Reshoring industries that had left the United States while suppressing their Chinese competitors is a key component of the Joe Biden administration’s supply chain reshuffling efforts. Such efforts sound perfect politically, because they are expected to serve the dual purposes of adding jobs at home while undermining the United States’ leading strategic competitor.
But the recent troubles in the US photovoltaic market may present uneasy evidence to the administration that these are economically unviable endeavors.
On July 17 local time, SunPower, a leading residential solar installer in the US, announced it would suspend multiple core businesses. Renova Energy, partially invested by the company, immediately declared it was temporarily halting all business operations in California and Arizona.
SunPower plans to cut jobs and close its direct sales channel to survive. But analysts see it on the cusp of failing. After conceding looming financial troubles in December, the company fired its CEO in February and COO in May, then saw its auditor resign this month. If SunPower fails, it will involve at least three other companies in the industry in which it is a partial investor.
But the troubles are far from exclusive to SunPower and its associated companies. SunPower is the third US photovoltaic enterprise to find itself in dire straits within a month. Just days ago, Toledo Solar announced it was suspending all research and development and then business operations. On June 28, the sixth-largest US consumer solar installer, Titan SolarPower, declared its permanent closure. This year has already seen a number of other smaller solar companies go bankrupt.
SunPower’s troubles derived ostensibly from suspicion that its management may have fudged numbers to make it more attractive to investors. Behind it, however, multiple factors are responsible. And those factors boil down to one simple truth — the US approach to boosting the domestic photovoltaic industry is failing, not because of Chinese competition, but because of its absence.
Transitioning from traditional fossil energy sources such as coal and petroleum is a global consensus as a means to address some of humanity’s biggest challenges, including environmental pollution, resource exhaustion, and climate change. In the 2020 presidential election, Biden campaigned on a pledge to shift the country to clean energy, and he retained that pledge in this year’s campaign until he dropped out. His administration has gone a very long way to foster the solar industry at home.
For that purpose, despite its fierce attacks on the Chinese government for allegedly breaking market rules, Washington has actually gone farther in doing that.
Since 2012, the US has launched anti-subsidy and antidumping probes against Chinese photovoltaic firms, and continuously raised tariffs. In May, for instance, it raised tariffs on Chinese solar batteries to 50 percent from the previous 25 percent. While limiting Chinese exports, the Biden administration signed the Inflation Reduction Act, vowing to subsidize domestic photovoltaic companies with the $369 billion earmarked for climate change and energy security. The astronomical subsidies and lax financial environment at the time did deliver a period of conspicuous growth in the US photovoltaic industry. But rising interest rates, inflation, policy changes and financial irregularities have combined to subvert that untenable model. The US dream of a prosperous homegrown photovoltaic industry may prove unrealistic in the near term because the approach is against market rules. As many have observed, closing the US solar market to the reasonably priced Chinese products has resulted in significantly higher consumer prices and installation costs in the US. There is no way this could hold for long.
