A Chinese solar giant came to America for a Biden windfall. Then Trump won.

Daily News Article   —   Posted on November 12, 2024

(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.

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