Original link: https://www.latepost.com/news/dj_detail?id=1673
After more than a year of see-saw, Biden finally won. On May 24, the US Congress initiated a vote to bypass the White House, trying to increase tariffs on Chinese photovoltaic products exported to the United States from Southeast Asia, but failed.
At least until June next year, Chinese companies assembling photovoltaic products in Southeast Asia will not have to worry about the US anti-dumping and anti-subsidy punitive tariffs up to 256%.
In April last year, the U.S. Department of Commerce began investigating Chinese photovoltaic factories in Southeast Asia, and Biden immediately announced a two-year exemption from punitive tariffs. The U.S. Congress organized a counterattack, and the Senate and the House of Representatives overturned Biden’s immunity order with a majority vote in April-May this year. Republican Senator Marco Rubio of Florida said that “if the president cares about American jobs, the environment, labor rights,” he should agree to the tariffs. More than 20 Democratic members of the Senate and House of Representatives also voted against Biden, who is also a Democrat.
Biden then used the presidential veto to veto the bill in Congress. This is one of the most powerful prerogatives of the President of the United States, and Congress must gather 2/3 of the votes in favor to dismiss it. The final vote was 214 in favor and 205 against.
This is the third time that Biden has used his veto power since he came to power in 2021 to ensure that Chinese photovoltaic products can be sold to the United States. The Biden administration also hopes to support local manufacturing, but he also wants to promote the energy transition in the United States and increase the proportion of clean energy. If photovoltaic products are too expensive, it will be difficult to popularize solar energy.
Last year, when China’s photovoltaic products were hit, the newly installed photovoltaic capacity in the United States decreased to 20.2 GW, a year-on-year decline of 14%, while the previous year’s increase was 23%.
Sometimes, a commodity that is cheap enough and easy to use can break through layers of resistance and continue to stick together the increasingly fragmented global supply chain.
Extremely low price formed in 20 years
No one cares what brand of photovoltaic modules the electricity they use comes from. People only care about whether the power supply is stable and how cheap the electricity price is.
Solar energy is currently the cheapest new energy. According to the data of Guosen Securities, the cost of photovoltaic power generation in 2022 is about 0.3 yuan/kWh, which is lower than that of wind power (0.35 yuan/kWh) and nuclear power (0.43 yuan/kWh).
Chinese companies have contributed a lot to setting global photovoltaic prices. During the rapid expansion of China’s photovoltaic industry from 2009 to 2021, the cost of photovoltaic power generation has dropped by more than 90%. Now Chinese photovoltaic enterprises produce a photovoltaic panel of one square centimeter at an approximate cost of only 0.02 yuan. Low prices and the scale advantages behind low prices are also the core competitiveness for Chinese companies to become the world’s number one in ten years and remain undefeated in the next ten years.
China’s photovoltaic industry started around 2000, starting from photovoltaic cells and modules. At that time, the main manufacturing country and market country of global photovoltaics were the United States. In 1997, US President Clinton announced the “Million Photovoltaic Roofs” plan. This ambition was not realized, but it stimulated a group of Chinese followers, and companies such as Tianhe, Yingli, and JA Solar were established one after another.
The main link of photovoltaic manufacturing. Image credit: National Renewable Energy Laboratory.
In 2000, Shi Zhengrong, an early figure in China’s photovoltaic industry, returned from Australia to found Wuxi Suntech. He was one of the few technology-based photovoltaic entrepreneurs in China at that time, and he studied under Martin Green, an academician of the Australian Academy of Sciences who invented the Perc photovoltaic cell.
Wuxi Suntech built a 10 MW (0.01 GW) cell production line in 2002, which is one-thirtieth of China’s current photovoltaic cell production capacity, but it was already China’s largest at that time. In 2005, the photoelectric conversion efficiency of Wuxi Suntech Cell, that is, the ratio of light energy into electrical energy, reached a high level in the world, and the gross profit margin of the module business rose from nearly 5% in 2002 to nearly 32%.
