The US wants to break into the solar panel business. Doing so, if its possible at all, means costs of the solar panels and electricity will surge…
China’s Grip on Solar
The Wall Street Journal asks Can the U.S. Break China’s Grip on Solar?
That’s a free link worth reading. The short answer is everything in China is cheaper from materials to electricity to labor.
The process is worth a closer look, however, and the US trails significantly in every stage.
The primary building block for some 97% of the world’s solar panels is high-purity silicon, or polysilicon. Making that silicon is the first big step in the solar manufacturing process. It is the most energy- and capital-intensive piece because of the high temperatures and expensive equipment used in refining.
Until around 2005, polysilicon manufacturing was dominated by companies from the U.S., Europe and Japan. With China’s huge expansion and investment into solar, that has flipped. In 2023, roughly 91% of the polysilicon for solar panels was produced in China.
Recently, the U.S. has effectively banned the use of most Chinese polysilicon in imported solar panels because much of it is made in the western Chinese region of Xinjiang, where the U.S. has accused Chinese authorities of committing human-rights abuses including forced labor, allegations that Beijing denies.
Today, U.S. buyers are increasingly relying on solar panels that use polysilicon made outside of China. Those supplies are tight, and keep prices for the U.S. market higher than for other markets.
Ingots and wafers
In the next part of the process, the solar-grade silicon is melted in furnaces then cooled into big rod-shaped crystals called ingots. The ingots are sawed into thin slices called wafers.
China makes more than 97% of the world’s solar ingots and wafers. The U.S. makes none.
Ingot manufacturing is very energy-intensive due to the high temperatures used.
China has built many factories in areas with cheap power from coal or hydroelectric plants. The bulk of China’s solar manufacturing is in provinces where electricity costs are nearly 30% below the global industrial average.
Sand and other materials
High-quality quartz sand is used to produce special containers, called crucibles, for melting the silicon.
Most of the world’s sand used in ingot production comes from the Appalachian mountains in North Carolina. But almost all of it is shipped straight to China, which makes the bulk of the world’s crucibles.
Would-be crucible makers in the U.S. could have trouble getting sand. And would-be ingot and wafer makers in the U.S. will probably be buying the crucibles from China, bumping up costs.
This is the stage at which the silicon becomes a device that can convert sunlight into electricity. There are many different ways of making solar cells, but in most, wafers are treated with chemicals and etched with circuits.
China controls around 80% of the solar-cell market, largely because of cost advantages, and because it controls other steps of the supply chain, which lets it build ecosystems of suppliers. Many Chinese cell manufacturers also produce wafers or panels.
The U.S. currently has no solar-cell manufacturers, with the last few pulling out of the country or going bankrupt within the past few years. Many companies have said they are planning to build solar-cell factories following the passage of the Inflation Reduction Act. More announcements are expected since it doesn’t require as much initial investment as silicon or wafer manufacturing.
Solar-panel manufacturing is effectively an assembly process. Companies take cells and line them between sheets of glass or another material, connect them with wires, laminate the whole thing and place it in a frame. Then wires and other electronics are added to connect the panels to each other and the larger electrical system.
This is the easiest and least capital-intensive piece of the solar supply chain, and the part that is most widely dispersed around the world. China accounted for 83% of the world’s solar-panel production and the U.S. less than 2% in 2023.
Europe’s green energy transition is stuck between a rock and a hard place. A flood of cheap Chinese solar panel imports is driving record solar energy installations. But those same imports are crushing Europe’s few local solar manufacturers.
Europe just had a bumper year for green energy. European Union countries installed record levels of solar capacity, 40% more than in 2022. The vast majority of those panels and parts came from China – in some cases, 95%, International Energy Agency data show.
German Economy Minister Robert Habeck wrote to the European Commission in November, expressing concern that the EU executive was about to slap trade restrictions on Chinese solar imports, a letter seen by Reuters showed.
Habeck warned restricting Chinese imports could kill off Europe’s rapid expansion of green energy and make 90% of the PV market more expensive. It risked bankruptcies among EU companies that assemble and install solar panels using imported parts, he said.
“You can’t reduce dependency on China in the short term or you don’t build the projects,” Miguel Stilwell d’Andrade, CEO of Portuguese utility EDP, told Reuters.
He noted that solar panel prices have climbed in the United States, which has duties on Chinese imports. “It is having an inflationary impact … the price of panels is more than double that of Europe,” he said.
Rather than being happy about cheap panels that help a green transition, the EU nannycrats are up in arms. So are President Biden and Donald Trump.
60 Percent Tariffs
The Inflation Reduction Act aims to bring some of the above processes back to the US. But it will not level the playing field on labor costs or electricity costs. Nor does the US have the plants.
The US can easily catch up on technical know how, but it is going to lose out on every other step without huge additional tariffs.
Both Biden and Trump are willing to do so. Trump proposes 60 percent tariffs on China. To date, Biden took Tariffs trump imposed and increased most of them.
If the US puts 60 percent tariffs on China, the final costs will rise at least 60 percent and we will need much more electricity as well. So electricity costs will jump too.
There are big inflationary pressures on many fronts.
Minimum Wages Hikes at California Fast Food Restaurants
On September 28, I noted Minimum Wage for Fast Food Workers Jumps 30% to $20 Per Hour in California
More inflation is coming your way. California again leads the way.The bill will force many small restaurants out of business or they will pony up too. If McDonalds pays $20, why take $15.50 elsewhere? The $4.50 hike from $15.50 to $20 is a massive 30 percent jump.More inflation is coming your way. California again leads the way.
Student Debt Cancellation
President Biden is bragging the Supreme Court didn’t stop him from handing out still more inflationary free money.
“The Supreme Court Didn’t Stop Me” said Biden on more student debt cancellation.
The True Costs of Net Zero Are Becoming Impossible to Hide
On February 6, I noted The True Costs of Net Zero Are Becoming Impossible to Hide
Bloomberg reports a 48% Surge in Costs Wrecks Biden’s Much-Lauded Wind-Power Plans.
Even with massive subsidies, these projects are not economical.
Big Explosion of Government and Social Assistance Jobs
President Biden is bragging about job growth in 2023. But he doesn’t say where those jobs are.
Data from the BLS, chart and calculations by Mish.
As a direct result of migration Denver Health at “Critical Point” as 8,000 Migrants Make 20,000 Emergency Visits
Denver Health CEO Donna Lynne warned Denver Health is at a critical, critical point. Eight-thousand migrants from Central America accounted for approximately 20,000 visits in 2023.
Denver Health asked the Federal Emergency Management Agency to provide funds for immigrants’ medical costs. The state and federal governments aren’t reimbursing the hospital, which spent $136 million for patients who didn’t pay.
For more discussion, please see Big Explosion of Government and Social Assistance Jobs in 2023 to Help Migrants
For now, we have disinflation, a slower increase in prices, not falling prices.
I wonder how long that can last given the huge number of inflationary pressures that are still on deck.
Fed Chairman Tells 60 Minutes US Fiscal Path is Unsustainable
Also note that Jerome Powell told 60 Minutes the US Fiscal Path is Unsustainable
Fed Chair Jerome Powell tells 60 Minutes that it’s “urgent” the US address its “Unsustainable Fiscal Path”
I list 15 key takeaways from the interview.
In light of unsustainable fiscal policy, the end of global wage arbitrage, the end of just in time manufacturing, and huge tariffs, I do not see the happy soft landing that nearly everyone including the Feds now sees.