[Hot US Solar] ② Hanwha, led by 'Kim Dong-kwan', boosts eco-friendly efforts and plans to increase US investment

Hanwha Solutions, No.1 US Solar Beneficiary of IRA
270 Billion KRW Annual Tax Benefits... Over 2 Trillion KRW US Investment Rumors
Vice Chairman Kim Dong-kwan Promoted... Solar Business Investment Expected to Accelerate
"Limited Resources... Choosing US Local Investment with Greater Benefits Than Korea Is Natural"

Editor's NoteThe biggest beneficiary of the U.S. Inflation Reduction Act (IRA) is 'renewable energy.' More than 40% of the support amount, totaling $160.3 billion, is allocated to tax credits for renewable energy. While the U.S. cites inflation and climate change response as the basis for the legislation, it is interpreted that the underlying intention is to attract new production bases to the U.S. in competition with China, the leader in renewable energy. So far, many global companies seem to be investing in the U.S. as intended by the U.S. government.

In particular, the solar power industry is expected to grow rapidly as it will account for the largest share of the future U.S. energy mix (composition of power generation sources) based on a fossil fuel economy. Due to the U.S.'s stance against China, an excellent opportunity has come to the domestic solar industry. However, the reality of relying on China for major solar supply chains has emerged as a challenge to be resolved. We have examined the response strategies of domestic solar companies to the Inflation Reduction Act and the industrial policy directions to support them.

Hanwha Solutions Q CELLS solar modules installed on a house in Arizona, USA. Photo by Hanwha Solutions

[Asia Economy Reporter Choi Seoyoon] Ahead of the implementation of the U.S. Inflation Reduction Act (IRA) next year, Hanwha Solutions, which holds the No. 1 market share in the U.S. solar market, is considered the biggest beneficiary. There are already reports of investments in the U.S. worth over 2 trillion won. Hanwha Group is already operating a module factory in the U.S. and is receiving tax benefits worth several hundred billion won from the IRA. The rapid growth of the U.S. renewable energy market, supported by policy incentives, is also a factor attracting investment. Once the detailed guidelines of the IRA are finalized, Hanwha Group's 'investment clock' in the U.S. is expected to accelerate further.

According to industry sources and major foreign media such as Bloomberg on the 5th, Hanwha Solutions will receive tax benefits exceeding $200 million (about 270 billion won) annually starting next year when the IRA is implemented. This figure is calculated based on 3.1GW considering the production tax credit (AMPC) of 7 cents per module watt (W). According to the IRA, investing in solar modules in the U.S. allows for an annual tax credit of 7 cents per watt. Hanwha Solutions currently operates a 1.7GW module factory in the state of Georgia. It plans to invest 200 billion won next year to add 1.4GW, which will bring the total module production capacity to 3.1GW upon completion.

The IRA, which grants tax reductions only for products produced domestically in the U.S., is encouraging Hanwha Solutions' local investments. According to PV Magazine, a U.S. solar industry media outlet, Hanwha Solutions is scouting sites in Texas, South Carolina, and Georgia to establish a new factory with an annual production capacity of 9GW.

Hanwha Solutions has submitted letters of intent to several cities in these three states. Among them, the publicly disclosed letter of intent for Texas states plans to invest $1.829 billion (about 2.5 trillion won) to establish factories for solar panels, ingots, wafers, and cells in Dallas County and other areas. The plan is to build a solar industry value chain in the order of 'polysilicon (raw material) → ingot (material) & wafer → cell (solar cell) → module (panel).' Through this, Hanwha Solutions will have a total solar panel production capacity of 12.1GW in the U.S.

An industry insider said, "The rapidly expanding U.S. renewable energy market is definitely an attractive market for renewable energy companies," adding, "If institutional and administrative support backs this, it will be beneficial for the renewable energy industry, including solar power, in the long term."

Hanwha Solutions is also the largest shareholder of REC Silicon, which operates two polysilicon factories, a solar cell material, in the U.S. Both factories had suspended operations due to China's tariff retaliation but have announced plans to resume production in the fourth quarter of next year following the passage of the IRA. Restarting the factories will allow them to benefit from the IRA. According to the IRA, the U.S. government provides a tax benefit of $3 per kilogram of polysilicon produced in the U.S. The REC Silicon factory in Butte, Montana, can produce 2,000 tons of semiconductor-grade polysilicon, and the Moses Lake factory in Washington state can produce 16,000 tons of clean polysilicon based on hydropower.

Researcher Cho Hyun-ryeol of Samsung Securities analyzed, "With the enactment of the IRA, the payback period for investment costs will shorten from the existing 7-8 years to within 2 years, greatly increasing investment incentives," adding, "This is why Hanwha Solutions is considering expanding its investment scale in the U.S. compared to before, and it is expected that many companies will consider investments to prioritize obtaining IRA tax benefits."

Hanwha Solutions' Q CELLS division, which is responsible for the solar business within Hanwha Group, has ranked first in the U.S. residential and commercial solar module markets for four consecutive years and three consecutive years, respectively. The market share in the U.S. residential module market was 24.1% last year, and the commercial module market share was 20.6%.

Hanwha Group's solar business has been led by Kim Dong-kwan, Vice Chairman and CEO of Hanwha Solutions and eldest son of Chairman Kim Seung-yeon, since 2011, just one year after joining the group, when he took charge of the planning office at Hanwha SolarOne (now Hanwha Solutions Q CELLS division). Because of this, the solar business of Hanwha is regarded inside and outside the industry as a test of Kim Dong-kwan's management capabilities.

Backed by full support from the group, Kim aggressively pursued overseas M&A when Samsung, SK, and LG exited the solar business due to China's volume offensive, and invested trillions of won in technology development. The scale of investment in next-generation domestic technology announced last year alone was 1.5 trillion won. After his promotion to Vice Chairman of Hanwha Solutions last month, support such as rapid investment in the solar division, the group's next-generation core business, is expected to strengthen.

Professor Hong Jong-ho of Seoul National University Graduate School of Environmental Studies said, "As investments in the U.S. increase due to the implementation of the IRA, the benefits also increase," adding, "From Hanwha's perspective, it is a natural step to choose local investment in the U.S. over Korea or other countries to maximize profits with limited resources when making decisions."