Tariffs on solar panels threaten Biden’s climate change goals
Ben Adler, Senior Editor – May 26, 2022
An ongoing Department of Commerce investigation into whether China is circumventing tariffs on its solar energy products is slowing the expansion of solar power capacity in the U.S., according to industry and outside experts.
“In the blink of an eye, we’re going to lose 100,000 American solar workers and any hope of reaching the president’s clean energy goals,” Abigail Ross Hopper, president and CEO of the Solar Energies Industry Association (SEIA), said in a statement late last month.
On March 25, James Maeder, the deputy assistant secretary of commerce for anti-dumping and countervailing duty operations, announced an investigation into whether crystalline silicon photovoltaic cells from Cambodia, Malaysia, Thailand or Vietnam that use components from China violate tariffs on Chinese solar imports. Pending the outcome of that investigation, tariffs could be applied — even retroactively, for recent purchases — to solar panels from those four Southeast Asian countries.
Solar panel installers anxious not to run up what could potentially be a huge tax bill are therefore avoiding buying panels from those major suppliers and are often unable to fulfill orders.
As a result, on April 27, after surveying its members on the effect the investigation is having, the SEIA cut by 46% its forecast for new solar installations in 2022 and 2023. A May 10 analysis by Rystad Energy, an independent energy research consulting company, found a potentially even more dramatic contraction in the solar industry, concluding that 64% of the 27 gigawatts of new solar capacity that was to be installed in this year is in jeopardy.
With new tariffs potentially being imposed in August, clean energy advocates and experts say the problems may only grow worse in the months ahead. “Imports have fallen off, projects are being canceled, and projections of growth are being revised radically downward,” David Roberts, host of the podcast “Volts,” said Wednesday. “The tariffs could be anywhere from 30%-250%, which would radically change the economics of big solar projects, and, if applied, will be retrospective over the last two years, which means even existing contracts are in jeopardy. The uncertainty has cast a pall over the entire sector.”
President Biden is publicly committed to expanding solar capacity as quickly as possible to combat climate change. The White House has issued press releases and fact sheets touting its administrative moves to encourage the installation of wind turbines and solar panels on federal lands and waters, and the president has proposed tens of billions of dollars in subsidies for rooftop solar panels in his budget reconciliation package.
The administration is caught between its climate goals and its desire to protect American manufacturers from unfair trade practices. If China can produce cheaper solar panels, with or without a government subsidy, it benefits American consumers and helps speed up the replacement of fossil fuels that cause greenhouse gas emissions. But allowing a rival to dominate the supply chain of growing U.S. energy sources could be risky, as Europe has seen with its reliance on Russian oil and gas. Every president wants to create domestic manufacturing jobs, which tend to pay relatively well, especially for those without a college degree.
In 2012, the Obama administration imposed tariffs on Chinese solar panel components — increasing the cost by 24% to 36% — when it found that, in violation of trade agreements, Chinese manufacturers were unfairly undercutting American competitors by using loans from the Chinese government to produce more panels at lower prices. (Tariffs have since increased to as much as 250%.)
The measure was supposed to bolster American solar manufacturing, but it didn’t work out that way.
“What happened was not that American domestic manufacturing flourished. What happened was: The same Chinese manufacturers decided to locate some of their supply chain in other countries,” Marcelo Ortega, an analyst at Rystad Energy who produced its recent report, told Yahoo News. Those countries include the four in Southeast Asia at issue in this case. As U.S. imports of solar panels from China fell, imports from these other countries rose just as fast.
In February, Auxin Solar, a U.S. manufacturer of solar modules, filed a complaint with the Commerce Department, which is responsible for enforcing the tariffs, claiming that the solar manufacturers in Cambodia, Malaysia, Thailand and Vietnam are making an end run around the tariffs on Chinese photovoltaic cells. Imports from those countries accounted for 85% of all imported U.S. solar power capacity installed in 2021 and 99% of solar imports in the first two months of this year, according to Rystad’s analysis.
Companies that provide solar panels to U.S. customers say their business has been thrown for a loop.
“It makes deploying solar simply just more difficult and more expensive,” Gabe Phillips, CEO of Catalyst Power, a retail energy provider and solar developer, told Yahoo News. “On the distributed solar side, the pricing’s all over the place. They can’t commit to pricing. They’ll give me a price, with the caveat that it’s contingent on the outcome of this case. It’s stymieing the sales process.”
Apart from the uncertainty in pricing, the process of providing a customer with solar energy has become slower and less reliable.
“Suppliers don’t want to take the risk of being slapped with a potential 100% import tariff,” Ortega said. When the SEIA surveyed its members, 83% reported that purchases had recently been canceled or delayed.
“At the moment, the products we’re seeking to market have been pushed back at least a quarter,” Phillips said. “There’s less expectation of panel availability, and therefore dates for projects are being pushed back.”
The White House declined to comment on the record, noting that it does not get involved in legal proceedings such as the current Commerce Department investigation, but it reiterated the president’s commitment to deploying solar power.
“While we cannot comment on an ongoing, independent judicial investigation, the process cannot factor in policy or our solar strategy,” a White House official who spoke on the condition of anonymity wrote in an email. “President Biden remains committed to standing up clean solar energy across the country to lower energy bills for families, create good-paying union jobs, and … grow our clean energy economy. As the president has made clear from the earliest days of the campaign, solar power is at the heart of his agenda for cutting energy costs for American families, creat[ing] good jobs, and fight[ing] the climate crisis that is already causing unprecedented harm to our economy and national security.”
The solar industry’s answer is to build up American solar manufacturing without resorting to jacking up the price on imports.
“I understand the detriment to American manufacturing that dumping causes,” Phillips said. “However, I’m not sure that I have a problem with the Chinese government subsidizing American renewable energy development. There are other ways that we could support our own domestic manufacturing of solar panels, other than sticking a tariff on someone else’s solar panels. We could do what China does and subsidize [it]. There must be tools that are available.”