The US solar industry push-pull, explained

Hundreds of US solar projects were threatened due to a Commerce Dept., probe—a White House order aims to fix that.
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· 5 min read

It’s been a chaotic spring for the solar industry.

Hundreds of solar projects were delayed or canceled after the US Department of Commerce began an investigation into whether solar panel and solar-panel parts suppliers in Southeast Asia—where the vast majority of US solar panels come from—were dodging tariffs on components made in China.

Last week, President Biden signed an executive order that aims to address some of the recent upheaval by halting new tariffs on solar panels from Southeast Asia for two years and accelerating solar production in the US.

“This is a get-back-to-work order,” Scott Buckley, president of Vermont-based solar installer Green Lantern Solar, told the New York Times. “That’s the way I think about it. Let’s clear the logjams.”

Renewable energy deployment is urgent not only because of recent high fuel prices and the need to decarbonize the grid—which accounts for about one-quarter of US greenhouse-gas emissions—but because other “clean-tech” can’t be considered truly clean if it’s powered by electricity that comes from fossil fuels.

From charging EVs, to electrolysing green hydrogen, to capturing CO2 from the air, technologies aiming to mitigate emissions across different sectors need a cleaner grid to deliver on their promises.

The US Department of Energy predicts solar power could generate ~40% of the nation’s electricity demand by 2035. That would require ​​between 760 and 1,000 GW of solar power capacity, the DOE estimates. The US had just over 60 GW of large-scale solar capacity at the end of 2021, according to the US Energy Information Agency, and it’s forecast to add at least 20 GW this year.

Solar slump

The US needs a lot more solar power to meet net-zero goals. The problem is that the US doesn’t produce many solar panels—about 90% of solar panels installed in the US are made overseas, according to the US Energy Information Administration (EIA).

The vast majority of solar-panel parts are manufactured in China, which has long dominated the industry. Decade-old existing tariffs on Chinese solar cells and panels have led US solar companies to buy elsewhere.

There are four countries in Southeast Asia that supply about 80% of US solar panels and parts: Cambodia, Malaysia, Thailand, and Vietnam. The US Dept. of Commerce probe, which began in April, is investigating whether suppliers in these countries are using parts made in China that should be subject to tariffs.

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Outside of these four countries and China, there is not enough supply to meet baseline US solar demand,  per a survey from the Solar Energy Industries Association. Solar and wind energy are the fastest-growing sources of electricity generation in the US.

The complaint that spurred the probe came from one relatively small, California-based solar panel manufacturer called Auxin Solar, but the investigation has created a crisis for the industry in the US.

The fear of possible retroactive tariffs of up to 250% on products from these major solar suppliers, as well as uncertainty around the supply of solar parts, led to more than 300 solar projects being stalled or abandoned entirely, according to the SEIA survey.

The SEIA estimated that enforcing these new tariffs on imports from Southeast Asia could cut the amount of solar power capacity added in the US this year in half—a potentially major setback, given that experts say global wind and solar installations need to continue at their current rapid pace to meet climate goals.

Executive action

In an effort to get solar projects back on track, President Biden signed an executive order on June 6 that paused new tariffs on solar panels imported from Southeast Asia for the next two years.

The Department of Commerce investigation will still move forward, but retroactive tariffs will no longer be a possibility, Reuters reported.

The executive order also pushes for federal procurement goals for solar panels. The US government plans to buy up to 10 GW of solar capacity from domestic manufacturers over the next decade and work with states and municipalities on purchasing agreements that could amount to as much as an additional 90 GW, according to the White House.

Finally, this action authorizes the use of the Defense Production Act (DPA) to fast-track US manufacturing for clean energy tech, including solar panels. Biden also invoked the DPA to try and quickly build the US supply chain for battery materials at the end of March.

The DPA gives the federal government the power to require companies to prioritize specific contracts and manufacturing in the interest of national defense. The government can support domestic manufacturers with grants and loans, but the power of the DPA is ultimately limited by the $888 million in DPA funding Congress has appropriated for fiscal year 2022.

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Tech Brew keeps business leaders up-to-date on the latest innovations, automation advances, policy shifts, and more, so they can make informed decisions about tech.