Ultimately, energy independence in today’s world is an illusion in the age of globalization, because the hyper-connectedness of the market makes this impossible. Yet it is a never-ending rallying cry that eventually becomes a semantic argument, the outcome of which depends on how you define “independence.”
The shale wave in America has briefly rekindled debate about something the nation had long come to regard as a distant dream: energy independence.
But that was before Covid-19 hit, and with it, a full-fledged flight to renewable energy.
The idea that the country could become self-sufficient by producing enough energy to support its entire population and industries was first put forward by Nixon when he declared war on foreign oil during the oil crisis of the 1970s. But with the ongoing shift to low-carbon energy, America may be no closer to achieving this energy utopia than it was 40 years ago.
The energy transition could even mean that America’s energy dependence is now shifting from the OPEC superpower, Saudi Arabia, to the largest manufacturer of renewable energy equipment and the largest importer of Saudi oil: China.
And that’s because, in the space of ten years, China has become the most dominant manufacturer of the equipment that produces renewable energy, especially solar energy. Related: Mexico’s Pemex Features Billion Barrel Oil Discovery
In fact, 7 of the top 10 solar manufacturers worldwide are Chinese companies, with only First Solar Inc. (NASDAQ: FSLR) and SunPower Inc. (NASDAQ: SPWR) representing the United States.
The Biden government has pledged to install at least 500 million solar panels nationwide and spend $ 1.7 trillion in federal spending on renewable energy infrastructure in an effort to make the United States a net-zero emitter of carbon pollution. by 2050.
But it is very likely that the vast majority of those investment dollars will end up in the coffers of the Middle Kingdom – and with it our dreams of energy independence.
Biden’s blinds
The solar industry emerged as the top-performing corner of the clean energy universe during the pandemic and continued to shine after Biden was named president-elect.
Unfortunately, the current year has been anything but kind to the solar industry, with the Invesco Solar ETF (TAN) Decreased 6.6% vs. 5.3% YTD profit with the S&P 500.
The sell-off is mainly due to concerns about overvaluation, as well as growing concerns about China’s blockage in the sector.
The irony of all this is that China could expand its dominance during Biden’s tenure.
In January 2018, the Trump administration implemented Section 201 solar tariffs on imported cells and modules at the height of the trade war with China. A presidential proclamation released in October aims to raise those rates and do away with an exemption for two-sided solar panels. Related: Another investment bank is betting on $ 100 of oil
While the evidence for their effectiveness is mixed, the drawbacks seem to outweigh the benefits. On the one hand, the 2.5 gigawatt solar cell import limit provided some support for domestic solar panel production and also helped level the playing field.
But the damage done is certainly not negligible. According to The Hill, the 2018 solar tariffs significantly hurt the U.S. solar industry by destroying more than 62,000 jobs and nearly $ 19 billion in new private sector investment. The tariffs, which started at 30% in 2018, made some imported panels more expensive, with the price of highly efficient PERC (Passivated Emitter Rear Cell) modules in the United States almost doubling compared to prices in other markets as the modules leaving factories in China and Southeast Asia. Indeed, Greentech Media estimates that when purchased in multiple megawatt quantities, such modules now cost 32 cents to 35 cents per watt in the US, compared to just 17 to 19 cents per watt when manufactured. The lion’s share of that extra cost can be directly attributed to the Trump tariffs, as shipping costs clock in at a much lower 1.5 cents to 2 cents per watt.
That the US solar industry has continued to thrive despite – not because of – tariffs is true testament to how much the sun’s momentum has grown. Indeed, module imports from China have shown a growth path since January 2019, despite a combination of Section 201 tariffs, countervailing duties and anti-dumping laws. Biden is expected to order the International Trade Commission to review and possibly revoke these tariffs, given the damage they have done to the downstream solar industry in this country. Even a partial abolition of those punitive tariffs for solar panels and inverters is expected to have positive effects on the development of solar energy.
But when it comes to boosting the US production of solar components and modules, the government faces a tough battle.
Most critics say Trump’s protectionist trade policies like tariffs have backfired, only serving to hinder domestic solar deployment and increase costs while doing nothing to stop China.
According to Jeff Ferry, chief economist of the Coalition for a Prosperous America (CPA) in Washington:
“Our evidence documents China’s chokehold in solar power production. China is aiming for global dominance of this industry as they recognize the importance of renewable energy and if they achieve their dominance in solar power, it will give them a huge advantage. winning the support and loyalty of many Other countries around the world In the game of global geopolitics, energy control is an essential weapon and advantage In a hyper-competitive business world, number one in energy production is far more important than number one on the stock exchange or basketball shoes.
Almost 80% of the solar panels installed in the United States come from Chinese companies. China currently owns 64% of the polysilicon material worldwide, versus 10% market share of the United States, as well as nearly 100% of the solar panels and solar wafers.
The CPA says the US must implement a combination of tax credits, incentives and favorable government policies for government-owned solar plant procurement to secure the long-term future of an end-to-end US solar power supply chain. Otherwise, we can say goodbye to our dreams of energy independence.
By Alex Kimani for Oilprice.com
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