At this time, the United States and Germany began to subsidize photovoltaic installations, and only a few domestic companies such as Wuxi Suntech could meet overseas demand. From January to September 2005, Suntech achieved revenue of US$137 million and net profit of US$31.97 million, and was listed on the New York Stock Exchange in December of the same year. By 2010, Suntech’s module shipments have become the world’s first.
Shi Zhengrong’s success has made more Chinese companies realize the potential of photovoltaics and stimulated investment in production expansion. A number of later photovoltaic giants such as LDK and Jinko were established. According to an executive of a photovoltaic company, from 2007 to 2008, companies that made shoes and gloves in Jiangsu and Zhejiang all came to do photovoltaics because they earned much more.
From 2006 to 2008, the growth rate of China’s photovoltaic module output exceeded 100% for three consecutive years. The larger scale reduces the production cost, coupled with the lower labor and manufacturing costs in China, Chinese companies achieved a photovoltaic price of 25 yuan/watt in 2008, while the price of American companies was generally 27 yuan/watt in the same period. In the cost-sensitive photovoltaic industry, an 8% price difference is enough to sway orders.
The outbreak of the financial crisis in 2008 led to a decrease in global demand for photovoltaics, and a number of American companies such as Solyndra and Evergreen closed down due to high production costs. At that time, China’s module market share exceeded 37%, and it was already the world’s largest producer.
By 2011, China’s cell and module output reached 13 GW and 21 GW respectively, and its global share rose to 37% and 57%. In the same year, the United States launched anti-dumping and anti-dumping investigations on photovoltaic products imported from mainland China, and then began to impose anti-dumping and anti-tariffs at the end of 2012. A group of photovoltaic companies such as Suntech, LDK, and Yingli have either gone bankrupt or been acquired due to aggressive production expansion and high debts. Wuxi Suntech still cut prices even when the capital chain was on the verge of breaking, trying to “kill the opponent”. Shi Zhengrong was removed from his position by the Wuxi Suntech board of directors in 2013.
But the entire Chinese photovoltaic industry has not been crushed by the double counterattack. For example, Jinko chose to transfer to other overseas markets such as South Africa, and is now the world’s second largest module manufacturer. At the same time, the Chinese government began to subsidize photovoltaic installed capacity, driving domestic market demand.
A change that was in the bud before the anti-dumping and anti-dumping measures also developed at this stage: In addition to downstream components and batteries, the scale of China’s silicon wafer and silicon material links has also begun to expand.
Established in 2000, LONGi, which began producing monocrystalline silicon in 2002, did not suffer a fatal blow due to its small size and conservative expansion of production during the double reverse period. Li Zhenguo, the founder of LONGi, insisted on the relatively niche monocrystalline silicon wafer route at that time. Since he could not find customers, LONGi later began to produce monocrystalline silicon cells and modules by himself. Monocrystalline silicon modules have become the mainstream of the market since 2018, and LONGi has grown into the world’s largest manufacturer of photovoltaic silicon wafers and modules.
In terms of silicon materials, two companies established in 1996 and entered the field of silicon materials from other industries ten years later, Tongwei Group and GCL-Poly later became the world’s largest and second largest silicon materials manufacturers. Tongwei also acquired photovoltaic cell manufacturer Hefei LDK in 2013, and is now the world’s largest photovoltaic cell manufacturer.
These Chinese silicon material and silicon wafer companies have gradually replaced overseas suppliers and established a complete local supply chain, which has further reduced China’s manufacturing costs and made its price advantage more obvious.
Chinese companies have not really lost the US market. At the beginning of the double anti-dumping, Chinese component companies such as Canadian Solar built factories in Taiwan, China, bought silicon materials and silicon wafers from mainland China, produced them in Taiwan, and then exported components to the United States to avoid tariffs. After 2015, the United States expanded the scope of anti-anti-dumping activities to Taiwan, China, and Chinese companies went to Southeast Asia to do the same. Until May 2022, the United States has not proposed to impose double and reverse tariffs on Chinese photovoltaic products exported to the United States through Southeast Asia.
