White House alarmed that Commerce probe is ‘smothering’ solar industry

Source: By Evan Halper and Jeff Stein, Washington Post • Posted: Sunday, May 8, 2022

The investigation is examining allegations that China is illegally circumventing U.S. tariffs.

Gina Raimondo, the U.S. commerce secretary, arrives for a Senate hearing in April. (Oliver Contreras/For The Washington Post)

Top climate officials in the Biden administration are warning that a federal investigation into alleged dodging of tariffs by Chinese suppliers has put the domestic solar industry in peril just as the United States is trying to ramp up clean-energy production.

White House officials and their allies in the solar industry have grown increasingly exasperated over a Department of Commerce investigation into panel makers from four Asian countries. The industry and its allies in Congress are demanding that Cabinet officials intervene to blunt the damage, but Commerce officials say their hands are tied by federal statute.

The impact of the probe puts the administration in a bind as it tries to balance Biden’s ambitious climate agenda with his pledge to restore the integrity of federal agencies and his promises to stand up for American manufacturing.

The tariffs at issue date to the Obama era. They are designed to prevent Chinese companies from dumping heavily government subsidized solar panels and cells into the American market. Investigators are examining whether manufacturers in Malaysia, Thailand, Vietnam and Cambodia have become conduits for such Chinese materials. While no determination has been made, the investigation carries the threat of retroactive tariffs — which has already driven up the cost of importing these parts and severely hampered the industry’s capacity.

The administration’s concerns about the investigation are so pronounced that Energy Secretary Jennifer Granholm approached Commerce Secretary Gina Raimondo about the issue during an unrelated media event they both attended on March 31. Granholm relayed the mounting concerns of the solar industry and asked for details about the investigation, according to a Commerce spokesperson. Raimondo told Granholm that she shared the concerns but that the investigation is a quasi-judicial process that the secretary cannot influence, the spokesperson said.

White House special presidential envoy for climate John F. Kerry also has relayed the industry’s concerns in internal administration conversations but has been clear that he defers to Commerce’s discretion over the investigation, a Kerry spokesperson said.

“At stake is the complete smothering of the investment and the jobs and the independence we would be seeking as a nation to get our fuel from our own generation sources,” Granholm told the Senate Energy and Natural Resources Committee on Thursday. “I am deeply concerned about being able to get to the goal of 100 percent clean electricity by 2035 if this is not resolved quickly.”

The White House also is urging the Commerce Department to act quickly in accordance with the law, according to a person who spoke on the condition of anonymity to discuss internal administration thinking.

Compounding the challenge for the administration is that its climate agenda in Congress is at a standstill amid a broader dispute with Sen. Joe Manchin III (D-W.Va.) over the president’s economic agenda.

“Solar industry representatives and advocates have communicated these concerns to us, and we are reviewing our options, consistent with requirements about independence of such investigations,” deputy White House press secretary Andrew Bates said in a statement. “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.”

Bates pointed to a range of actions taken by the administration to help the solar industry, including increasing the number of permits for renewable energy and providing funding for solar projects on mine lands.

Biden officials have been careful to avoid even the appearance of interfering with the Commerce probe, which is being run by career staffers at the department. The rules guiding the Commerce investigation are designed to minimize political interference, enabling the civil staff at the agency to pursue its work independently.

Confronting mounting political pressure to intervene and clear a path for solar installations to get back on track, Raimondo told Bloomberg television Friday that the department is moving as fast as it can, “but I can’t take any shortcuts here because we have to pursue the investigation in compliance with the law.”

A bipartisan group of lawmakers also has pressured the administration to “pursue allegations of rampant trade violations” by Chinese solar energy companies, as many U.S. lawmakers seek to pressure Beijing economically.

But solar industry officials warn that if the investigation drags on for months, as the law allows, businesses will be wiped out and massive solar projects will be scrapped. Rooftop solar companies are also struggling with the tumult in the market, industry officials said. Hundreds of big solar projects in the United States have been frozen or substantially delayed as investors become unnerved by the prospect of having to pay steep penalties retroactively.

Eighty percent of U.S. solar firms say the investigation has jeopardized at least half the projects they planned to complete in 2022, according to an industry survey. The tariffs under consideration by Commerce could exceed 50 percent of the price of panels.

“We have created so much chaos under this administration that nobody is even manufacturing panels for the U.S. right now,” said Heather Zichal, a former White House climate adviser who is now the chief executive of the American Clean Power Association. “This is because of regulatory decisions completely up to this administration.”

