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US bans imports of solar panel material tied to forced labour in China

Much of the world’s polysilicon, used to make solar panels, comes from Xinjiang, where the United States has accused China of committing genocide through its repression of Uyghurs. What does this mean for the country's renewables ambition?

It has canned the tomato imports and sewn shut the cotton trades from China’s Xinjiang Uyghur Autonomous Region (Xinjiang). Now the United States, alleging forced labour in a third industry there, has also banned all imports of Xinjiang-produced polysilicon.

As the main material needed for solar panels, this may cast a shadow on the economic giant’s path towards generating up to 50 per cent of energy through solar by 2035, said experts.

The Uyghur Forced Labour Prevention Act passed unanimously in the U.S. Senate on 14 July, reinforcing the 24 June Withhold Release Order (WRO) on imports from Hoshine Silicon Industry Co., Ltd., a Xinjiang-based manufacturer of silica-based products.

It also blacklisted three other Xinjiang-based solar energy companies — Xinjiang Daqo New Energy, Xinjiang East Hope Nonferrous Metals, and Xinjiang GCL New Energy Material Technology. 

Beijing has dismissed accusations of genocide and forced labour in Xinjiang as lies. “The U.S. side hypes up Xinjiang-related forced labor,” Chinese Foreign Ministry spokesman Zhao Lijian told reporters on 15 July at a regular press briefing in Beijing.

“The true motive is to damage the prosperity and stability in Xinjiang, deprive the Xinjiang people of their right to life, employment and development,” he said.

The bill, which will now go before the House of Representatives before it can be sent to President Joe Biden to sign into law, intensifies the spotlight on what the White House has labelled “genocide and crimes against humanity in Xinjiang.” 

It is a piece of legislation that will allow U.S. authorities to presume all goods manufactured in Xinjiang are made with forced labour, unless certified otherwise.

“It would make a difference,” William Alan Reinsch, senior adviser and Scholl Chair in International Business at the Centre for Strategic and International Studies (CSIS), told Eco-Business. “It shifts the burden of proof onto the importer, and makes it easier for customs agents to enforce the WRO. If it becomes law, it will be a significant event here.” 

But while these continued crackdowns on human rights abuses in the solar supply chain mollify bipartisan pressure on the Biden administration, they could also undermine its aggressive climate change goals. 

Two sides of the same coin

“The dilemma here is that you have competing objectives: You want to uphold trade rules, whilst standing up against forced labour,” said Reinsch. “But you also want to accelerate the conversion to renewables — solar in particular — and strong actions against these imports are going to slow that down.” 

American solar companies like Brooklyn SolarWorks agree. Its chief executive and founder T.R. Ludwig told Eco-Business: “We have to expand our goals, and the only way that happens is by deploying material en masse at a scale we’ve never done before. Limiting that material, [even if] for very good reason, will inevitably add more difficulty to obtaining those goals.”

Intensifying sanctions against Xinjiang products would also further drive up the price of solar-grade polysilicon, which is already “going through the roof,” said Johannes Bernreuter, Head of Bernreuter Research.

The current polysilicon spot price is about US$28 per kilogramme, up from around $6 in June 2020, driven by what Bernreuter calls “the typical… market psychology [of] fear of shortage [leading] to panic buying.”

In the short term, U.S. solar installation growth appears robust, according to a June report by research firm Wood Mackenzie and the Solar Energy Industries Association (SEIA) — a national trade association comprising 231,000 American solar workers and 1,000 member companies. But these developing supply chain constraints could pose a major barrier to further growth, the report added.

At present, roughly 45 per cent of the world’s solar-grade polysilicon is produced in Xinjiang; these are used in panels sold in the U.S. and other markets.

In end-consumer terms, “nearly every silicon-based solar module — at least 95 per cent of the market — is likely to have some Xinjiang silicon in it,” according to Jenny Chase, head of solar analysis at Bloomberg New Energy Finance (BNEF). 

We have to expand our goals, and the only way that happens is by deploying material en masse at a scale we’ve never done before. Limiting that material, [even if] for very good reason, will inevitably add more difficulty to obtaining those goals.

T.R. Ludwig, chief executive & founder, Brooklyn SolarWorks

It is also important to note that 35 per cent of polysilicon production does come from other regions in China.

Another 20 per cent is produced outside China altogether, and analysts like Corinne Lin of Infolink Consulting, a renewable energy research and advisory company, believe that “polysilicon sourced from regions outside of Xinjiang is sufficient [to meet demand] even in the worst case scenario [that more sanctions are imposed].”

For its part, the SEIA has been calling on U.S. solar companies to leave Xinjiang since October 2020, and even provided them with a traceability protocol in April 2021 to outline a series of best practices, including an independent, third-party audit mechanism to measure a company’s implementation of traceability policies and procedures.

On 8 July, almost 300 of the association’s members, including Brooklyn SolarWorks and Tesla, signed a pledge affirming their “firm opposition to the use of forced labour within the solar supply chain” and commitment to “ensure that the solar supply chain is free of forced labour.” 

Noting there is little transparency into supply chains in the Xinjiang region, John Smirnow, SEIA’s vice president of market strategy, said that: “Our understanding is that most of the major suppliers have turned to other non-Xinjiang sources of polysilicon for products sold to the U.S., and they have traceability protocols in place”.

“We’re directly aware that certain companies are doing independent, third-party audits. The industry is responding,” he added. 

If U.S. trade bans are a salvo against China’s forced labour practices, regionally targeted sanctions on imports by more trading blocs, such as the European Union and the Association of Southeast Asian Nations, would be more effective in creating actual economic pain for China, whose domestic market is the largest in the world for solar equipment, experts say. 

The caveat is that attempting to freeze out half the world’s polysilicon supply will also come with undeniable costs. “Whether that risk is acceptable ultimately comes down to an assessment of the harms inflicted versus the costs of the action,” noted Marcus Noland and Cullen Hendrix at the Peterson Institute for International Economics (PIIE). 

For the Biden Administration, the bottom line is clear: It will not achieve its environmental goals on the backs of human beings in a forced labour environment.

According to SEIA’s Smirnow: “There’s nothing more important than standing up for human rights as far as our responsibility in this industry is concerned.”

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