The world’s largest solar company warns the west against cutting out Chinese suppliers

Solar panel manufacturers in Europe and the US have warned against excluding Chinese companies from renewable energy supply chains.

China dominates the solar manufacturing industry, with more than 80 percent of global production, following decades of state-sponsored deep support, rapid growth in domestic demand and fierce local competition.

Western political and industrial leaders have called for greater varietyin the supply in response to a glut of Chinese imported goods. They also expressed security concerns about components made in China being used as critical infrastructure.

Dennis She, vice president of Longi Green Energy Technology (which has about 20 per cent of global photovoltaic module market), said that Western countries would “at the very least” slow down their transition away from fossil fuels, if they cut back on Chinese solar supply. He warned that solar panels manufactured in the US without Chinese participation would cost “double”.

Europe produces less than 3 percent of the solar panels it needs to achieve its goal of 42.5 percent of energy coming from renewable sources by 2030.

She said that if more panels are imported from China, it will create jobs in “downstream” industries, such as solar panel construction, engineering, design, and installation.

He said: “It doesn’t make any sense to destroy most of the jobs downstream in order to protect 1 percent [of the European solar manufacturing jobs] – it’s not a good idea.”

The warnings are in response to a growing concern among western countries that Beijing’s subsidies to its clean technology industries, which include wind, batteries, and electric vehicles, have increased Chinese manufacturing capacity well beyond what is needed to meet the domestic demand. This has led to unfair trade practices, as Chinese factories flood international markets with their exports.

Last month, a bipartisan group of US senators called on President Joe Biden to increase tariffs on Chinese-made solar imports. The heavily subsidised products were hurting American efforts to “reshore” domestic manufacturing, they said, adding that China’s overcapacity posed “an existential threat” to US energy security.
As a response to western protectionism, China’s Solar Industry, which has endured multiple rounds of tariffs in Europe and the US for the last 15 years, is expanding its manufacturing footprint to be closer to customers offshore, including the US.

In the US, however, some attempts to move production to South-East Asia were viewed as a way to avoid restrictions. In the US, companies, including a Longi subsidiary, were found guilty of using foreign production to avoid tariffs on Chinese components.

Longi manufactures most of its goods in China. It also has factories located in Vietnam, Malaysia’s southern state Sarawak and plans to open a new facility in India.

Longi said that to mitigate the worsening of geopolitical risks, she is “trying to collaborate with countries” including through local joint-venture partners to increase solar production capacity.

This includes the US where the Shanghai listed group has set up a joint venture with Invenergy in Ohio. Longi has also been in discussions to enter Saudi Arabia via a local partner.

Longi said that to better serve the developing economies of South-east Asia, Latin America, and Africa, she is increasing exports to China. She noted that approximately 1 billion people around the world do not have access to electricity.

Solar is a great gift from the gods for the rest of the industry. . . You have solar [panels] imported from China. Sunshine is your own sun,” he said.

Wood Mackenzie is an energy consultancy that has predicted that China will continue to dominate solar technology after investing more than $130bn in the last year. It will also control more than three quarters of the global solar polysilicon production capacity, wafers, cells and modules for at least the next three.

According to Wood Mackenzie, the cost of solar production in China dropped by over 40% last year to 15 cents per Watt, compared with 30 cents and 40 cents respectively in Europe and the US. This was partly due to lower material costs and an oversupply.

Longi’s factory utilisation rates have fallen between 70 and 80 percent due to the glut. However, it believes that consolidation in the industry and growth in demand will help it improve its profitability and gain market share over the next few years.

“Everyone is bleeding right now,” she said, adding only players of sufficient size like Longi would likely survive.

“Small or new players will disappear from the marketplace.” . . “I can’t give you an exact number but I think that tier two, tier three, and most companies are at risk.”