Signature Associates

First Solar plant could boost industry — if feds assist

Excitement enveloped greater Toledo two weeks ago as executives of First Solar Inc. said they intend to construct a 1.8 million-square-foot plant — their third high-tech solar panel-making operation in northern Wood County — starting in the second half of this year.

Politicians and economic development officials alike were thrilled by the decision that should boost local employment by the Tempe, Ariz.-based solar panel company to over 2,000 workers by 2023.

“It’s very great to see the continued commitment of companies wanting to settle right here in Wood County,” State Rep. Haraz Ghanbari (R., Perrysburg), said after the announcement.

In the long term, however, First Solar is doing more than just expanding job opportunities in northwest Ohio or enhancing the tax revenues of Lake Township, site of the new plant.

The company, whose roots run deep in the industrial history of the Toledo area, is making a $680 million gamble that the largely nascent U.S. solar industry is about to ascend with First Solar leading the way.

“It’s simply a matter of putting the right pieces together at the right time. I think First Solar has a very good plan to do that. They are in the right position at the right time,” said Nikolas Podraza, a professor of physics with a specialization in photovoltaics at the University of Toledo. “I’m optimistic about the future.”

First Solar, though, recognizes that it cannot jumpstart its domestic industry alone. Rather, it is betting (and likely lobbying) the Biden administration to provide assistance in several ways to nurture the solar industry and perhaps protect it while it matures.

Now is an “absolutely opportune time” to reshore solar industry assets now overseas and re-invest in clean energy jobs in America, said Samantha Sloan, vice president of global marketing and sales operations at First Solar.

“But to get there, we need to have protection from uneven and unfair competition. Not just for us, but the whole industry,” Ms. Sloan said. “We need assistance that will allow us to compete on our own merits.”

Unspoken is the economic threat posed by China, which claims 80 percent of the global solar market.

The Chinese government heavily subsidizes the solar industry. “They give a new company free land, a free building,” Ms. Sloan said.

Additionally, China makes 65 percent of the polycrystalline silicon used to make silicon-based solar panels. (First Solar uses thin-film technology that is based on cadmium-telluride rather than silicon.)

Even if a U.S.-based company wanted to start making panels or polycrystalline silicon wafers used to make panels, it likely would be subject to a Chinese-based supply chain.

“China has a long history of being an unreliable and risky partner in the solar industry,” Ms. Sloan said.

If the U.S. wants its solar industry to grow, building “a more resilient supply chain” is the first step, she added.

First Solar officials believe a two-prong approach, one that provides tax breaks and other incentives to spur domestic investment and the other which would include tariffs to protect domestic companies, is what President Joe Biden and his administration should pursue.

“You have to have buy-side and sell-side incentives,” Ms. Sloan said.

Sell-side incentives — that is, breaks to encourage companies that produce a product — would include policies and incentives to encourage investment capital “to get manufacturing facilities off the ground,” Ms. Sloan said.

Recently-elected Sen. Jon Ossoff (D., Ga.) last week introduced legislation that would grant tax credits for solar energy manufacturers at all stages of the supply chain, which he said was essential to making the U.S. internationally competitive on renewable energy.

Essentially, the bill would protect solar start-ups from unfair competition while they are ramping up.

Buy-side help is policies and credits that fuel demand for solar products, such as state incentives for companies using solar or the continued extensions of the federal solar investment tax credit (ITC), first enacted in 2006, that provides a 26 percent tax credit for solar systems on residential or commercial properties.

First Solar and the Solar Energy Industries Association (SEIA), the national non-profit trade association of the solar energy industry, agree mostly on what’s needed to help the industry become a powerful economic force.

Both support Senator Ossoff’s bill and continued extension of the ITC to the end of the decade. Mr. Biden has urged Congress to extend the ITC for 10 years.

Now is, “a once-in-a-generation opportunity to really invest and grow the U.S. solar manufacturing supply chain,” Jon Smirnow, general counsel and vice president of market strategy at SEIA, said.

“We believe you need a long-term vision and a suite of U.S. investment,” Mr. Smirnow added.

