Biden hikes solar tariffs, launches import probe

Source: By Jack Quinn, Christian Robles, Brian Dabbs, E&E News • Posted: Thursday, May 16, 2024

The plan could have major repercussions for the solar market and the presidential campaign.

Solar workers at a factory.

Workers building silicon wafers for solar panels at a factory. Hanwha Qcells | Hanwha Q Cells

The White House announced sweeping trade actions and tax guidance Thursday to bolster solar manufacturing, moves that could affect the industry’s growth.

In June, new tariffs will hit solar panels and cells from Cambodia, Malaysia, Thailand and Vietnam after the Biden administration exempted those countries from fees two years ago. The shift could be significant for the market, as the four Southeast Asian nations currently dominate solar imports.

The administration also said they would no longer exempt countries from tariffs on “bifacial,” or two-sided, panels, a technology that accounts for the majority of solar imports. Those types of panels will now face a 14.25 percent duty, according to the White House.

“The investment boom that we’re seeing in the United States is threatened by unfair and non-market practices taking place overseas,” White House climate adviser Ali Zaidi told reporters Wednesday.

The moves come as the solar industry is facing ongoing inflation and post-pandemic challenges. The Solar Energy Industries Association, the industry’s main trade group, was publicly supportive when the Trump-era exemption on bifacial modules was reinstated in 2021. Many solar manufacturers, meanwhile, have said tariffs are needed to compete with a flood of cheap imports, arguing the four Southeast Asian countries overtook the market because Chinese firms operating in them evaded existing U.S. fees.

The Biden plan could further inject tariff policy into the presidential race and affect solar manufacturing in swing states. Former President Donald Trump has vowed higher tariffs while arguing that Biden is soft on China.

The Southeast Asia tariffs will affect companies that have been circumventing antidumping and countervailing duties on Chinese solar manufacturers, the White House said.

Along with the decision to remove exemptions, the administration pledged Thursday to increase the U.S. tariff-rate quota “as necessary” for imported solar cells. That could raise the amount of solar cell imports that can have reduced duties within a given year — an attempt to ensure domestic panel manufacturers have an adequate supply. The change will help “make sure we’re sprinting into the acceleration that’s necessary to grow the U.S. manufacturing capacity,” Zaidi said.

The administration also announced $70 million in grants for domestic solar producers from the bipartisan infrastructure law. The Department of Energy plans to distribute them to 18 projects to support a domestic solar supply chain.

Additionally, the White House is providing guidance for the domestic content adder, a 10 percent tax credit bonus for clean energy projects using a sizable amount of American products. Solar manufacturers and developers have argued that the current method to determine if a project is eligible for the tax bonus is too complicated, administration officials said.

The new guidance allows clean energy developers to use “Department of Energy-provided default cost percentages” to determine if they can qualify for the bonus.

The tariff announcement follows a flurry of Biden administration actions to limit imports of clean energy products, particularly those with links to China.

Earlier this week, the White House announced separate Section 301 national security tariffs on Chinese solar panels, electric vehicles, minerals and more goods. The White House is also targeting Chinese steel.

New Commerce probe

The administration is taking other actions that could affect solar manufacturing. On Wednesday, the International Trade Commission and Commerce Department formally opened investigations into allegations that Chinese companies are engaging in illegal trade practices through operations in the four Southeast Asian countries.

The probe, which is expected to last through the end of the year, could lead to additional solar tariffs.

The investigation was sparked by an antidumping and countervailing duties petition filed in late April by a coalition of seven solar manufacturers, including Hanwha Qcells and First Solar.

They alleged subsidized solar imports from Malaysia, Cambodia, Thailand and Vietnam are making it difficult for U.S. companies to compete. The seven companies are seeking new tariffs ranging from 70 to 271 percent on solar cells from the four countries.

The ITC will make a preliminary assessment on whether Southeast Asian imports are harming U.S. solar manufacturers in early June. Commerce’s determination is expected in early October.

On Wednesday, the ITC heard testimony from company representatives about the alleged harm to U.S. manufacturing from Southeast Asian imports.

“The U.S. solar manufacturing industry is at a critical turning point,” said Tim Brightbill, chief counsel for the seven solar manufacturers, at the hearing. “Surging import volumes have crushed U.S. prices. … There is a meltdown going on, on pricing in this industry due to subject imports.”

“While U.S. demand has been strong and growing, U.S. producers have been prevented from serving it,” he added.

Southeast Asia accounted for 84 percent of U.S. solar panel imports in the fourth quarter of 2023, up from 78 percent in the third quarter, according to Market Intelligence Global Trade Analytics Suite.

But the prospect of a tougher tariff regime is being criticized by some solar manufacturers.

As long as domestic manufacturing capacity for polysilicon wafers, the base material used in solar cells and panels, remains in its infancy, retaliatory trade measures will mostly slow down the pace of U.S. solar deployment, said Leslie Chang, director of strategy and policy at Caelux, a Los Angeles-based solar module producer.

“A hard line on trade forces the U.S. to start building capacity for manufacturing … but this won’t happen overnight,” said Chang in an emailed statement.

“More consideration is needed for our short-term ability to deploy energy solutions so that we can continue decarbonizing while building up energy security,” Chang added. “If startups and small businesses can’t meaningfully participate due to lack of investment, then we won’t have a competitive marketplace.”

‘Dominant source’

The trade fight is occurring as the U.S. solar industry experiences sharp growth. Residential and commercial installations reached five million this year, according to a separate report Thursday from SEIA and the consultancy Wood Mackenzie.

The report projected that total U.S. installations will double to 10 million by the end of the decade and reach 15 million by 2034. Residential projects will be key to the growth, as they currently make up roughly 97 percent of installations.

“Today 7% of homes in America have solar, and this number will grow to over 15% of U.S. homes by 2030,” Abigail Ross Hopper, SEIA president and CEO, said in a statement before the tariff announcement. “Solar is quickly becoming the dominant source of electricity on the grid, allowing communities to breathe cleaner air and lead healthier lives.”

SEIA said after taking 50 years to reach 5 million installations, the U.S. will add another 5 million projects to the grid within six years.

Solar will also eclipse natural gas as the top energy source for power generation in the United States by 2050, the report said. It estimated that 22 states and territories will have more than 100,000 solar installations by 2030. Currently 11 states have that level of solar power.

The expansion will be unevenly distributed across the country depending on market and regulatory conditions, SEIA said.

“California leads the nation with 2 million solar installations [currently], but recent policy decisions in the state have harmed the rooftop solar market,” SEIA said in a statement, alluding to the California Public Utilities Commission’s challenges to incentives for community solar projects.