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Canadian Solar boosts manufacturing after US tariff exemption

Canadian Solar Inc. is adding more manufacturing capacity than previously planned in response to increasing demand for solar panels in the U.S., China and emerging markets, acting CEO Yan Zhuang said Aug. 15.

The company raised 2019 guidance for panel-making capacity by 9%, or 1,000 MW, to 12,200 MW by year-end. All of the additional capacity will be "bifacial compatible," meaning the panels can absorb sunlight on both sides, Canadian Solar Chairman and President Xiaohua Qu said on the company's second-quarter earnings call.

The plan to boost manufacturing capacity follows a decision by the Trump administration in June to exempt bifacial solar panels from import tariffs, which created new buying opportunities for companies in the U.S. ahead of a scheduled cut to the industry's investment tax credit in 2020.

During the third quarter, Canadian Solar expects to roughly double the volume of solar panels it sends to the U.S., increasing the country's share of total shipments to about 13%, from about 7% during the second quarter, according to Canadian Solar's earnings statement and comments by Zhuang.

"I'm incrementally more positive in our outlook for the second half of 2019, based on healthier demand for our differentiated products and services in key markets," Qu, who has been on leave from his job as Canadian Solar CEO following an accident, said in prepared remarks.

While solar demand is also forecast to rise in China and emerging markets, there are questions about how quickly China's market will accelerate, and Canadian Solar is picky about entering emerging markets, according to Qu.

Companies with U.S. plants are likely watching Canadian Solar closely.

First Solar Inc. CEO Mark Widmar recently warned that exempting bifacial panels from tariffs could hurt domestic manufacturing by opening the country to a "flood of imports."

"I think it will create some challenges that we'll have to be able to deal with," Widmar said on an Aug. 1 earnings call. "So we're very disappointed in that decision."

"The decision will provide a boost to manufacturers of bifacial cells and modules, offering the potential of a price premium, increased bankability, and giving manufacturers a reason to increase capacity," Paula Mints, chief analyst at SPV Market Research, wrote in a June client report.

However, SunPower Corp. Chairman, President and CEO Thomas Werner suggested the impact of bifacial panels on the U.S. market could be limited.

It only makes sense to use the panels for utility-scale plants, rather than smaller distributed generating facilities, because there has to be "adequate space between the module and the reflective surface for the math to work," Werner said on a July 31 earnings call.

Utility-scale projects accounted for about 60% of total solar capacity installed in the U.S. during the first quarter.