Janet Yellen warns China about excess capacity building in solar, EVs, lithium-ion batteries

Treasury Secretary Janet Yellen turning a solar plant in Georgia this afternoon. Megan Casella joining us now with more on what Secretary Yellen had to say about China. Megan Hey, Julia. So in a speech just getting underway this afternoon, Janet Yellen is taking aim at Beijing over what she sees as overproduction of several key technologies. That includes solar electric vehicles and lithium ion batteries. Yellen is saying she’ll be pressing Chinese officials to address over capacity during her upcoming trip to China. She says she’ll make it a key issue in discussions, arguing that excess capacity in these industries hurts not only American workers and firms, but also China and the global economy. The issue here, as Yellen will layout in her speech, is that Chinese overproduction in government subsidized industries has LED China in the past to sell products abroad at reduced prices. That makes it harder for other countries to compete. So part of her concern now is that the US has seen this play out before with solar panels. To emphasize this point, she’s delivering these remarks inside a Suniva facility. It’s a solar cell manufacturer that produced solar cells in the US for a decade before declaring bankruptcy 7 years ago due to a flood of cheap imports from abroad. Today, Yellen says the company is back on track to restart manufacturing this spring after securing around $100 million in financing from the Inflation Reduction Act. So guys, this shows just one way the BYTE administration is aiming to compete with China on these issues, guys. All right, Megan, stick around as we bring in our own Pippa Stevens to help react to this and the impact on the solar industry. So I think the crux of the issue here is that the administration is trying to have as much renewable energy developed as quickly as possible while also jump starting AUS domestic supply chain. And this is challenging because China is by far the leader here. They control more than 80% of the solar supply chain by some estimates. They’ve invested very heavily to be the leader in these new technologies like solar and batteries, you know, lithium refining, things like that. They also benefit from cheaper electricity, cheaper labor, all of which is to say that what Mackenzie says that solar cells manufactured in China are about 50% cheaper than those in Europe and 65% cheaper than those in the US So there’s no question it’s hard to compete. On the other hand, the Inflation Reduction Act is certainly making a big stride there. We’ve seen 10s of billions of announcements of factories to try to reassure that production. But the reality is that these things take time and for right now, China is the leader and they are sending a lot more product into the channel. So Megan, how did this company come back from the ropes? The company that you’re at, they got, they got financing through the Inflation Reduction Act. What makes them think now given the the sort of dynamics of the marketplace that they can make a goal of it? I think they’re looking at this financing, they’re looking at the administration’s focus on making sure we produce at least some of these solar cells and solar panels in the US as sort of their opportunity. They’re trying to hire more and build out this production. But I think when the question really one criticism that we hear most often of the inflation reduction act is that by subsidizing our industries here we’re doing exactly what China’s doing. Do we really want to over subsidized or are we at risk of over subsidizing I should say an industry that wouldn’t be sustainable without this government investment and maybe can’t be sustainable then term? Yeah, so both sides potentially over subsidizing. How do you see this playing out? You mentioned that it’s going to take a long time. No matter what happens here, it’s going to take a long time. But how do you see this ultimately impacting what’s happening here on U.S. oil? Well, I think the first thing to note is that the module manufacturing is now coming to the US and that is the last stage of the panel manufacturing process. And for the time being things we haven’t really gone further up the supply chain. So things like the polysilicon, the ingot and the wafers that is still taking place outside the US and the US doesn’t actually import cells and modules from China. After a series of terror of tariffs were levied against China solar products, a lot of that production then moved to Southeast Asia. So we now get more than 80% of our modules from four countries in Southeast Asia. And so I think that ultimately the US will build out a robust supply chain at least for certain portions of clean energy. But the fear is that just like we’ve seen with Europe’s reliance on Russia for hydrocarbons, if it’s too concentrated in one area that also poses a of risk, even maybe a national security risk. And just a final question to you, Megan, Does this indicate any sort of a change in the the US China policy or is this just more of the same? I think we are seeing the Biden administration get a little bit firmer on this point. In previous trips to China by Yellen or by officials beneath her, they have been noted, they’ve been noting that they’re addressing over capacity, but we haven’t quite seen her be this specific on exactly what they’re worried about. You know, this is something that is an issue in this industry. It’s also something some people worry about with chips as well because we’ve seen this play out before. So I think you know, they emphasize that they want to be cordial with China. They don’t want to shut down that interaction, especially not that Economic Cooperation, but they also want to make sure that it’s fair. So we’re seeing them ramp up that dialogue.