As recently as 2010, a small town in central Michigan was the world’s biggest producer of solar polysilicon, but now more than 90% comes from China:
Washington blames China’s dominance of the solar industry on what are routinely dubbed “unfair trade practices.” But that’s just a comforting myth. China’s edge doesn’t come from a conspiratorial plot hatched by an authoritarian government. It hasn’t been driven by state-owned manufacturers, subsidized loans to factories, tariffs on imported modules or theft of foreign technological expertise. Instead, it’s come from private businesses convinced of a bright future, investing aggressively and luring global talent to a booming industry — exactly the entrepreneurial mix that made the US an industrial powerhouse.
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Hemlock Semiconductor Corp. produces about one-third of the world’s chip-grade polysilicon, which finds its way into almost every electronic device on the planet. Solar polysilicon is simply the poor cousin of the stuff computer chips are made from: While impurities of one part in 100 million are considered acceptable for solar panels, microprocessors need to be pure to as much as one part in 10 trillion.
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Dow had established itself in the 1890s in nearby Midland to take advantage of rich underground deposits of brine that could be refined into useful chemicals. The trains rattling back and forth there upset the delicate polysilicon purification process, so a new plant was established on isolated farmland in Hemlock, 14 miles (22.5 kilometers) to the south.
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Things started to change around the year 2000, as rising concerns about climate change coincided with a surge in oil prices and the prospect of subsidies for renewables. Solar panels were traditionally so costly they were only used for highly specialized applications such as space probes, as well as watches and pocket calculators that only sip power. Suddenly in the early 2000s, solar started to look like a competitive way of producing energy.
As a result, PV-grade polysilicon — made until then from material rejected by chipmakers — seemed like it might become a valuable commodity in its own right. Almost overnight, it went from a backwater to a boom industry. The growth has yet to stop. Since 2005, annual installations of solar panels have increased at an average annual rate of about 44%. This year, the capacity of new modules installed globally every three days is roughly equivalent to what existed in the entire world at the end of 2005.
Hemlock initially surfed this wave. In 2005, it announced a $400 million to $500 million plan to increase production at the plant by half. Eighteen months later, it promised $1 billion more to add a further 90%. One more billion was announced amid the 2008 financial crisis, along with yet another $1.2 billion for a separate plant in Clarksville, Tennessee.
Those numbers sound big — but they were insufficient to keep up with demand.
There are a few reasons for that. First, Hemlock was owned by a joint venture between two American and two Japanese chemical companies, which between them produce everything from fiber optic cables to smartphone glass, plastics to insecticides, pill casings to machine tools and gold bullion. Such setups are notorious for complexity, which can undermine their ability to adapt quickly to changing conditions. Any fresh spending needed to get signed off by four corporate boards, none of whom saw solar poly as a priority.
Making matters worse was the fact that, when solar power started to take off in the late 1990s, Hemlock’s main shareholder Dow Corning was in the middle of a decade of bankruptcy protection — the result of lawsuits from women who claimed to have been harmed by its silicone breast implants.
Another factor was energy. As much of 40% of the cost of producing polysilicon is power, and the Hemlock factory is the biggest single-site consumer of electricity in Michigan — a remarkable statistic, when you consider the state also includes the immense General Motors Co. and Ford Motor Co. factories in Detroit.
Local electricity costs are relatively high. The 2008 expansion in Hemlock only went ahead after the state’s governor Jennifer Granholm — now President Biden’s secretary of energy — signed a bill giving the facility tax credits to protect it from electricity price hikes.
