestic solar industry today is involved in developing, financing, and building projects rather than making the nuts and bolts. This explains why Auxin is now about as popular with the solar crowd as a coal plant.

The idea that a small manufacturer could throw such a huge wrench into a vital industry seems outlandish. But Auxin highlighted an inherent tension in Biden’s green agenda.

About a year ago, the president began redefining his efforts not just to save the planet or create jobs, but also to take on China in a Sputnik-style contest for industrial supremacy. The problem is that Chinese manufacturing is what drove down the cost of clean tech, making Biden’s green industrial policy viable in the first place. While the likes of Auxin have been marginalized, you can’t have a green revolution if green power isn’t competitive, and global supply chains are the cause.

Yet globalization has fewer advocates left or right these days, with populism, the pandemic, and Russia’s attack on Ukraine fraying or breaking trade ties altogether. De-globalization is inflationary for all types of energy. The secular downward trend in the prices of solar equipment, batteries and other clean technologies has been halted.

Think of it in terms of externalities. Fossil fuel advocates often criticize renewables for their reliance on subsidies, conveniently forgetting that their favorite energy source has long benefited from the biggest subsidy of all: unpriced emissions. Yet cleantech developers and advocates must now strive to internalize their own unpriced externalities: security and protectionism.

It’s undeniable that while a growing majority of Americans are expressing concern about climate change, its abstract nature often makes it necessary to co-brand policies to address it – with jobs, infrastructure, geopolitics or other. As the Auxin challenge shows, this creates tensions, especially around costs.

Likewise, the war in Ukraine lays bare real dilemmas. It would be madness to rely too heavily on critical equipment or minerals on a China that supports Russian aggression, let alone Russia itself. Similarly, it would be foolish to aim for energy autarky, an unnecessary fetish dating back to the oil crises of the 1970s. Interdependence can be increased or reduced, but it is inevitable. Note how the US becoming a net oil exporter – scratching that neurotic 1970s itch – did not protect drivers from high and volatile pump prices. Diversifying away from fossil fuels, on the other hand, offers a way to mitigate the power of oil states such as Russia (and fight climate change, of course). Auxin’s victory would be Pyrrhic if, by increasing costs, it reduced solar opportunity overall.

Reconciling these complex and conflicting pressures is not easy. But any attempt must begin by recognizing that national security and environmental protection are public goods that require more than a little tax relief here, a research grant there. Nor can they simply be left to the “market”. “It means recognizing that energy is actually not a commodity, it’s strategic,” says Sarah Ladislaw, who leads the US program at the Rocky Mountain Institute.

That doesn’t mean requiring all solar panels to be built in American factories (or looking the other way while the Commerce Department actually does). This means setting policy goals like decarbonization and security of supply, then using government tools creatively to balance cost and risk. Where the United States can reasonably extract or manufacture what it needs, it should. Where it cannot, it should strive to strike trade deals with allies that promote alternative supply chains.

Biden has shown a willingness to use executive powers to promote domestic production of lithium and other critical minerals, albeit in fairly limited ways. Yet he has failed to communicate a holistic strategy, as evidenced by his mixed messages on fossil fuels – which, like it or not, are also strategic as long as we rely heavily on them. Politically, it remains difficult to rally the collective effort necessary to meet the challenges ahead. As Ladislaw puts it: “The United States tries to have an industrial policy without being able to do the difficult things.

In case you think that’s fooling the Democrats, it’s not. This stuff involves tough trade-offs in the context of a wafer-thin ruling majority, a pandemic recovery, and a major foreign policy crisis. Biden’s party is at least trying to address these vital issues. If you are looking for thought leadership from the Republican Party on energy and climate, I regret to inform you that its leaders have their hands full to undo Disney.

The simultaneous imperatives to reshape and decarbonize fractured energy markets require more than denial or piecemeal measures – or, for that matter, policy defined by random business inquiries.

More from Bloomberg Opinion:

Solar energy emerges from the energy crisis: David Fickling

The solar farm that almost destroyed a city: Francis Wilkinson

Switching to clean energy means subsidizing dirty energy: Liam Denning

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He was previously editor of the Heard on the Street column of the Wall Street Journal and wrote for the Lex column of the Financial Times. He was also an investment banker.

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