Australia’s Solar Sunshot could benefit from US tariffs on China, but Coalition can’t see the light

Australia’s hopes of building its own solar supply industry – dubbed as the Solar Sunshot – has received a boost with news that the US government is doubling its import tariffs on China solar cells.

But there is still the question of whether it will be shot down by the federal Coalition, which is objecting to the federal budget initiatives that promise production tax credits for green manufacturing in Australia, for both solar and other green products, and green hydrogen production.

Australia is desperately keen to establish its own solar manufacturing industry – not to compete and replace Chinese imports, which it has little chance of doing, but to integrate itself into the global supply chain, and maybe claim some advantage in niche areas.

The federal budget released on Tuesday confirms $1 billion for the Solar Sunshot program to help unlock domestic solar manufacturing, which could be in the form of grants or in credits that make up at least part of the difference in the production with Chinese manufacturing.

It will be administered by the Australian Renewable Energy Agency as part of a $7.1 billion package that includes production tax credits for green hydrogen and critical materials that could include the polysilicon supply chain.

“The Solar Sunshot program will enable Australia to take a first step in establishing a local solar PV manufacturing industry and supply chain,” ARENA chief executive Darren Miller said in a statement this week.

“Playing a meaningful role in the solar PV supply chain is an important part of becoming a renewable energy superpower in the decades ahead.”

Solar industry veteran Oliver Hartley, one of the lead authors of the Silicon to Solar report, which underpins the Solar Sunshot program, says that with Australia likely to be one of the world’s biggest producers of solar energy, it makes sense to seek a significant role in the solar supply chain, rather than being entirely dependent on outside interests.

“Australia will depend on solar like no other country, but it has no control (over the supply chain),” he told a briefing on the Silicon to Solar report in Sydney on Wednesday. “It is just a big cork bobbing up and down on the great ocean of the energy transition.”

Hartley says it is not about competing with China, but turning Australia from a mere importer into an important part of the global supply chain.

There are a number of Australian companies hopeful of moving to do this at a significant scale, and the industry hopes that at least one gigawatt of capacity can be supported, hopefully aiming for more than 5 GW where economies of scale can be obtained.

The solar hopefuls include SunDrive, backed by billionaire Mike Cannon-Brookes and former prime minister Malcolm Turnbull, that has been looking at manufacturing options with AGL at the site of the shuttered Liddell coal plant.

Zhengrong Shi is looking at building a major manufacturing line for his flexible solar panels under the Sunman brand in Australia – while Quinbrook is looking at the polysilicon supply chain near Townsville. Other Australian innovators such as 5B and Tindo Solar are also looking to expand their operations through the program.

ITP and APVI solar expert Muriel Watt, the leader of the Solar to Silicon report, said the newly tariffs announced by the Biden administration will make solar more expensive in the US.

“We don’t want that to happen here. We want solar to remain cheap in Australia. That’s why we could structure the mechanisms to support the local industry, to have production credits to make up the differential cost, and keep the cost at the same price as if you were buying it from China.

“We want low cost solar in this country. We don’t want it to be high cost. We don’t want to use the tariff approach to encourage local manufacturing.”

Still, the proposal faces opposition from the federal Opposition, which has also vowed to stop large scale wind, solar and storage projects, rip up government contracts, and bring a halt to the roll out of new transmission projects.

The Coalition has dubbed the production tax credits as “handouts for billionaires”, and says it will try and stop the proposal going through parliament.