Ultimately, energy independence in today’s world is an illusion in the era of globalization because the hyperconnection of the market makes it impossible. Yet it is an endless battle cry that is ultimately an argument of semantics, the outcome of which depends on how you define ‘independence’.
The American shale boom has briefly rekindled the debate over something the country has long regarded as a distant dream: energy independence.
But that was before Covid-19 struck, and with it a full-fledged flight to renewable energy.
The idea that the country could become self-sufficient by producing enough energy to sustain the entire population and industries was first driven by Nixon when he declared war on foreign oil during the oil crisis of the 1970s. But with the constant shift to low-carbon energy, America may not be closer to achieving this energy utopia than it was four decades ago.
In fact, the energy transition could simply mean that America’s energy dependence is now shifting from the OPEC power station, Saudi Arabia, to the largest manufacturer of renewable energy equipment and the largest importer of Saudi oil: China.
And this is because over the course of a decade, China has become the most dominant manufacturer of renewable energy equipment, especially solar power. Related: Mexico’s Pemex boasts a billion oil discovery
In fact, 7 of the top ten solar manufacturers worldwide are Chinese companies, with only First Solar Inc. (NASDAQ: FSLR) and SunPower Inc. (NASDAQ: SPWR) representing the United States.
The Biden administration has promised to install at least 500 million solar panels nationwide and spend $ 1.7 billion on federal spending on renewable energy infrastructure in an effort to make the United States a net emitter of carbon pollution by 2050.
But it is very likely that the vast majority of investment dollars will end up in the coffers of the Middle Kingdom – and with it our dreams of energy independence.
Biden’s sun wall
The solar sector became the best performing corner of the clean energy universe during the pandemic and continued to shine after Biden was elected president.
Unfortunately, the current year has been anything but friendly for the solar sector, with the Invesco Solar ETF (TAN) decreased by 6.6% compared to 5.3% YTD profit by the S&P 500.
The sales can mostly be attributed to the concern of overvaluation, but also to the growing concern about China’s suffocation market in the sector.
The irony of it all is that China will eventually expand its rule during Biden’s tenure.
In January 2018, the Trump administration implemented Division 201 tariffs on imported cells and modules at the height of the trade war with China. A presidential proclamation issued in October seeks to raise rates and eliminate an exemption for two-sided solar panels. Related: Another investment bank bets on $ 100 oil
Although the evidence is diverse on its effectiveness, the disadvantages seem to outweigh the advantages. On the one hand, the import restriction of 2.5 gigawatts of solar power provided some support for the local manufacturing industry for solar modules and also helped to level the playing field.
But the damage done is by no means negligible. According to The Hill, the 2018 solar tariffs have significantly hurt the US solar industry by destroying more than 62,000 jobs and nearly $ 19 billion in new private sector investment. Tariffs, which started at 30% in 2018, have made some imported panels more expensive, with the price of high-efficiency PERC (Passivated Emitter Rear Cell) modules in the United States almost doubling compared to prices in other markets, as the modules leave factories. in China and Southeast Asia. Indeed, Greentech Media estimates that such modules, when purchased in multi-megawatt quantities, now cost 32 cents to 35 cents per watt in the US, compared to only 17 to 19 cents per watt when manufactured. Most of the extra cost can be obtained directly up to the Trump rates, as the delivery cost is at a much lower 1.5 cents to 2 cents per watt.
That the U.S. solar power sector continued to thrive, despite tariffs, is a true testament to how strongly solar power momentum has grown. Imports of modules from China have indeed been growing since January 2019. This despite a combination of Article 201 tariffs, compensatory rights and anti-dumping laws. Biden is expected to order the International Trade Commission to evaluate these tariffs and possibly recall them given the damage they have done to the downstream solar power industry in this country. Even partial lifting of the penalty tariffs on solar modules and converters is expected to have a positive effect on the development of solar power.
But when it comes to U.S. production of solar components and modules, the government must wage an uphill battle.
Most critics say Trump’s protectionist trade policies, such as tariffs, have fallen behind and serve only to hamper domestic solar power development 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 testimony documents the China chokehold on solar power generation. China seeks global domination of this industry because they recognize the importance of renewable energy and if they achieve their dominance in solar energy, it will give them a huge advantage in the support and loyalty of many other countries around the world.In the game of global geopolitics, energy supply control is an important weapon and advantage.In a hyper-competitive business world, it is more important to be number one in energy production than to be number one in stock market notations. or basketball sneakers.“
Nearly 80% of the solar panels installed in the United States come from Chinese companies. China currently controls 64% of the polysilicon material worldwide versus 10% market share by the United States, as well as almost 100% of the sunblock and solar waffles.
The CPA says the U.S. needs to implement a mix of tax credits, incentives and favorable government procurement policies for government-owned solar installations to ensure the long-term future of an end-to-end U.S. solar power supply. Otherwise, we can kiss goodbye to our energy independence dreams.
By Alex Kimani for Oilprice.com
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