Trump’s return casts a shadow over China’s success in US solar sector

Chinese investors eyeing the US market have faced an increasingly hostile reception in recent years — but one sector of the country’s business community has quietly made a success of its American ventures: solar. 

Amid a boom in US cleantech manufacturing, solar plants backed by Chinese investors have sprung up from Texas to Ohio — and to minimal fanfare.

But the growth prospects for Chinese solar in the US are suddenly looking dimmer. Donald Trump’s return to the White House in January looks set to bring a crackdown on inward investment from Beijing and a bipartisan political push to exclude Chinese-owned plants from generous clean energy subsidies. 

“These solar investments have gone under the radar,” says Antoine Vagneur-Jones, head of trade and supply chains at BloombergNEF. “There was a real openness to hosting Chinese manufacturing through these subsidies. Whether or not that’s the case next year is a big question mark.”

The progress by Chinese businesses operating in the industry in the US stands out even as rising geopolitical tensions are rippling across other sectors — from the looming ban on social media platform TikTok to the collapse of the New York IPO for clothing group Shein.

Battery makers have also found themselves in the line of fire. Last year, Virginia’s Republican governor Glenn Youngkin described a proposed collaboration in his state between US carmaker Ford and China’s CATL as a “Trojan horse” for Beijing.

So far, solar has remained relatively unscathed. According to BloombergNEF, as of August, about 21 gigawatts per year of solar module production capacity was being developed in the US by Chinese-backed companies — equal to just under half of total forecast US demand this year.

Many Chinese companies rushed in after the 2022 passage of the Inflation Reduction Act — President Joe Biden’s landmark climate legislation, which granted billions of dollars in subsidies, including particularly generous allowances for clean energy manufacturing. 

The IRA’s 45X tax credit has supported investment of more than $100bn in new factories since the passage of the legislation, according to BloombergNEF. Beneficiaries include Chinese-backed projects, such as: Trina Solar’s 5GW plant in Wilmer, Texas; Illuminate Solar’s 5GW plant in Pataskala, Ohio; and Jinko Solar’s expansion of its Jacksonville, Florida, facility to 1GW.

The companies declined or did not respond to requests for comment.

“Some of the larger Chinese solar manufacturers certainly viewed the immediate post-IRA period as a moment of strategic opportunity to pursue new US investments,” says Herbert Crowther, an analyst at Eurasia Group. 

“Compared to other more consumer-facing sectors, the solar industry is still relatively less politicised for inbound investment,” he adds. “Some manufacturers have also been conscientious in their collaboration with local joint venture partners, and in their active engagement with local communities.”

The projects have been further boosted by their backers’ substantial financial firepower and the technological knowhow garnered during China’s rise to dominate the global solar supply chain. This has allowing them to push ahead rapidly with new plants, even as some of the competition has faltered.

Switzerland’s Meyer Burger scrapped a project in Colorado in August; Italy’s Enel has paused work on its $1bn Oklahoma factory; and US-based Convalt Energy has halted construction on a New York facility due to low prices.

“[Chinese-backed projects] are able to set up shop more quickly because they have massive operations back in China and around the world,” says Tim Brightbill, a lawyer who represents the American Alliance for Solar Manufacturing, which includes the largest non-Chinese manufacturers in the US — such as First Solar, the biggest US player, and South Korea’s Qcells, as well as Convalt and Meyer Burger.

However, the imminent return of Trump to the White House has changed the tone for Chinese-backed facilities. On the day after the election, China’s Trina Solar announced it was selling its Texas facility to Norwegian battery maker Freyr for $340mn.

“The event . . . that any presidential election represents was something that helped serve as a timeframe to get something done by,” says Evan Calio, Freyr’s chief financial officer, noting that the timing of the announcement was “just the way it fell”.

Under the deal, Trina will take a stake of up to 21 per cent in Freyr. The plant will use Trina’s technology to build its solar modules, which will be sold under the Chinese company’s brand.

“It was a bit of a knee-jerk reaction and sort of predicated on the assumption that Trump coming in is quite bad for all of these Chinese manufacturers,” suggests Vagneur-Jones.

If Chinese companies want to manufacture here and compete for sales in the US, that’s fine, but it’s our view that they shouldn’t receive US taxpayer dollars to help them

Republican and Democrat lawmakers alike have proposed legislation to make Chinese-backed projects ineligible for funding under the 45X credit — mirroring the exclusion of Chinese sourcing for the IRA’s EV tax credit for consumers, and leaving investors wary. 

“We would expect to see more of what we’ve seen in terms of attempts to limit the ability to access the credit if there’s foreign ownership — that’s been no secret,” says Jim Murphy, president of Invenergy, the largest privately held US renewables developer, which co-owns Illuminate under a joint venture with Chinese solar giant Longi. 

But he warns: “If the credits were to become unavailable, then that’s going to be unfortunate because of the ultimate effect on the customer.”

The subsidies fight is the latest chapter in a long-running tussle between the US and China over solar. Washington has cracked down on imports of solar parts, slapping tariffs on imports directly from China and also from Chinese companies operating in south-east Asia.

Brightbill, who is leading the latest of the industry’s trade challenges, says it was an “error” for the IRA not to exclude Chinese-backed projects from eligibility from the outset. 

“If Chinese companies want to manufacture here and compete for sales in the United States, that’s fine, but it’s our view that they shouldn’t receive US taxpayer dollars to help them,” he argues. “I think this [Trump] administration is ready to move quickly. And I think Congress will support that.”

Additional reporting by Amanda Chu