By Liam Denning
A new and unexpected obstacle to President Joe Biden’s green ambitions has emerged: a tiny solar-power company based in San Jose.
Auxin Solar Inc., which accounts for all of 2% of U.S. solar-module manufacturing, recently persuaded the Commerce Department to open a potentially devastating trade inquiry. After the U.S. imposed anti-dumping measures against Chinese solar-cell and module manufacturers just over a decade ago, alternative suppliers sprang up in South Korea and Southeast Asia. Auxin now contends that those other Asian suppliers are effectively used by Chinese companies to circumvent the anti-dumping measures.
If Commerce ultimately agrees, then more than four-fifths of solar-module imports to the U.S. and half of all cells could suddenly be subject to steep tariffs, perhaps levied retroactively. The Solar Energy Industries Association warns of dire consequences for U.S. solar-power development — critical to Biden’s decarbonization targets — claiming that some suppliers are already backing away because of the risk. Heavyweight NextEra Energy Inc. warns that the investigation may delay 2.8 gigawatts of projects slated for this year. Timothy Fox of ClearView Energy Partners, a Washington-based analysis firm, says Commerce’s “structural” inclination toward protectionism may lead it to concur with Auxin.
Auxin, like many western solar-equipment manufacturers, finds it hard to compete with China. The U.S. share of the global solar-module market has collapsed to about 1%. The vast majority of the U.S. domestic solar industry today is involved in developing, financing and constructing 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 tiny manufacturer could throw a wrench of such proportions into a vital industry does seem farcical. But Auxin has illuminated an inherent tension within Biden’s green agenda.
About a year ago, the president began recasting his efforts as being about not merely saving the planet or creating jobs, but also taking on China in a Sputnik-like contest for industrial supremacy. The problem is that Chinese manufacturing is what drove down the cost of cleantech, 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 energy isn’t competitive, and global supply chains are what made it so.
Yet globalization has fewer defenders on either the left or the right these days, with populism, the pandemic and Russia’s attack on Ukraine fraying or altogether snapping the bonds of trade. Deglobalization is inflationary for all types of energy. The secular trend of falling prices for solar equipment, batteries and other cleantech has been arrested.
Think about this in terms of externalities. Fossil-fuel advocates often criticize renewables for their reliance on subsidies, conveniently forgetting that their favored energy source has long enjoyed the biggest subsidy of all: unpriced emissions. Yet cleantech developers and advocates must now grapple with having to internalize some unpriced externalities of their own: security and protectionism.
There is no getting away from the reality that, while an increasing majority of Americans express concern about climate change, its abstract nature often makes it necessary to co-brand policies to address it — with jobs or infrastructure or geopolitics or whatever. As Auxin’s challenge shows, this creates tensions, especially around costs.
Similarly, the Ukraine War lays bare some real dilemmas. It would be madness to rely too much for critical equipment or minerals on a China that backs Russian aggression, not to mention on Russia itself. Equally, it would be madness to aim for energy autarky, an unhelpful fetish dating from the 1970s oil crises. Interdependence may be dialed up or down but it is inescapable. Note how the U.S. becoming a net oil exporter — scratching that neurotic itch from the 1970s — hasn’t shielded drivers from high and volatile pump prices. Diversifying away from fossil fuels, on the other hand, offers a way to blunt the power of petrostates such as Russia (and address climate change, obviously). Auxin’s victory would be a Pyrrhic one if, by raising costs, it shrinks the solar opportunity overall.
Reconciling these complex, conflicting pressures isn’t easy. But any attempt must start with acknowledging that national security and environmental protection are public goods that demand more than the odd tax break here, research grant there. Nor can they be simply left to “the market.” “It means recognizing that, actually, energy is not a commodity, it’s strategic,” says Sarah Ladislaw, who leads the U.S. program at the Rocky Mountain Institute.
This doesn’t mean demanding that all solar panels be built in American factories (or looking the other way while the Commerce Department effectively does that). It does mean setting strategic goals such as decarbonization and security of supply and then using the tools of government creatively to balance costs with risks. Where the U.S. can reasonably mine or manufacture what it needs, it should. Where it can’t, it should strive for trade agreements with allies that foster alternative supply chains.
Biden has shown himself willing to use executive powers to foster domestic production of lithium and other critical minerals, albeit in a fairly limited way. Yet he hasn’t communicated a holistic strategy, as evidenced by his mixed messaging on fossil fuels — which, like it or not, are also strategic as long as we are overwhelmingly reliant on them. Politically, it remains difficult to rally the collective effort required to address the challenges at hand. As Ladislaw puts it: “The U.S. is trying to have an industrial policy without being able to do the hard stuff.”
In case you think this is dunking on Democrats, it isn’t. This stuff involves difficult trade-offs in the context of a razor-thin governing majority, recovery from a pandemic and a major foreign policy crisis. Biden’s party is at least trying to grapple with these vital issues. If you’re seeking thought-leadership from the Republican party on energy and climate, I regret to inform you that its leading lights have their hands full canceling Disney.
The simultaneous imperatives to refashion and decarbonize fractured energy markets requires more than denial or piecemeal measures — or, for that matter, policy set by random trade investigations.
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Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal’s Heard on the Street column and wrote for the Financial Times’ Lex column. He was also an investment banker. Energiesnet.com does not necessarily share these views.
Editor’s Note: This article was originally published by Bloomberg on April 25 , 2022. EnergiesNet.com reproduces this article in the interest of our readers. All comments posted and published on EnergiesNet.com, do not reflect either for or against the opinion expressed in the comment as an endorsement of EnergiesNet.com or Petroleumworld.
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EnergiesNet.com 04 26 2022