Summarizing the development of photovoltaics in China over the past 20 years, the formation of price competitiveness comes from the reduction of marginal costs brought about by the expansion of scale. By 2022, China’s production capacity of photovoltaic silicon materials, silicon wafers, cells, and modules will be 827,000 tons, 357 GW, 318 GW, and 288.7 GW, respectively, an increase of 8.8 times to 23.5 times compared to 2011 before the double-reversal occurred. According to the calculation of Orient Securities, in 2010, China’s photovoltaic power generation cost 0.381 US dollars per kilowatt-hour, and in 2021 it will only need 0.048 US dollars.
The price reduction is also related to the technology and process innovation of Chinese companies: the diamond wire process developed by LONGi in 2013 has reduced the production cost of monocrystalline silicon by 60%. Before that, the non-silicon cost of LONGi’s monocrystalline silicon wafer was more than 6 yuan per piece, but by 2016 it was less than 2 yuan. GCL-Poly developed the cold hydrogenation process in 2009, which reduced the production cost of silicon material from US$40/kg at the beginning of the year to US$25/kg. Jinko took the lead in mass-producing TOPCon photovoltaic cells and modules last year. This is an important innovation after Perc cells. Its power generation in the first year is larger and the power generation decays slower, so the power generation cost in the entire battery life cycle is lower. .
Behind the waves of production expansion and investment in new technologies, the deeper driving force for price cuts is the competitive decisions and actions made by entrepreneurs based on market sense, professional judgment or confrontational instinct. This has brought about new changes in China’s photovoltaic industry.
Due to the rapid growth in shipments of TOPCon cells and modules with lower comprehensive power generation costs, JinkoSolar surpassed Trina and LONGi in the first quarter of this year, ranking first in global photovoltaic module shipments.
Li Zhenguo, chairman of LONGi, who has been betting on the right technology route in the past, told the media again at the SNEC International Solar Photovoltaic and Smart Energy Exhibition held in Shanghai this week, “TOPCon is just a transitional technology.” After finding the ultimate technology Before the route, Longji, which holds a cash reserve of 50 billion yuan, will expand production cautiously.
A new wave of players is entering the component market. Tongwei, the world’s largest polysilicon manufacturer, made a lot of money from last year’s polysilicon price increase. After the polysilicon price fell in the second half of the year, it entered the module market at a low price, seeking a stable source of profit that is less affected by price fluctuations.
In 2018, when the price of silicon materials fell, Tongwei, which was not the leader in silicon materials at that time, expanded its share by expanding production against the trend in the price reduction cycle. In the first quarter of this year, the domestic market share of Tongwei modules has reached 4.65%, ranking 8th, with a shipment of 3 GW, which was close to zero in the same period last year.
Uncoupling is not so easy
When China has established such a scale and price advantage, and is still pursuing more extreme cost performance through new technology improvements and industry competition, it is not the most economically optimal choice for the United States, Europe and other places to support local industries. After the House of Representatives voted on May 24, a member of the US Congress said: “To develop the domestic photovoltaic manufacturing industry chain in the United States, the import of Chinese products must be restricted.” However, it is not easy for Europe and the United States to achieve a large proportion of photovoltaic self-sufficiency.
The current main support policies in Europe and the United States are tax-free and cash subsidies to support local photovoltaic manufacturing.
In August last year, the United States introduced the Anti-Inflation Act (IRA), planning to invest a total of 369 billion US dollars (about 2.6 trillion yuan) to reduce carbon emissions. Among them, the subsidy for photovoltaics involves the whole process of silicon materials, silicon wafers, batteries and components. The European Union also introduced the REpowerEU Act last May to establish a subsidy alliance. It plans to provide up to 26 billion euros (about 197.6 billion yuan) in subsidies to local photovoltaic companies in the next five years, aiming to realize “European manufacturing” of photovoltaic modules.
