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(by Benjamin Storrow, Kelsey Tamborrino, Politico) – The results of the presidential election were still being tallied on Wednesday when the announcement came: One of China’s largest solar manufacturers was selling a massive new factory in Texas.
Chinese owned Trina Solar was in line to receive nearly $1.8 billion in tax credits under President Joe Biden’s climate law, as one of several Chinese solar businesses setting up factories in the United States to benefit from the incentives in the Inflation Reduction Act (IRA). But President-elect Donald Trump has vowed to dismember Biden’s climate agenda, and has called for taking a hard line against economic competition from China [to protect American companies because China does not operate fairly].
Trina said Trump’s victory had “nothing to do” with the sale of the factory near Dallas to the Georgia-based battery manufacturer Freyr.
“Rather, it is based on the company’s long-term growth in the country,” a spokesperson said in a statement.
But analysts said the news illustrated the impact of Trump’s victory on energy markets.
With Republicans on track to control both chambers of Congress come January, the focus on Capitol Hill has turned to the future of the IRA. At the forefront of those discussions is the fate of [huge] tax breaks for companies that make solar panel parts and other clean energy components in the United States.
Lawmakers of both parties have already filed a handful of bills that could bar Chinese-linked companies from receiving tax credits under the IRA. Those talks will intensify after Republicans’ victories last week, industry analysts and lobbyists said.
Republicans have also expressed broader [opposition to] Biden’s handling of Chinese-made solar gear, including a two-year pause in imposing tougher trade barriers against equipment that comes to the U.S. via Southeast Asia.
“Democrats made a mistake when they failed to prohibit China from being eligible for the IRA tax credits, and the Biden administration’s solar tariff moratorium was a disastrous policy that allowed China to overproduce and flood the market in an effort to harm U.S. solar manufacturers and undermine the IRA,” said Nick Iacovella, a former aide to Sen. Marco Rubio (R-Fla.) and a senior vice president at the Coalition for a Prosperous America, a trade group representing U.S. manufacturers. “That’s not going to happen under Trump.”
Trina’s sale caught industry observers and local officials by surprise. The mayor of Wilmer, Texas, where the 1.35-million-square-foot factory was recently completed, said she had not heard the news when a reporter contacted her on Friday.
“That is the first I’ve heard of it,” said Sheila Petta. “I speak to Trina all the time, and I’ve not spoken to them about this.”
The acquisition was initially announced Wednesday morning by Freyr, a small battery manufacturer that shifted operations from Europe to the United States late last year in part to take advantage of the IRA tax credits. The company, which also has operations in Norway, plans to build a battery factory in Georgia.
Trina confirmed the deal in a release on Friday. It’s expected to be finalized this year.
Under the terms of the deal, Trina could eventually acquire an approximately 20 percent stake in the battery-maker, appoint representatives to its board and market panels under Trina’s name. Freyr would own and operate the factory, which would be able to produce enough panels annually to power 500,000 homes. The factory began production on Nov. 1, according to statements by Trina and Freyr.
It would also mark Freyr’s first entry into solar manufacturing.
Trina “will continue to serve the U.S. market with industry-leading smart PV and energy storage solutions, technology and manufacturing expertise,” the company said in a statement.
Freyr CEO Dan Barcelo underscored to POLITICO that the company would own 100 percent of Trina’s solar manufacturing assets and said conversations first began with Trina earlier in the year. He said Freyr would control and own any of the tax benefits.
“This transaction is not really about politics. It’s about economics,” Barcelo said. “We really believe in solar and batteries longer term and we saw an opportunity to invest in this very strong asset.”
While the IRA contains provisions preventing Chinese automakers from benefiting from the law, it contains no such prohibitions for Chinese solar manufacturers, which dominate the global market for panels. Trina was one of eight major solar-makers with links to China moving forward with new factories in the U.S., according to a review by POLITICO.
The Chinese-built factories have prompted intense debate within the solar industry. SUPPORTERS see factories such as Trina’s as a step forward in America’s transition to cleaner energy sources, saying they will create U.S. jobs, drive down the cost of solar installations and ultimately lead to deeper emission reductions. They said that even as the U.S. is trying to build out its supply chain, it is in the early stages and most of the technological expertise now sits in Asia.
But OPPONENTS argue that the trend leaves the U.S. overly reliant on China, which continues to dominate the market for critical subcomponents. They contend the new facilities stifle attempts to foster a domestic solar manufacturing industry. …..
“There is no appetite to repeal the tax credits that have led to the job creation, investment and manufacturing capacity from the IRA,” Iacovella said.
The feeling does not extend to Chinese companies, however. Many analysts expect that Republicans will move to bar Chinese companies from receiving credits under 45X, one of the key manufacturing provisions under the law that has spurred the wave of project announcements.
