In the course of the company’s Q2 earnings call, NextEra CFO Kirk Crews has claimed that by the end of the two-year tariff grace period imposed by the President, “we expect our suppliers to be making ingots and wafers outside of China.” If true, this means we are seeing the US post-China solar supply chain taking form.
Crews reminds us that the Department of Commerce clarified in early May that panels made with wafers manufactured outside of China are not subject to its investigation, which has the ability to impose punitive retroactive tariffs on modules deemed to be substantively manufactured in China, even if the cell or module work was done in the four countries of Vietnam, Cambodia, Thailand, and Malaysia.
Since imposing anti-dumping tariffs on Chinese solar module imports in 2012, the US has been importing solar modules manufactured by Chinese companies operating in South-East Asia to dodge the tariffs, with much of the supply chain still located in China, just with cell or module work done outside of China. The AD-CVD investigation launched by the Department of Commerce at the end of March aims to put a stop to that, and so now we are going to see the “second dodge” – the Chinese companies will also move the wafer manufacturing part of the polysilicon-ingot-wafer-cell-module chain into these countries.
Already back in 2021, we saw JinkoSolar announce a 7 GW wafer factory in Vietnam, to supply downstream cell and module factories in Malaysia and the US. Having noted that, there is probably not enough wafer capacity built outside China, which dominates wafers more than any other part of the supply chain, to supply the US market – so companies had best get cracking on new factories in South-East Asia now.
As for options outside of South-East Asia, those are limited – India and South Korean manufacturers will be busy enough feeding their own markets, while the US First Solar cannot scale up its manufacturing swiftly enough to supply the entirety of US demand. As for a full Si supply chain built in the US itself, it is hard to see its government passing the necessary subsidies prior to 2027.
NextEra Energy Resources CEO Rebecca Kujawa stated that between 1 GW and 2 GW of solar development put at risk of cancellation by the Department of Commerce investigation in the April-June period should mostly be salved, thanks to President Biden’s executive order imposing a tariff moratorium.
CFO Kirk Crews stated that 2 GW of renewables consisting of 1.2 GW solar, 815 MW wind and 20 MW battery have been added to NextEra Energy Resources’ development backlog since the previous quarterly earnings call – bringing the total pipeline to 19.6 GW. The company intends to commission between 28 GW and 37 GW of new renewables by the end of 2025.
NextEra subsidiary Florida Power & Light (FPL), which serves the majority of Florida, reported a Q2 net income of $989 million, with 11% quarterly growth and a capital expenditure of $1.9 billion. This quarter also saw NextEra commission the $900 million, 1.2 GW Dania Beach gas plant, which is replacing the three-times more polluting Lauderdale Plant. CFO Kirk Crews states that the company intends to convert 16 GW of natural gas plants to green hydrogen – which is most of the company’s gas fleet – as part of last month’s 2045 net-zero pledge. The company has assets of over $141 billion, with 28 GW of renewables in operation and another 18 GW under development, with 4.5 GW of battery capacity operating or under development.
Crews expects gas to remain expensive indefinitely, which will propel renewables through whatever supply chain disruption they experience – he points out that Europe no longer has the option of switching from gas to coal whenever the gas price is high.