These subsidy policies have stimulated local photovoltaic expansion and investment. According to the US National Energy Administration, within six months from the introduction of the IRA to January 2023, the newly added local capacity planning has included about 20 GW of silicon wafers, 15 GW of cells and 30 GW of components. Among them, the module production expansion plan has reached more than four times the existing production capacity in the United States, which is close to meeting the demand for new installed photovoltaic capacity in the United States in 2021 (23.6 GW).
According to the domestic cycle, it generally takes 12-18 months to expand the production of all aspects of photovoltaics. If these plans can be realized smoothly, the scale is indeed considerable, but the problem is price and cost.
Longji stated at the shareholder meeting in April this year that the cost of building a factory in the United States to produce photovoltaic cells and modules is on average 6 times more expensive than in China, which does not include the higher maintenance and labor costs in the subsequent operation of the factory.
In 2019, Jinko invested in a module factory with an annual production capacity of 2 GW in Jacksonville, Florida, USA, at a cost of over US$50 million. According to the announcement issued by Jinko on the Shanghai Stock Exchange yesterday, the single GW cost of the 56 GW vertically integrated production base it plans to build in Shanxi is 100 million yuan, which includes the cost of silicon materials, silicon wafers, cells and modules.
According to the IRA, the U.S. government now subsidizes 7 cents/watt for domestically produced modules. The production cost of First Solar, the largest photovoltaic module company in the United States, is about 20 cents per watt, and subsidies can cover 35% of the cost. The production cost of Trina, a Chinese photovoltaic company, is about 16 cents. In anticipation of the IRA and more stringent tariff policies, leading Chinese companies are also planning to build factories in North America, and some of them, such as Jinko, already have factories in the United States and can receive IRA subsidies.
There are indeed uncertainties for Chinese companies to export to the United States and build factories in the United States. In April this year, when the city of Jacksonville was preparing to review a government loan to Jinko to support its expansion, Jinko’s factory and sales office in California were investigated by the U.S. Department of Homeland Security, and the loan review was put on hold. Longi announced in March this year that it plans to build a 5 GW module factory in the United States. In the recent annual report meeting, Longi said: “It is the first time to go to the United States to build a factory without experience, and it will definitely be slower than domestically.” Longi expects that its American factory will probably It will be put into production by the end of this year or early next year.
In the United States, the potential main competitor of Chinese companies is Hanwha QCELLS, a South Korean photovoltaic manufacturer. Its existing and planned production capacity in the United States exceeds 8 GW, second only to the US company First Solar (over 10 GW). And Hanwha also has strong upstream control like Chinese photovoltaic companies. In April last year, it invested US$240 million in Norwegian silicon material producer REC Silicon, becoming its largest shareholder. REC Silicon plans to restart the silicon material production in Washington State, USA this year. factory. The United States’ support for local production capacity does not necessarily mean that American companies will get all the dividends. If Chinese companies can pass the compliance requirements and build production capacity in the United States on the basis of bringing jobs and tax revenue to the United States, they will also be the beneficiaries of the subsidies.
At the same time, it is impossible for any country to subsidize a single industry all the time, no matter how strong its financial resources. The US IRA’s subsidy for photovoltaic production will continue until 2029, and then decrease by 25% every year, ending in 2033.
After that, 2035 is the time when the US government plans to achieve zero emissions in the power system. By then, renewable clean energy will account for the vast majority of the power generation map. Photovoltaic will be the mainstream form of renewable energy due to its balance of price, safety and convenience. The International Energy Agency predicts that the global photovoltaic installed capacity will reach 2,400 GW in 2035, 10 times that of last year, and the annual photovoltaic power generation will reach 2.4 trillion kWh.
After the tide of subsidy ebbs, the decisive factor for the long-term competition in the photovoltaic industry is still comprehensive economic benefits, which is to see who can quote a lower price under the same value.
