Solar industry is parsing the fallout from Biden sanction on key solar material

After months of anticipation, in late June the Biden administration announced its first trade sanctions affecting the U.S. solar industry: It will restrict imports of metal silicon from a producer in China’s Xinjiang province because facilities there have been linked to forced labor of Uyghur Muslims.

How the sanctions will affect solar firms in the U.S. is not immediately clear, and analysts are split on the potential ramifications. But the solar industry is ​“a little panicked,” said Xiaojing Sun, head of solar research at energy consultancy Wood Mackenzie.

Rather than targeting polysilicon suppliers, the White House went further upstream, placing restrictions on imports from Xinjiang-based silicon metal producer Hoshine Silicon Industry Co., Ltd., which supplies polysilicon makers tied to some of the biggest names in solar.

Beginning immediately, importers of solar modules will have to prove to U.S. Customs and Border Protection that shipments do not include silicon manufactured by Hoshine — a potentially difficult task due to the opacity of the polysilicon supply chain.

“The challenge is not going to be avoiding Hoshine metal silicon, because there’s not that much of it. The challenge is having traceability when you don’t have cooperation from the Chinese government,” said Jenny Chase, manager of solar research at BloombergNEF. ​“Nobody tracks where their metal silicon comes from.”

It’s unclear exactly how much Hoshine silicon makes its way into the solar panels that end up in installations in California, Texas or Minnesota. The majority of solar panels imported to the U.S. are now manufactured in Southeast Asia because of existing trade duties on Chinese-made solar. But many Southeast Asian module factories are owned by Chinese firms, and their supply chains likely stretch into China.

Also, silicon from several producers may be blended to create polysilicon, and then polysilicon from different producers may be used in the same solar module.

Hoshine produces 16 percent of the world’s metal silicon supply, according to Bloomberg. Only a small percentage of that goes into polysilicon, which is then made into solar cells, but the tendency for producers to blend materials means it’s likely that at least some Chinese polysilicon ends up in modules brought to the U.S., both Bloomberg’s Chase and WoodMac’s Sun said. One of Hoshine’s polysilicon clients, German firm Wacker Chemie, has a production facility in Tennessee. Another client, Daqo of China, sells polysilicon to solar manufacturers such as Jinko, Longi and Trina, whose panels have been used in U.S. projects.

But the amounts of Chinese polysilicon making their way into the U.S. are likely ​“immaterially small,” argued Pavel Molchanov, an energy research analyst at financial services firm Raymond James & Associates, because China’s booming solar industry also imports polysilicon from countries such as South Korea and Germany.

Analysts do agree that the new sanctions are likely to have little impact in China. The country has consistently disputed allegations of forced labor and human rights abuses connected with the Uyghur Muslim population. After the Biden administration announced restrictions on silicon imports, Zhao Lijian, the spokesperson for the Chinese Foreign Ministry, condemned the sanctions.

“It would take a truly multinational coalition of allied countries to pressure the Chinese solar industry, and ultimately the Chinese government, to behave better,” said Molchanov. ​“There is simply not enough leverage on the part of the United States by itself to make any meaningful difference.”

Last year the Solar Energy Industries Association (SEIA), the industry’s largest U.S. trade group, began encouraging members to move supply chains out of Xinjiang to prepare for possible trade sanctions. ​“We do not have transparency into supply chains in the Xinjiang region, and there is too much risk in operating there,” said John Smirnow, SEIA’s general counsel, in a statement on the sanctions.

Ongoing efforts from companies to voluntarily move production to other regions could blunt the impact of the new policy in the U.S. And while tracking from WoodMac suggests that Xinjiang will remain dominant in polysilicon production in the near term, the great majority of the industry’s growth in the next three years will be in other parts of China. According to Bloomberg, there is also currently enough non-Hoshine silicon to meet U.S. demand for silicon-based solar modules.

The restrictions could, however, serve another objective of the Biden administration: encouraging more manufacturing in the U.S. In June, Georgia Sen. Jon Ossoff (D) introduced a bill that would offer a tax credit to domestic solar manufacturers.

In addition to restricting Hoshine imports, the U.S. Commerce Department added several of the world’s largest polysilicon producers — including East Hope Nonferrous Metals, Daqo New Energy and GCL New Energy Material Technology — to its ​“Entity List,” which forbids U.S. companies to export to them. The White House said Customs and Border Protection will continue to investigate allegations of human rights abuses in polysilicon production.

(Lead photo by Science in HD)