Ban Chinese Solar Genocide Panels
Manchin-Schumer energy bill must include ban on Chinese solar panels, which are a moral catastrophe.
Yesterday I praised Sen. Joe Manchin (D-WV) for attempting to level the playing field between energy sources with proposed legislation that would cut the renewable energy tax credit by 80%, extend it to existing nuclear plants, and prohibit wind and solar development on federal land, or in federal waters, unless oil or gas lease sales had also been issued. The bill was not perfect, I noted, but it appeared to be an improvement over Build Back Better, which would have effectively killed off nuclear energy.
Unfortunately, as has become clear over the last 24 hours, the legislation lards in so many additional subsidies for solar and wind, and disadvantages nuclear in other ways, that it may still kill off nuclear. It turns out that the 80% reduction in the subsidy for wind, known as the “PTC,” or production tax credit, from 1.5 cents per kilowatt-hour to 0.3 cents/kWh is before inflation. After inflation is accounted for, the reduction is 73%, from today’s 2.6 cents/kWh to 0.6 cents/kWh.
And it gets worse. If wind developers pay the “prevailing wage,” which most will do, the subsidy returns to today’s 2.6 cents/kWh. And if the wind project includes domestically manufactured content, and is produced in places where fossil fuel energy used to be produced, both of which will almost certainly be defined very expansively, that subsidy rises to 3.1 cents/kWh.
It’s true that: the subsidy ends on December 31, 2024, after which it becomes technology-neutral; it’s good to encourage the domestic manufacturing of solar and wind; and that the new clean electricity tax credit subsidy will, finally, apply to existing nuclear plants, not just solar and wind. Like the wind subsidy, the nuclear tax credit subsidy would start at 3 cents/kWh base rate, and increase five-fold, if the plants meet prevailing wage requirements, which they almost certainly would, given the high wages nuclear plants pay.
But the nuclear tax credit subsidy would only last from 2024 to 2032, which means it wouldn’t help nuclear plants right now, whereas the solar and wind subsidies would cover both 2022 and 2023. This is actually a step backward from the last reconciliation bill.
And the subsidy for solar, an investment tax credit, known as the “ITC,” which reduces the cost of the solar project by 26%, is even more unfair. A tax credit is a dollar-for-dollar reduction in taxes a company or person would otherwise pay the government. Here again the Manchin-Schumer bill appears to lower it to 6%, but if prevailing wages are paid, it would rise to 30%. If the solar panels are build where there used to be fossil fuel production and with domestic content, the credit could rise to an egregious 50%.
Yes, you read that right. The Manchin-Schumer bill would have taxpayers pay for a full half the cost of solar panel projects. And solar producers would, if they choose, be able to give up the ITC in exchange for PTC starting in 2023.
The total cost of those tax credits would be an estimated $260 billion. If that amount covered half the cost of nuclear plants, the United States could build 35 to 70 full-sized nuclear power plant reactors, depending on how much one assumes the cost would come down over time. Doing so would increase nuclear’s share of electricity in the U.S., from 19% to between 28% and 38%, again, depending on how much you assume the cost of building the nuclear reactor would come down over time, which depends on standardization.
Such use of $260 billion in tax credit subsidies would likely have a far larger impact on emissions than Manchin-Schumer, which might not reduce emissions any more than they are already likely to be reduced, according to modeling by Rhodium Group. It’s true that the tax credit subsidy would not be available for existing plants, but very few need them, given that states like Illinois have already subsidized them, and given rising natural gas prices.
But that’s not even the worst of it. The worse of it is that virtually all of the solar panels are likely to come from China for the forseeable future. That’s because China dominates every single segment of the solar panel supply chain globally. It makes 97% of solar wafers, 85% of the solar cells, 79% of the polysilicon, and 75% of the solar panels (modules).
True, that might reduce the solar subsidy from 50% to 40%. But if the solar manufacturers can claim some amount of domestic content, they still might be eligible for 50%. And taking 40% rather than 50% might be worth it if the entirely-made-in-China solar panels are cheaper than ones with a splash of made-in-America components included in them.
Many people, myself included, believed President Joe Biden was going to ban the importation of solar panels and solar components made in China. In May, the Uyghur Forced Labor Prevention Act (UFLPA), which Biden signed into law in 2021, took effect. The aim was to end U.S. imports of products made in the Xinjiang province, where Chinese authorities have created concentrated, forced labor camps for Uyghurs Muslims, where one of the main products they make are solar panels.
The law gave the U.S. Customs and Border Protection the power to decide which imports should be banned, and had included on its list several makers of solar-grade polysilicon, the raw material used to produce solar panels.
But after lobbying by the solar industry, Biden in early June declared an “emergency” and ordered that the U.S. continue importing Chinese solar panels and products, thereby skirting the law. He did so, cynically, by making his announcement alongside invoking the Defense Production Act to accelerate the making of solar panels in the U.S., which required the declaration of an emergency.
Biden administration officials spun the move to suspend the tariffs as a temporary “bridge” to ramp up a fledgling U.S. solar manufacturing industry, and to keep the lights on. “In this case, the emergency is a threat to the availability of sufficient electricity generation capacity to meet expected customer demand,” said White House press secretary Karine Jean-Pierre.
But it was a ruse.