The business dilemma presents Biden with the difficult choice of keeping his promises to support domestic manufacturing, including high-paying jobs in solar panel manufacturing, or his other campaign pledge to move forward to move away energy. of the United States of fossil fuels.
Even the mere prospect of further trade restrictions prompted solar installers, who already face supply issues and higher labor costs, to back down on some projects. At the same time, Biden wants to avoid being seen as weak in China – another centerpiece of his campaign pitch and his first political platform.
The conflict pits parts of the solar industry against each other. US solar panel makers are asking to extend existing tariffs on Chinese products to those from Malaysia, Thailand and Vietnam. Supporters of the tariffs and trade restrictions say they would allow panel makers in the United States to increase production. Additional homework would also accomplish another of Biden’s goals: punishing China for using forced labor.
But the Solar Energy Industries Association, which represents developers who install panels and build solar projects, says imposing tariffs on these three countries would affect more than three-quarters of imports and about half of the total supply of panels. solar panels in the United States. quite a devastating impact on the solar industry, ”said Abby Hopper, CEO of the business group.
The trade association says if new panel taxes in Southeast Asian countries are approved, it could reduce the deployment of solar energy in the United States by nearly a third over the next two years. years. The move would also reduce the number of jobs for solar project developments by 45,000 from what they would otherwise be in 2023.
The obligations imposed on the three additional countries would be “absolute industry killers,” warned Ben Catt, CEO of Pine Gate Renewables, a developer of North Carolina-based solar projects. “If you were to put those tariffs on one of the projects we’re doing right now, I just think the pricing structure would be thrown out the window.”
Trade is to decide by Thursday whether it will reject solar petitions in Southeast Asia or open an investigation that could result in tariffs. If the Commerce Department finds that importers are avoiding tariffs on solar panels by simply redirecting their goods through countries in Southeast Asia, it must legally impose tariffs.
That is what the petitioners are saying. They also argue that Biden’s lofty climate aspirations are “outside the box,” said Tim Brightbill, international business partner at Wiley Rein LLP, who represents the petitioners. He also dismissed the dire predictions of employment and solar deployment figures presented by the developers.
“This administration’s climate action goals are very much aligned with the goals of building the solar supply chain and returning it to the United States,” Brightbill said, noting that solar deployment has continued to grow. in the United States after the Obama administration imposed import tariffs in 2012.
Commerce and administration have leeway to cushion the impact of any tariff. When panels or components are shipped from China to countries in Southeast Asia, they usually go through some kind of assembly or modification. U.S. solar panel makers complain that the work is too minor to allow them to avoid tariffs on Chinese panels, but Commerce staff may reject this argument for some or all of the companies named in the petitions. The administration could also apply tariff rates lower than those currently in force for Chinese imports.
Solar developers say they have had discussions with climate officials in the Biden administration about the potential of tariffs and trade restrictions to slow solar growth in the United States. The White House has made no one available to comment despite repeated requests.
Chinese tariffs and trade restrictions add anxiety
Other business issues brought to the administration could also hamper solar construction. The trade plans to extend the separate Trump-era tariffs on Chinese solar power for another four years, and the Department of Homeland Security is considering increasing trade restrictions on components in Chinese panels, as it said. done this summer.
In June, the Biden administration blocked the import of silicon-containing products from a key Chinese supplier, Hoshine, over fears it would use forced labor in its manufacture. The company operates in the Xinjiang region in northwest China, where the ruling Communist Party has interned hundreds of thousands of Uyghur Muslims.
The policy gave rise to customs and border protection withhold certain shipments of solar panels from China.
“What we’re hearing from developers and customers is that there are projects that are on hold because their modules are sitting in a port,” Hopper said. “But there are also projects that are on hold or delayed because there is uncertainty as to whether their modules are going to get here.”
Solar companies also face additional costs from existing tariffs on steel and aluminum, rising commodity prices, and supply chain issues affecting businesses across the economy. . As a result, the industry group recently said that the installed price of solar panels in the United States is now increasing slightly, after two decades of steadily declining.
“That kind of uncertainty and volatility and risk and price exposure ironically add costs as people start to assess risk,” Hopper said. “And the risk is expensive. “
Proponents of solar tariffs claim that these price cuts are largely due to the fact that under the Obama administration the solar sector almost completely outsourced its production to China, where about 80% of the panels and their components are still native. Many of the panels and exhibits are from the northwest China’s Xinjiang region, the epicenter of forced labor and other human rights abuses in China. Although some US manufacturers are ramping up production, it will take years to bring enough capacity online to meet booming solar demand in the United States.
“We can’t go back to the days when we only wanted the cheapest solar panels without worrying about where they came from or how they are made,” Brightbill said.
The developers say there are simply not enough American panels available. Catt said his company would like to use domestically sourced panels, but the US manufacturing base still cannot serve the entire industry, especially in the short term while new factories are being built. Supporters of the petition, meanwhile, say more manufacturing capacity would come online if regulators cracked down on unfair prices from foreign competitors.
Solar installers withdraw from projects
Developers like Pine Gate are already pulling out of planned projects because they don’t know what the price or availability of the panels will be in the next few years.
“We have to either be extremely careful in tendering processes or in projects put on the back burner so that things just don’t get built,” he said. “The risk for us of having to predict what the tariff regime will be in three years is too great for us to be able to cover part of the expenses.”
Demand for solar panels in the United States is expected to increase if Congress passes the Democrats’ Reconciliation Plan, which includes a clean energy performance plan that would require huge increases in carbon-free energy each year.
This package also contains funds to launch domestic solar panel manufacturing, as well as advanced battery factories, but the fate of these provisions and the overall package remains in flux.
Meanwhile, solar developers are struggling to work through their own supply chains to identify which of their countless suppliers in China are involved in forced labor or other violations.
“This due diligence has proven difficult for a number of reasons,” said Richard Mojica, a former CBP business lawyer who now represents importers of solar panels.
Some Chinese sellers are reluctant to provide information about their suppliers, he said, because they do not want to break Chinese law which prohibits cooperation with US sanctions. Other times, Chinese suppliers don’t know where their raw materials are coming from or just don’t feel pressured to handle tracing requests from US companies due to demand elsewhere.
“I have been told that many polysilicone suppliers in China do not rush to provide this information because they are very busy supplying the Chinese market and others,” Mojica said.
Uncertain legislative corrections
Reform of the CBP enforcement process may be on the way. The Senate Anti-China Economic Development Bill contains the Uyghur Forced Labor Prevention Law, S.65 (117), which would ban all imports from the Xinjiang region. But it also contains business-friendly changes to the trade restriction process that Mojica and others say will make it easier for companies to prove that their products are not made with forced labor. Like the reconciliation package, this bill faces an uncertain future.
Faced with the multiple headwinds of trade, solar installers stress that the climate impacts of more expensive panels will be serious.
Many blue states with renewable energy mandates will likely continue to add solar power despite the additional tariff costs. But the solar projects most likely to be abandoned are in places like the Midwest and Southeastern United States, where solar power has started to replace coal and gas-fired power plants. This means that most of the lost projects are likely to be replaced by the production of fossil fuels, rather than by other forms of renewable energy.
“The end buyer says that [the electricity] could be from natural gas, it could be from solar power – I don’t care, I buy the cheapest, ”Catt said. “You are already there with renewables if you suppress all the noise of business issues. “
Kelsey Tamborrino contributed to this report.