December 22, 2024

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Hanwha Qcells' Cartersville plant in Georgia (Hanwha Qcells)

In the wake of a generative artificial intelligence-driven energy surge and favorable regulatory shifts, Hanwha Solutions’ Qcells is poised to benefit from massive government subsidies in the US solar market.

As many US solar companies have been scaling back investments due to the influx of inexpensive Chinese solar products, the Korean solar panel maker is seizing the opportunity to become the only company with a fully integrated local solar value chain that allows it to benefit from a combination of government subsidies.

“Once the 3.2 trillion won ($2.3 billion) plant in Cartersville is completed, the estimated maximum tax benefits based on annual production are estimated to be over $900 million per year,” said a Hanwha Qcells official.

Hanwha Solutions is still expected to report a 39.5 billion won ($28.6 million) operating loss in 2024, with deficits in both chemicals and renewable energy segments that Qcells is part of.

“We foresee a major turnaround starting in the second half, driven by a 142 percent increase in solar module sales to 6.4 gigawatts compared to the same period last year,” said Wee Jung-won, analyst at Daisin Securities.

Rising demand

According to S&P Global Commodity Insights, there are about 2,200 data centers in the US, with approximately 480 more expected by 2030. The rise of generative AI, cloud computing and 5G has fueled a compound annual growth rate of 4.5 percent in data center power demand, which is expected to accelerate to 7 percent through 2035.

“Modern data centers, particularly those supporting generative AI applications, must be near users due to the latency-sensitive nature of real-time AI services. This need for proximity is driving the trend toward on-site power generation,” said Wee.

In 2023, power purchase agreements in North America grew by more than 40 percent year-over-year, driven by supply disruptions from aging transmission grids rather than demand growth. While overall PPA contract volumes declined by 16 percent, off-grid solar installations increased by 3.6 percent.

As of this year, solar PPA prices remain elevated due to aging grids. As a result, Big Tech companies are increasingly turning to direct, off-grid renewable energy sources like solar, Wee explained.

“New off-grid solar installations in North America are expected to reach 118 megawatts this year,” he said.

Bigger presence

Qcells completed the construction of a module production line at its Cartersville plant in Georgia in April this year and has commenced full-scale production. This development, along with the expansion of the Dalton plant with a capacity of 5.1 GW, makes Qcells the largest silicon solar module manufacturer in the US.

Unlike the Dalton plant, which focuses solely on solar modules, the Cartersville plant is also constructing facilities for cell, wafer and ingot production, each with a capacity of 3.3 GW. These facilities are expected to be operational by the end of 2024 and fully productive by January 2025.

Once completed, Cartersville will be the first facility in the US to achieve full vertical integration of the solar value chain. This is crucial for securing the Domestic Content Adder, which provides an additional 10 percent benefit on top of the 30 percent Investment Tax Credit for projects with at least 40 percent domestic content. Unlike the Production Tax Credit, which allows manufacturers to deduct 30 percent of total project costs, the ITC offers a more substantial subsidy.

Boost from China ban

Recent US government sanctions on China’s solar industry might have also created a favorable environment for Hanwha.

Section 301 of the Trade Act of 1974 is the most significant regulation in discussion. It proposes raising tariffs on Chinese solar modules from 25 percent to 50 percent. Section 301 empowers the US Trade Representative to investigate and address foreign trade practices that hinder US laws, trade agreements or fair competition, granting the president the authority to implement retaliatory measures.

However, the direct impact of these measures on Chinese solar modules imported into the US might be minimal.

“Section 301 targets modules exported directly from China, but Chinese manufacturers have shifted production to Southeast Asia for export to the US Currently, China accounts for less than 1 percent of solar modules imported into the US, limiting the tariffs' effectiveness,” said Cho Hyun-yeol from Samsung Securities.

By Moon Joon-hyun (mjh@heraldcorp.com)