Philip Shen, managing director of ROTH Capital Partners, has stated that according to his industry contacts, 3 GW of solar modules have been held back from entering the US market since the Uyghur Forced Labor Prevention Act (UFLPA) came into force on June 21. Shen went on to say that a further 9 GW to 12 GW could be blocked this year.
As of the end of 2020, some 45% of global polysilicon supply came from Xinjiang, with another 35% from other Chinese provinces and regions. Since then the clear majority of new factories have been built outside of Xinjiang because of the Uyghur-related sanction threats, with the EU Parliament considering following the US’ lead. Under UFLPA rules, Customs and Border Protection (CBP) agents have been requiring documentation concerning the source of quartzite, the ultimate raw material of silicon-based semiconductors.
The Energy Information Administration’s recent statistical report found that of almost 25 GW of planned solar developments “only” 20% has been delayed, with 4.4 GW delayed on average each month, mostly for less than six months. To take a different metric however, H1 2022 installations were disastrously kneecapped to a mere 4.2 GW, barely 10% higher than Germany’s figure for the same time period. Yet the two-month period in which the Department of Commerce Investigation hung over South-East Asian solar imports, up until President Biden’s moratorium, does not seem to have impacted the rest of the pipeline.
The question is how bad things get – and Philip Shen’s numbers on UFLPA restrictions imply that the 20% delay figure will grow to as much as 50% in the second half of this year. Reportedly, LONGi, Trina Solar, and Jinko are all affected – the administrative infrastructure to comply with supply chain tracing doesn’t seem to have been established, and perhaps these companies, or rather the Chinese government behind them, has no intention of complying with such a precedent.
The US isn’t the only country experiencing solar module delays – in the EU, where trade interference has been minimal, the Dutch Sustainable Energy Association reports that the wait time for a residential solar installation has risen from four weeks in 2021 to between 8 and 12 weeks, partly due to a labor shortage, partly due to delays sourcing inverters and other system components. For half of companies surveyed by the Association there was a delay of at least three months, for a quarter six months, for supply of heat pumps and solar panels – and the Netherlands’s ports are the initial destination for most Chinese solar panels en route to European markets.
Meanwhile, the US’ recently-passed solar manufacturing incentives look set to attract a major new factory investment from Hanwha Q Cells, covering not just modules, but also cells, wafers, and ingots. According to a filing in Texas, the company is considering locations in Georgia, South Carolina, and Texas itself. This move by Hanwha indicates that domestic US solar manufacture is now financially viable throughout almost the whole supply chain, including ingot-pulling.
But polysilicon itself appears to still be outside of financial viability for new projects. This raises the question – will supply tracing be obeyed by the Chinese and respected by the US enforcers, with the US solar manufacturing industry able to buy polysilicon from China, or will Chinese polysilicon be excluded, leading to an American domestic industry being built? The problem with the latter is that polysilicon investment may require the certainty that Chinese products will be excluded, but then there’s a two-year delay to build the new Western capacity.