What LG’s exit says about the solar industry’s road ahead

The announcement didn't come as much of a surprise to Martin Pochtaruk.

As CEO of Heliene, one of the few North American manufacturers of solar modules, Pochtaruk had heard rumblings for months that LG was charting its exit from the cutthroat solar industry.

Heliene CEO Martin Pochtaruk

"This is the product of a larger decision," Pochtaruk told Renewable Energy World during an interview.

There likely isn't one single reason LG decided to end its solar business, which will result in the closure of the company's 550 MW Huntsville, Alabama module manufacturing facility.

And, Pochtaruk says, it isn't as easy as blaming the economics and circumstances surrounding U.S. solar manufacturing. LG's move is, instead, an indictment on the global solar industry itself, foreshadowing more difficult times ahead.

"They have 200 lines of business. And this one, as we all know, is one that you have to fight for every single day," Pochtaruk said. The question becomes, he said, "who else will fall?"

Pochtaruk blames policy inaction at the federal level and an economic imbalance for solar that began a year ago.

Congress has so far failed to pass the Build Back Better Act, including $550 billion for clean energy and domestic manufacturing. A bill from Sen. Jon Ossoff (D-Ga.), dubbed the Solar Energy Manufacturing for America Act, would provide tax credits for every stage of the solar supply chain -- from the production of solar cells, trackers and inverters, to modules. But it still can't get a vote in the U.S. Senate after passing the House.

Meanwhile, a nearly decade-long trend of declining solar module prices appears to be over. At $39.3/kg, the price of polysilicon is at its highest point since 2011. The cost of solar racking for trackers has skyrocketed with steel prices tripling over the last year. Transportation expenses are also up with gas prices reaching 2008 levels in some areas. And China expects to add nearly 100 GW of solar capacity each year through 2025, squeezing the global supply of components.

And to add an extra layer for U.S. solar module manufacturers, importing non-Chinese polysilicon to avoid anti-dumping and other trade enforcement action can come with as much as a 20% premium.

"We're not going back anytime soon to lower costs, lower price," Pochtaruk said. Increasingly, what is emerging is a reversal in the market dynamics that make many projects--particularly larger ones--"unbuildable."

At the order of President Joe Biden, the U.S. Department of Energy conducted what it said was the first comprehensive analysis of the American clean energy supply chain. One finding is that the supply chain remains heavily dependent on China.

That finding echoed a recent report from the Ultra Low Carbon Solar Association that found that Chinese producers hold 83% of global capacity for polysilicon production, 96% for wafers, 79% for cells, and 70% for modules.

The DOE report said incentives could offset the higher cost of solar PV manufacturing in the U.S., which can be 30-40% higher. 

DOE recommended that the U.S. expand thin-film module production, which isn't as reliant on China for input materials. The agency suggested that cell production and international standards for inverters also present opportunities to improve the domestic supply chain.

The U.S. solar PV supply chain will, above all else, need significant financial support from the federal government, the report said. With the right support, the U.S. could take strategic actions on workforce development, manufacturing, human rights, and trade.

Pochtaruk said he isn't giving up on the U.S. Even amid challenging market conditions, Heliene has announced the expansion of its manufacturing in Minnesota and launched a new facility in Riviera Beach, Florida. Company execs will also take a hard look at whether to buy some of LG's equipment.

But margins remain razor-thin, and the business is tough. So, it's hard to blame a company like LG for jumping ship.

Is this the price of inaction?, Pochtaruk asked, referring to Washington's policy gridlock. "Probably" was his answer to his own question. After all, "For those of us who do this for a living, this is life."