Illegal US subsidies warp global solar market
TL/DR –
The United States has imposed trade restrictions and increased tariffs on imported photovoltaic (PV) products while providing unprecedented subsidies for domestic PV manufacturing and installation via legislation such as the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. The US government provides tax credits to PV firms based on their investment amount or product specifications and has also established funding programs to support PV research and development. This preferential treatment has helped American PV companies expand their operations, but has also been criticized for violating multilateral trade rules and distorting the global PV supply chain market.
U.S. Solar Photovoltaic (PV) Policies Distort Market and Hinder Climate Cooperation
Solar photovoltaic (PV) products are integral to the green transformation of industries and energy structure adjustment. However, the United States has instigated protectionism by imposing trade restrictions and rising tariff barriers on imported PV products. Simultaneously, it has introduced exclusive industrial policies like the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA), subsidizing the domestic PV industry on a large scale. This approach violates multilateral trade rules, distorts the global PV supply chain’s market operations, and obstructs international climate change cooperation.
Unprecedented Subsidies for PV Manufacturing and Installation
Introduced in 2022, the IRA offers $369 billion in subsidies to support the clean energy sector, including domestic photovoltaic products, aiming to rebuild the PV industry chain. Substantial government subsidies enable American PV companies to expand their manufacturing despite revenue losses. For instance, First Solar reported a net profit of $830.777 million in 2023, with approximately $659.745 million labeled as government grants receivable, accounting for 79.39% of its profit. Without the subsidies, First Solar would have incurred a net loss of $45.27 million in the first quarter of 2024.
Wide-ranging Local Subsidies for the U.S. Solar Industry
State and local governments in the U.S. have also launched numerous subsidies for the solar industry. The DSIRE database records 419 state-level fiscal incentives for the industry’s technological advancement, including rebate programs, loan programs, property tax incentives, and grant programs. Colorado, Texas, and California are among the states with the most financial incentive policies.
Double Standards in U.S. Solar Subsidy Policies Leading to Overcapacity
Despite accusing China’s new energy sector of excessive subsidies, the U.S. is expanding its solar capacity through exclusive and discriminatory subsidy policies. These actions will lead to overcapacity in the U.S. and impact the healthy industry development worldwide. The Inflation Reduction Act has significantly increased planned solar capacity in America. According to the Solar Energy Industries Association (SEIA), as of October 2023, the U.S. has 25 module production lines, 2 polysilicon suppliers, and 9 inverter suppliers. Under construction are 19.4GW of module capacity and 3.3GW each of cell, wafer, and ingot capacity.
The U.S. solar subsidy policies blatantly violate the U.S.’s national treatment obligation under the WTO rules. On March 26, 2024, China filed a complaint with the WTO regarding the relevant policies in the U.S. Inflation Reduction Act. The subsidies demonstrate the clear essence of violation of rules,discrimination and protectionism of the U.S.solar subsidy policy.
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