The climate lobby and Chinese solar exporters got a big win on Monday when President Biden waived all duties on solar panels coming from Southeast Asia, declaring it an emergency need.
To counter that move to open the floodgates, despite voter opposition, Biden authorized the Defense Production Act to spur manufacturing of domestic solar products. Monday’s Executive Order said the Department of Energy will use the DPA to “create a 24-month bridge as domestic manufacturing rapidly scales up to ensure the reliable supply of components that U.S. solar deployers need to construct clean energy projects and an electric grid for the 21st century, while reinforcing the integrity of our trade laws and processes.”
However, it is unclear if commercial buyers will even need U.S. made product if they now have unfettered, duty-free access to Chinese multinational solar panels that have been flowing out of Southeast Asia ever since mainland Chinese manufacturers were hit with anti-dumping and countervailing (AD/CVD) duties and solar safeguard tariffs over four years ago. Around 80% of all solar products imported into the U.S. last year came from Southeast Asia, led by Vietnam. Mostly all of it is from Chinese manufacturers that have been implicated in the use of forced labor. Southeast Asia does not have any serious, domestic solar industry contenders.
Chinese companies were holding U.S.-bound solar product shipments in Asia out of concerns they would be hit with retroactive duties if the Commerce Department’s latest investigation into illegal trade activity by Chinese solar manufacturers sided in favor of U.S. manufacturers, led by Auxin Solar of California. Now those solar goods will be shipped to the U.S. without facing any duties.
On Monday, Commerce Secretary Gina Raimondo touted the White House line that they had to do this because of a pending climate emergency and because of the Russian war in Ukraine sending oil and gas prices higher.
The Biden administration is selling this move as a means to avoid energy rationing, declaring this risk an emergency situation.
The crisis in Ukraine is being touted as the main reason for the duties waiver in “order to avoid disruptions to the electric power system,” Commerce said in a statement on Monday.
Raimondo said: “As we invest in expanding domestic solar manufacturing and strengthening supply chains to protect our long-term energy security, imported solar panels remain an important component to addressing the immediate demands of bringing additional energy sources online.”
This has been the main argument of solar importers for the latter part of a year – first it was the climate crisis during last year’s United Nations COP-26 meeting; then it was inflation; now it’s the war in Ukraine setting the table for an energy crisis. It’s been one crisis after the next, all to the benefit of green energy importers.
Assistant Secretary of Commerce for Enforcement and Compliance Lisa Wang said the anti-dumping investigation will continue. This seems like a red herring. “Whatever conclusion Commerce reaches when the investigation concludes will apply once this short-term emergency period is over. In accordance with the President’s declaration, no solar cells or modules imported from Cambodia, Malaysia, Thailand, and Vietnam will be subject to new antidumping or countervailing duties during the period of the emergency,” Wang said.
Biden’s emergency period will last for two years – meaning even if the expected preliminary decision on the dumping case in August were to rule against Southeast Asia, none of it would matter until the summer of 2024 anyway. Duties would not be implemented until then, if at all.
This latest decision will have an impact on U.S. solar manufacturing investment.
The waiver sends a signal to domestic manufacturers that they will be outgunned by subsidized Chinese multinationals spread throughout Asia with only temporary, half-measure support from Washington. And that Asian companies can dump products into the U.S. market without risk as long as they can convince Washington that it is all in the interest of climate change policy, inflation, and now energy security.
Ironically, relying on foreign sources for a burgeoning source of electric power is not energy security.
DPA must be used to the full extent to make it more attractive for utility companies and general contractors to install U.S.-made solar panels instead of imports. The only problem is that the White House told stakeholders on a call that the DPA plan is for 10GW of solar over a ten-year period. Industry experts know that 10GW is a very small amount. Moreover, it is unclear if this policy would even remain if a Democrat loses the White House in 2024, meaning the DPA might be a bandaid for U.S. solar for two years.
At a minimum, the DPA should be used to immediately increase local manufacturing by placing long term orders for both solar cells and solar modules to build solar installations during this two-year waiver on federal lands. There is no indication that such a move is in the works. Without those government orders, there is little incentive at this time for U.S. solar companies to invest in new capacity as the much larger private market will have abundant duty-free supply from the big Chinese solar companies. Local producers could see a loss in domestic market share over the two year period, as well.
Worth noting, LG Electronics USA, makers of solar panels in Alabama, closed shop this year after the White House weakened the Section 201 solar safeguards in February. Monday’s tariff waiver is likely to have similar effects.
Biden Goes Against Voters
Three polls have shown that American voters are in favor of tariffs on China, and on Chinese solar manufacturers in Southeast Asia.
A January poll conducted by Morning Consult for Coalition for a Prosperous America revealed that a significant majority (57%) of voters, including 52% of Democrats, said they would not vote for candidates in the mid-term elections that support solar imports from China or China-controlled factories in Southeast Asia. Some 55% of voters, including 60% of Independents, said that they are less likely to support a candidate who supports addressing climate change by importing Chinese solar panels. Voters signaled overwhelming support for domestic solar manufacturing, with 9 out of 10 respondents and nearly 100% of voters who identify as liberal, saying that it is important for the United States to domestically manufacture renewable energy equipment like solar panels.
In April, over 70% said they supported keeping tariffs on China. That, too, was a CPA/Morning Consult poll.
And in May, a separate Morning Consult poll not affiliated with CPA showed that Democrats were more likely to want to keep tariffs than reduce tariffs on goods manufactured by China. While that did not include questions about Chinese manufacturers in Southeast Asia, it was clear that both Democrats and Republicans were not sold on reducing tariffs to fight inflation. It is no surprise then that a new energy emergency is being touted as the reason for cutting tariffs instead of inflation and, until this year, battling climate change.