When Shunfeng International Clean Energy bought a controlling stake in Suniva for what must have been a fraction of the solar company’s earlier valuation, the Hong Kong-listed, Chinese-owned holding company had clear objectives: access to the U.S. market and innovative technology.
The infusion of $58 million in cash for a 63.13 percent stake preceded an announcement that Norcross-based Suniva would create 500 new jobs at its solar cell plant in metro Atlanta and panel factory in Saginaw, Mich.
In other words, the confidence of a Chinese investor laid the groundwork for American expansion — or so it seemed.
But that investment itself was likely made possible by a trade imbalance of the sort that President Donald Trump vowed to address in his first meeting with Chinese President Xi Jinping at the Mar-a-Lago resort this week. Suniva’s predicament shows how thorny it can be for U.S. policy makers to craft trade remedies that actually hit their targets.
Suniva now blames Asian panel manufacturers for a “significant reduction in force” — deep job cuts — at both of its U.S. plants. The company notified the Georgia Department of Economic Development March 29 that it would eliminate 130 jobs in Norcross. It’s now also facing a federal lawsuit for failing to give employees the required 60-day notice before layoffs, according to the Atlanta Business Chronicle. The Saginaw plant, which was set to see a quarter-billion dollars in investment, has been shuttered, according to news reports. The 500 jobs never materialized.
Suniva declined to comment on this story beyond a statement that said it’s “investigating all economically-responsible operational structures and will aggressively pursue all avenues that create a fair and rational market for U.S. manufacturers in this important industry.”
The company said that U.S. producers are under “attack” from overcapacity in solar panel production across Asia. A glut of panels has slashed global prices and undercut Suniva’s American solar-cell and panel production, even at a time when solar installations in the U.S. are growing at a record clip. In 2016, the sector nearly doubled, led by strong growth in utility-level projects in many states including Georgia, according to the Solar Energy Industries Association.
As Suniva notes in its statement, the challenge of overseas competition isn’t new: The U.S. in 2013 imposed anti-dumping and countervailing duties on Chinese-made panels in an attempt to offset government subsidies that the International Trade Administration said propped up its domestic industry at the expense of U.S. producers.
The effect of the move, however, was to encourage Chinese firms to set up factories in other Southeast Asian countries not subject to the tariffs, shifting the geographic locus of the problem. Meanwhile, China retaliated with its own duties on solar cells, the part of the system where U.S. companies maintain a tech edge.
Despite these headwinds, Suniva continued to tout its homegrown technology and U.S. manufacturing base. Initially having thrived by exporting to places like India, Suniva carved out a niche as a preferred supplier to U.S. government installations. It also landed some deals in Mexico.
Suniva executives said in an interview with Recharge News last year that they had found a sweet spot in the industry. Their crystalline solar cells had much better efficiency than the cheapest commodity players but weren’t expensive as those at the top end.
That strategy seems to be what Shunfeng was betting on, along with the ability to make panels in the U.S. without incurring tariffs. Another Shunfeng subsidiary, Suntech America, in 2015 was forced to file for bankruptcy protection, seemingly hit hard by the tariffs on cells and panels made at its home base in Wuxi, China. Before its downfall, Suntech was thought to be the largest panel manufacturer globally.
But Shunfeng’s financials from 2016 showed that its optimism about Suniva might’ve been misplaced, at best underestimating the volatility of global panel prices.
According to a Shunfeng annual report released on March 28, a day before Suniva notified Georgia of its impending layoffs, the joint venture with Suniva lost 82.6 million Chinese renminbi, about $12 million at today’s exchange rates, over the course of 2016.
More telling, the company wrote down much of the value of the joint venture, acknowledging it as a 259.9 million RMB ($37.6 million) hit to Shunfeng’s bottom line. The holding company also paid about $33 million to cover obligations to Suniva’s lenders.
Suniva had raised nearly $130 million in venture capital and ramped up manufacturing more conservatively, seeking to avoid the same pitfalls as Solyndra and other U.S. firms that have struggled to make made-in-America work.
The Solar Energy Industries Association wouldn’t comment directly on this story aside from sending a statement in support of “free and fair trade” to “diversify our energy infrastructure, enhance national security and preserve the 260,000 jobs and growing in the U.S. solar industry.”
But some have said the rush to incentivize U.S. manufacturing jobs in solar is misplaced.
While acknowledging how sticky the intellectual property issues and political concerns can be, researchers at Stanford University argue the U.S. should “leverage” China’s solar manufacturing prowess rather than fighting it.
Tariffs haven’t protected American jobs, and with American companies largely absent in the Chinese market, China has become formidable in research and development, said Dan Reicher, executive director of Stanford’s Steyer-Taylor Center on Energy Policy and Finance and co-author of “The New Solar System,” a report that argues for a new model of China-U.S. collaboration in the industry.
Many of the largest U.S. solar firms, like SunPower, manufacture overseas, and that will likely continue to be the case until volume, scale and automation make it cost-effective here, he told Global Atlanta.
Solar currently makes up just 1 percent of global energy production. If it’s ever going to be “big enough to matter”, China and the U.S. must work together, Dr. Reicher said.
U.S. policy makers should focus more heavily on deployment, since higher volumes will make local manufacturing more feasible. Meanwhile, they should take advantage of the lower cost provided by Chinese industry while incentivizing the high-level research that the U.S. is known for.
“We were the inventors, we own some of the intellectual property, and there is money to be made there,” he said.
And as Mr. Trump eyes moves to protect American manufacturing and create jobs, the president should note that more than half of newly created solar jobs are in deployment, which is much harder to outsource or automate than factory work, Dr. Reicher added.
Solar jobs are growing much more quickly than the U.S. economy as a whole. The Solar Foundation in February reported that solar jobs grew by 25 percent 260,000, creating about 1 in 50 new jobs in the U.S. in 2016. Only 15 percent were in manufacturing. Georgia mirrored the national trend, with solar jobs growing by 23 percent to 3,924, according to the report.