How Chinese Solar Panel Companies Benefit From Federal & State Incentives – CleanTechnica

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There is a frenzy in America about electric cars made in China. The US has imposed a 100 percent tariff on Chinese-made vehicles and enacted an outright ban on the use of electronic systems for automobiles that rely on Chinese-made chips and software. The fear is that those items could spy on US military installations and send back data about where they go and who is using them directly to the mothership in Beijing. BYD is making noises about a car factory in Mexico, which in theory would allow it to circumvent US tariffs but not the ban on critical components made in China.

Yet while there is intense focus on Chinese-made cars, there is little to no attention being paid to Chinese companies that are finding ways to insinuate themselves into the US economy and even qualify for federal and state financial incentives funded by American taxpayers. Bloomberg Green has a report this week about Illuminate USA, which is building solar panels in Pataskala, Ohio. On its website, it says “Illuminate USA is an American advanced manufacturing company. We are committed to developing renewable energy solutions through cutting-edge solar panel technology, sustainable practices and a dynamic workforce.”

The factory is capable of manufacturing 9.2 million solar panels a year — enough to generate 5 GW of clean, renewable electricity. In addition, it is employing several hundred workers at competitive wages that start at twice the minimum wage in Ohio. Its operations also support many local electricians and suppliers. From the outside, these are the hallmarks of the 21st century clean energy manufacturing boom promised by the Biden administration and the result of sweeping incentives designed to restore national prowess in a market dominated by China.

Should Chinese Manufacturers Be Welcome In America?

In reality, what looks like a domestic triumph is also a win for China, America’s primary industrial and geopolitical rival, Bloomberg says. Invenergy, America’s biggest private renewable power developer, owns 51 percent of the company. Longi Green Energy Technology, the Chinese solar panel manufacturing giant, owns the other 49 percent. In reality, it is Longi’s solar panel manufacturing expertise, technology, and supply chain that are churning out tariff-free panels for the US market.

Inside the factory, more than 100 Chinese nationals work alongside more than 1,000 Americans. Bridging the language barrier requires lots of hand gestures and smartphone-enabled translation. Illuminate says much of this is temporary and most of the Chinese workers will leave once the Americans are up to speed. But long after they return home, Longi will continue to profit. The joint venture benefits from millions in economic development incentives and federal tax credits for domestic clean energy manufacturing.

Companies based in or linked to China are replicating the strategy across the US. They are building or planning to build at least a dozen plants with 30 gigawatts of solar panel making capacity, according to a Bloomberg review of public statements, filings and other documentation. All told, the facilities would be able to supply roughly three-quarters of the panels needed in America today.

Domestic Manufacturers Are Opposed

American solar panel manufacturers are crying foul. They claim panels like the ones built in Ohio undermine their ability to build a domestic solar panel supply chain. Bipartisan momentum is building in Congress to block China-backed firms from claiming tax credits for manufacturing anything central to the energy transition — a category that extends beyond solar panels to electric vehicles and batteries.

In Ohio, retired middle school science teacher Eileen DeRolf has become an outspoken critic of Illuminate USA and the policies that brought it to her home town. She points to a 15-year tax abatement granted by the city and $4 million in incentives from a state economic development agency. That’s before any consideration of the $350 million a year in potential tax subsidies from the Inflation Reduction Act. “To me, this is betraying America, to allow an uneven playing field,” DeRolf told Bloomberg. “I happen to not particularly want our geopolitical No. 1 enemy to benefit off our economic system.”

Illuminate and its American and Chinese parent companies see it differently. They point to the well paying jobs the factory has created in a part of the country where industrial activity has been declining for decades. “We’re a majority-owned American company,” said John Duer, Illuminate’s chief legal officer. “We have a minority partner based in China. We’re not a Chinese company trying to do business in the US.”

The IRA Effect

Bloomberg reports that Invenergy and Longi have been talking about collaborating for years, but it took the Inflation Reduction Act to move their plans forward. Less than seven months after the IRA took effect, they announced plans for the Pataskala plant, and by early 2024, solar panels were rolling off the assembly line. In addition to the tax credits Illuminate can claim for its US-made panels, its parent companies reap significant benefits from the tie-up. Invenergy is the factory’s first and biggest customer, earning additional credits for using domestically produced components in its solar arrays. And Longi, like other Chinese panel makers, brings advantages gained through decades of experience and generous support from Beijing.

China identified solar panels as a priority more than a decade ago, handing subsidies and low-cost financing to developers and manufacturers while pushing utilities to use more renewable power. Chinese firms also benefited from cheap electricity and cheap labor. The industry has been dogged by allegations that some suppliers used forced labor from the country’s westernmost province, a mostly-Muslim region called Xinjiang. Beijing has repeatedly denied these accusations. What no one disputes is that Chinese companies currently dominate the market for solar panels and all of their component parts.

For environmental advocates, China’s cheap panels have been a boon, driving a more than 50-fold increase in emissions-free solar power generation globally since 2010. But to American rivals, something more nefarious is at work. They argued that Chinese solar companies were selling their products below cost to unfairly corner the market, and trade authorities agreed, kicking off a cycle of tariffs meant to level the playing field. Today those tariffs have largely eliminated domestic demand for Chinese-made solar panels.

The tie-up with Invenergy allows Longi to avoid at least $155 million in annual tariffs. Combined with the incentives from the IRA, Longi and other panel-makers can “make huge profits,” said Yana Hryshko, chief solar analyst at consulting group Wood Mackenzie. After surviving two decades of industry turbulence, these “are not stupid companies,” she said. “They will not make a move without being confident.”

A Transfer Of Knowledge

For now, Illuminate depends on the expertise of Chinese workers who have years of experience handling the specialized panel manufacturing machinery and brittle crystalline silicon cells. For many, it’s their first time outside of China, drawn by higher salaries and a sense of adventure. “We’re here just to teach the American workers,” said a production line technician. “When they can start a production line by themselves, there’ll be no need for us to be here anymore.”

“Most of the companies that are building solar panels right now that have the know-how or skills are Chinese,” said Ilaria Mazzocco, a senior fellow at the Center for Strategic and International Studies. They also have well established supply chains outside the US. At Illuminate, for example, panels are made with photovoltaic cells and glass from Malaysia and aluminum frames from Vietnam. Many key materials aren’t yet produced domestically, and Illuminate says it’s actively working to expand its US supply base.

Some opposition to Chinese investment in US manufacturing is just outright xenophobia, much of it fueled by overheated and intemperate remarks by certain political candidates. US Treasury officials have argued they are constrained in what limits they can impose on products by the terms of the IRA itself, while those who advocate for disagree. Nick Iacovella, a senior vice president at the Coalition for a Prosperous America, said, “any administration could fix a major flaw in the IRA, which is that it allows China to benefit.” He apparently has not heard of Congress or the rule of law, which is understandable since he is a lobbyist.

Others worry that Chinese companies could quickly pull up stakes and leave if the regulatory environment becomes unfavorable. But Illuminate isn’t going anywhere, Duer said. Even if Washington puts the manufacturing subsidies out of reach, “We would adjust. Nothing is fatal. Nothing can’t be overcome. The fact of the matter is, we’re here to stay.”