“It seems like there is a good chance that something to this effect will eventually be passed,” said Elissa Pierce, a solar analyst at the consulting firm Wood Mackenzie. “I have spoken with some Chinese manufacturers who have floated the idea of partnering with a U.S. company as a strategy to avoid being blocked from getting the 45X tax credits for their U.S. factories, so this could be Trina’s motivation for the sale.”
Trina has been at the center of a larger trade battle that has divided the solar industry. U.S., European and South Korean-based panel manufacturers have accused Chinese companies of flooding the market with cheap panels and called for higher tariffs on Chinese-made imports. In 2023, the Commerce Department accused Trina of circumventing American tariffs on Chinese solar imports by shipping goods to Southeast Asia for minor processing before they’re sent to the U.S.
Those calls have drawn protests from some American solar developers [who receive generous subsidies from the U.S. government], which rely on Chinese panel suppliers and worry that tariffs could drive up the cost of new solar installations.
Trump’s victory adds a new wrinkle to that debate. The once and future president has pledged to raise tariffs by 20 percent on all imports and impose an additional 60 percent levy on Chinese shipments. [The Chinese government does not operate fairly, and Human Rights Watch and the U.S. government have noted some Chinese companies use forced labor.]
Trina’s sale appears designed to avoid potential U.S. restrictions on Chinese companies benefiting from the IRA, Iacovella said.
“The Chinese are, and have been for a long time, very adept at reading the tea leaves and navigating U.S. policy,” he said. “I think they saw Trump got elected and they saw the writing on the wall very clearly.”
Published at Politico on Nov. 11, 2024. Reprinted here for educational purposes only. May not be reproduced on other websites without permission.
Questions
1. What is the goal of the Biden administration’s Inflation Reduction Act?
2. a) How much money in U.S. tax credits was Chinese owned Trina Solar set to receive from President Biden’s climate law (the Inflation Reduction Act)?
b) Is Trina Solar the only Chinese business to receive U.S. tax credits?
3. a) What did Trina Solar do with the new factory it had just built in Texas?
b) What was the reason Trina sold the factory? (para. 3, 7)
4. Re-read paragraphs 12-16, 23-24, 29. How has Chinese owned Trina Solar attempted to get around being blocked from receiving U.S. tax credits now that Trump has been re-elected?
5. What is your reaction to Freyr CEO Dan Barcelo’s assertion about the U.S. tax benefits in para. 17-18?
6. a) What type of Chinese companies are prevented from receiving U.S. tax credits?
b) Why do you think the Biden administration did not include prohibitions for Chinese solar manufacturers?
7. Re-read paragraphs 20 and 21 supporting and opposing Chinese factories operating in the U.S. With which argument do you agree? Explain your answer.
8. American owned companies can only operate in China if they form a joint venture with a Chinese company. What do you think: Should the U.S. ban Chinese companies from building factories in the U.S.? Explain your answer.
Background
The Inflation Reduction Act of 2022 is a federal law promoted by President Joe Biden which aims to reduce inflation by possibly reducing the federal government budget deficit, lowering prescription drug prices, and investing into domestic energy production while promoting clean energy. (Wikipedia)
Its aim is to reduce carbon emissions by promoting “clean energy” (solar, wind, electric in place of gas in homes, Electric Vehicles, etc.) by giving people and corporations tax incentives to switch to these much more expensive options.
“The IRA is the largest investment in the U.S. to address climate change. It includes $783 billion in spending on energy and climate change, and is projected to reduce U.S. greenhouse gas emissions by 40% below 2005 levels by 2030. The IRA also includes investments in clean water, clean air, wildlife habitat, cultural resources, and open spaces.” (from Treasury .gov)
The Inflation Reduction Act (IRA) was signed into law by President Joe Biden on August 16, 2022. All Democrats in the Senate and House voted for the bill, while all voting Republicans voted against it. It is estimated the IRA’s fiscal cost to the federal budget will amount to more than $800 billion over 10 years.
From the White House page on the IRA: “With the stroke of his pen, the President redefined American leadership in confronting the existential threat of the climate crisis and set forth a new era of American innovation and ingenuity to lower consumer costs and drive the global clean energy economy forward.”
Who qualifies for Inflation Reduction Act rebates?
The law also specifies that Home Electrification and Appliance Rebates are available to:
- low- or moderate-income households,
- individuals or entities that own a multifamily building with low- or moderate-income households comprising at least 50% of the residents, and
- governmental, commercial, or nonprofit … (from Energy .gov)
FREYR Battery is a developer of clean, next-generation battery cell production capacity. The company’s mission is to accelerate the decarbonization of global energy and transportation systems by producing clean, cost-competitive batteries.
FREYR Battery was founded in 2017 in Norway with a mission to offer sustainable and high quality battery solutions. The company redomiciled from Luxembourg to the U.S. effective December 31, 2023.
Freyr Battery is building a $2.5 billion battery plant in Coweta County, Georgia. The plant is expected to open in 2026 and will produce cells for electric vehicles, stationary energy storage systems, and marine products.
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