Over the past three years, the price of solar panels in the United States has fluctuated between an historic high and low due to a reliance on China. Now, as the Donald Trump administration imposes a long-threatened 10% tariff on Chinese imports, could America’s bid for freedom from the Chinese solar market prove a boon for India and Pakistan?
The price volatility of solar installations can only be understood through the Chinese and US trading relationship. The US was a leader in manufacturing polysilicon, which is used to make solar panels, until China enacted a 57% anti-dumping tariff against US polysilicon in 2013. For the next decade, the US solar market increasingly relied on Chinese expansions in polysilicon manufacturing to fuel its exponential growth. When US demand for solar skyrocketed during the pandemic, China was unable to keep up.
The shortage of raw material came against a backdrop of the urgent need to transition away from fossil fuels. As the demand for solar skyrocketed, prices increased by 50% in two years, says Andries Wanderwaar, solar analyst at US-based energy consulting firm Rethink.
Wanderwaar told Sapan News that it takes about two years to build a polysilicon factory and “bring more production capacity online”.
Conditions that created the polysilicon shortage are unlikely to repeat, he said in 2023. “The demand has now been met, but there are still a huge number of projects that it is too late to give up on. As soon as there is a 5% percent increase in demand for polysilicon, another (Chinese) factory will be ready to meet it.”
A year later, Wanderwaar’s prediction appears correct. Chinese polysilicon wafers hit a record low, triggering US accusations of dumping – a charge China once made. Meanwhile, solar power growth surges in India and Pakistan.
Scientific consensus
The solar energy market chaos unfolds amid the urgent need to transition from fossil fuels. The UN Framework Convention on Climate Change warns that global temperatures must not exceed 1.5 degree celsius over 1990 levels to avoid severe effects such as water scarcity and extreme weather. To stay under the 2 degrees celsius limit, the US must reach zero emissions before 2050. However, current emissions trends put the world on track for more than a two degrees celsius rise by mid-century.
Since the 2017 Climate Accord in Paris, US emissions have remained steady, with rising energy use offsetting gains from renewables. Projections show renewables increasing from 20% in 2020 to 35% by 2030 – still falling short of the UN’s recommended 50% emissions reduction.
Solar energy has shown the most growth in renewables, expanding an average of 20% annually over the past five years. Panel costs dropped 83% between 2010 and 2019, increasing accessibility to consumers. The US government’s tax credit for solar installations increased from 26% tax in 2020 to 30% in 2022.
Other renewable options have grown at a slower rate. Wind grew at an average of 10.50% over the past five years, bioenergy and hydropower have not grown significantly.
The Solar Energy Industries Association, a US-based trade organisation, does not foresee solar installations slowing down in the next decade. In fact, its 2021 report predicted that the US can produce and install enough solar panels to supply 30% of the country’s total energy consumption by 2030. This is nearly 10 times more than in 2022, when solar only provided 3.4% of US electrical generation.
However, the solar industry subsequently experienced a shortage that tripled prices for the next two years. Two main factors contributed to this shortage. First, one of the largest factories in China for polysilicon unexpectedly closed for repairs, partly due to Covid-19. Second, the US passed the Uyghur Force Labor Prevention Act.
Despite the strengthened supply chain, the US may experience inflated prices due to trade restrictions. “The shortage won’t come back to China or any country open to Chinese imports, but now you see the problem,” said Wanderwaar.
The Act requires US Customs and Border Enforcement to block all goods produced in China’s Xinjiang province, including most polysilicon used in solar panels, due to concerns about Uyghur forced labour. Human rights groups accuse the Chinese government of crimes against humanity directed against Uyghur, a predominantly Muslim ethnic minority, which China denies.
Emergency order
Most solar panels in the US are imported from Southeast Asia – with components largely made in China – requiring lengthy reviews at the US border. In 2023, during the polysilicon shortage, US customs seized 1,400 solar shipments worth hundreds of millions.
A Department of Commerce investigation found solar companies had used imports from Southeast Asia to circumvent tariffs on Chinese panels. From June 2024, these countries also faced new tariffs.
Another reason the US solar polysilicon shortage ended in 2023 was because President Biden signed an emergency order ending sanctions on Chinese solar panel components, in a bid to counter the energy shortage created by sanctions on Russian oil. But then, prompted by the Uyghur Human Rights Project, the Republican-controlled House Ways and Means Committee voted to reverse the order.
The price of polysilicon thus largely depends on whichever political party controls the US government. Eventually though, the Inflation Reduction Act will help reduce prices overall, and even lead to the US becoming self-sufficient in producing solar panels, believes Wanderwaar.
“With all the subsidies and support the United States is getting, it can make its own polysilicon,” he told Sapan News.
But will Americans be willing to pay the higher price for domestically produced solar panels – a hugely energy-intensive and time-consuming process. Energy here is also more expensive as is labour. “In the end, the price per gram to produce polysilicon in the US would be around double the price in China,” said Wanderwaar.
This number turned out to be accurate as in December of 2024, the Biden Administration announced an increase to 50% of its tariff against Chinese made solar power components in a bid to protect US industry.
As the demand for solar exponentially increases, another source of price hikes could be a labor shortage. Stephen Lapointe, co-owner of PowerDash, a Massachusetts-based renewable energy output monitoring company, says recruitment is one of his riskiest decisions.
“To monitor or resolve issues in a solar panel’s energy output, a worker must reconcile with the advanced and antiquated software. No degree program teaches the combination of skills we need,” he told Sapan News.
As a result, his company has to provide extensive training to every new employee. “If we hire someone who finds they are not suited to the job, that’s a cost we cannot afford to take too often,” said Lapointe.
Given all these factors, solar power as an industry faces growing pains to meet the expectations placed on it.
Solar growth
While the US and China both suffer from the oversupply of solar panels, it has spurred growth in energy capacity in India and Pakistan. Until China had resolved its production issues in 2022, India’s solar electricity generation had grown at a linear rate. Upon the supply glut, the growth turned exponential. Just this year, 71% of the energy capacity added by India was renewable, thanks in large part to the record low price of polysilicon.
Perhaps one of the most dramatically affected countries by the supply glut was Pakistan. In 2022, Pakistan was adopting solar power at only an average rate worldwide. By 2024, Pakistan had become the sixth largest solar market in the world, largely prompted by unexpected oversupply of panels.
The future of renewable energy is in an especially fragile state in both India and Pakistan. For the next three years they will be in a position of building their energy capacity. This means that whatever manner of energy facilities they chose to power their grid will stay in use for over a decade. As a result, the price of polysilicon in the next three years will profoundly impact the countries’ carbon emissions for the next decade.
This is a Sapan News syndicated feature.
