In 2023, the Biden Administration’s green industrial policy faced a formidable test as U.S. solar manufacturers, despite subsidies and tariffs, struggled to compete with the influx of inexpensive solar panels flooding the global market from China. While some advocate for loosening restrictions on Chinese solar panels to expedite renewable energy deployment, concerns arise over the sustainability of such an approach.
The race to deploy renewable energy encountered hurdles in 2023, with rising interest rates, delayed tax credit guidance, and an overdue reform in the project permitting process hampering progress in the U.S. Despite these challenges, solar emerged as a bright spot, contributing three-fifths of new renewable electricity capacity globally. According to the International Energy Agency, solar is the sole renewable technology advancing at a pace to meet the net-zero by 2050 targets.
This positive trend, beneficial for climate goals, also underscores China’s increasing market dominance. Over the past decade, China’s global market share of solar panels has surged from 40% to over 80%, establishing a near monopoly.
China’s advantageous position in the solar market is a result of substantial investments by its government in the mid-2000s, concentrating on electric vehicles, lithium batteries, and solar cells—the so-called “new three.” Integrated supply chains, innovative manufacturing techniques, consistent government support, and a massive domestic market contributed to the growth of China’s solar industry.
However, the darker truth behind China’s solar boom lies in its connection to the Chinese Communist Party’s persecution of the Uyghur ethnic minority in Xinjiang. The region produces a significant portion of the world’s solar-grade polysilicon. While the U.S. has imposed restrictions on direct solar imports from China, solar modules assembled in Southeast Asian countries, major sources of U.S. solar panels, often use Chinese components traced back to the Uyghur Region.
Despite the carbon-emission-free energy produced by Chinese solar panels, the environmental impact of their production raises concerns. A recent study found that solar panels manufactured in China contribute 30% more greenhouse gas emissions than if the supply chain were reshored to the U.S., primarily due to the coal-intensive power generation in Xinjiang.
China’s solar dominance also raises security concerns for the U.S. and its allies, akin to Europe’s past dependence on Russian natural gas. While critics argue that renewable energy cannot be weaponized like fossil fuels, the overwhelming reliance on a single country, especially one with potential adversarial relations, poses a genuine security threat.
To address these challenges, critics of the Biden Administration’s green protectionism suggest that foregoing cheap Chinese solar panels might slow the energy transition. However, they acknowledge that other factors, such as high interest rates and permitting issues, must be addressed. To break China’s solar monopoly, the U.S. could consider measures such as domestic clean energy manufacturing incentives, reinstating tariffs on Chinese-made solar components routed through Southeast Asia, and collaborating with allies to bolster their solar manufacturing capacities.
While this strategy might marginally slow solar energy deployment, proponents argue that it is a necessary step to reduce dependence on China and safeguard national security. The Inflation Reduction Act’s domestic clean energy incentives mark a starting point, emphasizing the need for a multifaceted approach to tackle the complex challenges presented by China’s solar dominance.