Others see the investigation as a necessary disruption, citing China’s record on human rights and climate change. “Shortages show why the U.S. must rebuild solar equipment manufacturing, and that won’t happen if our market is flooded with imports made cheap by Uyghur forced labor and high-carbon coal-fired silicon smelting,” said Lori Wallach, a trade policy expert at the American Economic Liberties Project.

The first climate casualty emerged this week when an Indiana utility announced that it was extending the life of two coal-fired power plants because the solar energy needed to replace their electricity output will not be available. The utility placed the blame squarely on the Commerce investigation. California Gov. Gavin Newsom (D) warned in a letter to Raimondo that the sudden tumult created by the investigation is jeopardizing a state plan to quickly install enough new solar to power 2.5 million homes.

It is also throwing into doubt the Biden administration’s plan to cut the cost of solar electricity in half by 2030, which would make it the cheapest energy source available. The Solar Energy Industries Association reported that 318 solar projects have been canceled or delayed because of the investigation — more than a third of the utility-scale solar development in the pipeline.

As top White House officials express alarm but vow to stay at arm’s length from the Commerce investigation, energy analysts warn that the outlook for solar energy could be bleak if they do not step in.

“Political pressure from Congressional overseers and the White House may provide the best prospects for opponents to prevent the Commerce Department from reaching an affirmative determination,” ClearView Energy Partners, an independent research firm, wrote in a note to clients this week.

The founder of Auxin Solar, the small San Jose solar panel manufacturer that petitioned Commerce to launch the investigation, has become the target of a torrent of outrage from green-energy and environmental advocates. Mamun Rashid says the panic in the industry merely bolsters his case that Chinese products are being illegally dumped in the U.S. market.

“There’s absolutely no reason to stop shipments of products or stop projects or delay projects if there’s no cheating going on,” he said. “I did not expect to hear about projects being delayed, and I did not expect to see all this vitriol.”

He was also surprised, he said, to find himself branded in a clean-power blog post as a “Phantom Menace.”

The Auxin chief executive said he left the computer chip business 14 years ago to launch the company because he saw in solar energy a potential catalyst to help revive manufacturing in the United States. It is a tiny player by solar industry standards, able to produce not even enough panels in a year to support a major utility-scale installation.

And Auxin is not even producing at capacity, which Rashid attributes to a boycott by developers aggrieved at his company’s request for the Commerce investigation. Others in the industry say his operation is not ready for prime time. Suspicions that Rashid’s legal bills for the Commerce action — potentially in the millions of dollars — are being secretly bankrolled by oil or gas interests are echoing through the solar world.

Rashid says he is getting no such help. He said the cost of doing nothing would be higher than his legal bills. “We don’t have a business if we don’t do something about this,” he said, adding that some foreign competitors are selling assembled panels for less than what Auxin pays for materials.

“It’s an existential moment for us,” Rashid said. “We’re not irresponsible. I’m here to try to create a foundation for reshaping the entire solar supply chain because I believe very strongly that renewable energy will dominate our grid and solar will be the dominant renewable energy.”

Solar industry trade groups and their many allies in Congress say the case is meritless, will do nothing to bolster domestic production and could set back by years the country’s progress toward achieving a cleaner power grid. The groups note that several other petitions of this kind have previously been filed with Commerce and did not result in findings that rules were broken.

“We need to repeal the existing job-killing solar tariffs, not add new ones,” Sen. Jacky Rosen (D-Nev.) said in an email that called the Commerce investigation “misguided.” Sen. Martin Heinrich (D-N.M.) on Friday called on Biden to bring the trade case to a close immediately.

Yet the case underscores the challenges the administration faces in making good on its promises to protect American manufacturing.

“This is just emblematic of the bigger complexities the administration is going to face if it actually wants to put some rubber to the road in its effort to move supply chains, because China is in almost every supply chain,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics, a Washington-based think tank. “When is something not from China? The administration has not defined that.”

“If you’re moving China out of supply chains, how far out does it have to be? How many stages back?” Lovely said.

These are complicated questions for the administration. As it wrestles with them, the political fallout is mounting.

“I am perplexed and furious we find ourselves in this situation under an administration that extols the virtues of solar energy,” said Abigail Ross Hopper, the president of the Solar Energy Industries Association. “We are going to be building less than during the Trump years. That is hard to explain.”