Unlike First Solar, SEIA advocates a three-pronged strategy to build a domestic solar base.

One key is demand certainty. “Companies need to know that if they build a plant there will be demand for their products,” Mr. Smirnow said.

Second is capital support. “It could be in the form of a manufacturing tax credit or if they buy the equipment they get a tax credit,” the SEIA official said.

Lastly, production support is needed. As the industry grows there needs to be some sort of domestic production tax credit so that all aspects of a supply chain can sprout and flourish.

“First Solar has done a really good job of building a factory and then procuring the products it needs and that are made in the U.S.,” Mr. Smirnow said. “But where … are the silicon ingot and wafer manufacturers? There’s no one in the U.S. that even makes wafer manufacturing equipment. There’s no one that supplies the diamond wire used to cut the ingots,” he said.

The U.S. needs a decade-long vision to advance the solar industry. “We think this administration has that vision,” Mr. Smirnow said.

Where the SEIA and First Solar part ways is on the issue of tariffs. The SEIA does not support tariffs.

“Our view on tariffs is tariffs are ineffective on incentivizing. You’re not going to build a strong base with tariffs,” Mr. Smirnow said. “We fully support a rules-based trading system and countries have to follow the rules or there will be repercussions.”

First Solar, on the other hand, thinks tariffs or some form of protectionism could be a useful tool to insulate the solar industry when needed from unfair competition.

“The Trump tariffs, they were well intentioned. …Where they fell apart is there weren’t alternatives for people to turn to once they were implemented,” Ms. Sloan said.

“If your only option is to buy the thing that has tariffs on it, of course people are going to be against tariffs,” she said.

That said, the company is not advocating for tariffs. But, “Trade law has a role to play to protect the country,” Ms. Sloan said.

And that includes protecting First Solar’s expanding investment in Wood County, which will make it the largest solar panel manufacturing operation outside of China — a fitting legacy for a company that began in Toledo in 1986 as Solar Cells Inc. and was the brainchild of late inventor and visionary Harold McMaster.

Mr. McMaster sold the company in 1999 to True North Partners LLC and it was renamed First Solar. It went public in 2006.

“Ohio is our home. We have a long view and passion about our home. We started here because of the Maumee River and the soda ash we can get from it. We rely on the capability of the University of Toledo and local support is strong,” Ms. Sloan said.

But just two quarters ago, company CEO Mark Widmar was talking about building the company’s next plant — which, like its second plant in Wood County, would produce First Solar’s game-changing Series 6 solar module — somewhere in Asia, possibly India.

The decision to expand in Lake Township was an indication that First Solar likes the signals it is getting from Mr. Biden and his administration.

Already, Mr. Biden has plans to make America’s electric grid carbon-free by 2035.

And if anyone in Washington should understand the current fragile state of America’s solar industry, it is Mr. Biden. Northwest Ohioans may recall that in 2009, a then-Vice President Joe Biden came to Perrysburg to visit Willard & Kelsey — a promising solar panel maker that is now out of business.

“The project we announced, our third facility in Ohio, currently there are not substantial incentives on the sell side for it,” Ms. Sloan said. “But we want to be closer to our customers and our demand. We think there’s a role First Solar can play to make the industry grow and be innovative.”

Its investment in Ohio also is strategic in that it eliminates reliance on freight shipping from Asia.

Mike Koralewski, First Solar’s chief manufacturing operations officer, said shipping has become more expensive and less reliable in recent years and especially during the coronavirus pandemic.

“If you look at what the industry is today in ocean freight, right now the reliability of ocean freight is at its worst in the last five to 10 years. It’s also the most expensive, driven by supply and demand, and also driven by the pandemic initially. But the growth of ecommerce has also contributed,” he said.

Ms. Sloan said as shipping rates rise it is not inconceivable that freight expense could be “north of 10 percent” when calculating the overall cost to First Solar for producing a single solar panel.

Posted By: The Toledo Blade on June 27, 2021.  For more information, please click here to read the source article.

To receive the In The Know from Signature Associates, please click here to be added to our mailing list.