The back-and-forth game in the United States surrounding tariffs on Chinese photovoltaic products is a trade-off between economic benefits and security needs. It is difficult for the United States to get rid of China’s photovoltaic industry in the short term.
After the U.S. Department of Commerce launched an anti-dumping investigation on photovoltaic factories in Southeast Asia in May last year, and in June, U.S. Customs cited the relevant U.S. Human Rights Act and seized photovoltaic modules suspected of using Chinese silicon materials, Chinese photovoltaic companies actually stopped importing photovoltaic modules to the United States exit. This led to the suspension of construction of 318 photovoltaic projects in the United States in the second half of last year, and many projects were postponed to this year. An American photovoltaic integrator said: “These policies will cause us to lay off employees and go out of business.”
This will also drag down the new energy transition in the United States. The United States plans to achieve zero emissions in the power system by 2035 and replace fossil energy with renewable energy. According to EIA, from January to October 2022, the proportion of renewable energy power generation in the United States will be 24% of the total power generation, which is lower than China’s 31.6% in the same period. New PV installations in the U.S. fell 14% year-on-year last year, compared with a 23% increase the year before.
Liu Hanyuan, Chairman of the Board of Directors of Tongwei Group, said at the Tongwei Shareholders’ Meeting last week, “No matter what happens, it will hardly have a substantial impact on China’s industry in 5 or even 10 years.” China’s current position is irreplaceable, and only China has Promote the huge scale of global new energy transformation.
The cost of change and the inertia of resilience
Energy is the first industry to enter the global division of labor, and it has the side of extreme pursuit of efficiency; it is also the industry that is most likely to be coerced into the competition of major powers. The diplomatic game between countries and mutual trust are important variables in the energy industry.
In the more than 30 years since the end of the Cold War, for most of the time, the major countries have a strong sense of security and trust, which enables a system of division of labor and cooperation in which countries make full use of their strengths to operate. According to different endowments such as manpower, technology, capital, and resources, R&D and design in the United States, manufacturing in China and East Asia, raw materials and minerals in Russia, India, Africa, and the Middle East, and roads, railways, and ocean transportation that connect the world together form a global economy. The world we are familiar with: 30,000 parts and a ton of cars cost less than 100,000 yuan; while energy becomes cleaner, the overall cost is also falling; the bustling Fifth Avenue in New York and the noisy streets of Mumbai You can buy Coca-Cola with the same taste in the slums.
Credit Suisse analyst Zoltan Polzsar pointed out in his article “War, Inflation, Economics, and the Geopolitical Game between China, the United States, Russia and Europe” published last year that this global supply chain has brought years of ” Low inflation, high growth”, benefits for all parties: Although the income of the American public has not increased for many years, the cheap goods produced in China have improved their real purchasing power; Russia provides cheap energy for the European industrial system, so that European industrial products can obtain more high profit. As for the producers and energy providers, they have also gained income and growth in this cooperation, improving their living standards.
When trust is frayed and economic and even armed conflicts break out, the world’s major economies expect to establish supply chains they can fully control. As the original beneficiaries, the United States and Europe are also re-adapting to the new environment. Pursar summed up their actions as: rearming, attracting the return of manufacturing industries, re-establishing strategic material stocks such as crude oil, and rebuilding energy networks.
In today’s environment, efficiency and growth give way to security as a matter of course. Even Zhang Zhongmou, who started the global supply chain of chips, said that “globalization is dying”, and lamented its fragility.
The previous globalization and global supply chain were not a grand plan conceived by a brain, but a spontaneous trend with no command—countless people and companies choose the most efficient way to do business for their own interests. The pandemic and geopolitical conflict have shaken the system. But to break it completely requires everyone to be willing to accept higher costs and less convenient life, which is not so easy.
The obstacles and cooperation surrounding the photovoltaic business are the embodiment of the resilience of the global supply chain.
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