Biden Overthrows Normal Anti-Dumping Procedures to Make U.S. More Dependent on Chinese Solar

The signs for the U.S. solar equipment market were good, until hasty action by the Biden administration uprooted four years of solid progress. The administration’s unprecedented actions, suspending the ability of the International Trade Commission to levy anti-circumvention tariffs on what were likely to be illegal imports of solar equipment from China via Southeast Asia, throws the U.S. solar equipment industry into disarray and dangerously politicizes what has historically been an objective and apolitical process of anti-dumping investigations.

With growing American enthusiasm to fight climate change, supported by a generous solar investment tax credit, the U.S. solar market has posted strong growth for the last ten years. Last year, the industry installed 23.6 Gigawatts (GW) of solar power capacity, according to industry analysts Wood Mackenzie, accounting for a record 46% of the electricity generating capacity added to the U.S. grid in 2021. About 4.3 GW or 18% of that total was domestically produced, an all-time high for U.S. production of solar panels.

After a “nuclear winter” between 2010 and 2016 when U.S. solar production almost vanished under the pressure of a Chinese onslaught on the global market, U.S. production began to come back to life. The Section 201 tariffs of 2018 helped the revival, as did First Solar’s evolution from a startup based on differentiated thin film technology into a major international technology company with a growing manufacturing footprint in Ohio.

The U.S. industry was poised to increase production further before Monday’s announcement. Hanwha Q Cells, the South Korean-owned solar manufacturer with a large module factory in Georgia, announced plans to invest $170 million to build a second Georgia facility to create 500 jobs and increase its U.S. production by 82%. It also recently invested a total of $200 million in buying and restarting an idled polysilicon facility in the state of Washington. Auxin Solar, the Silicon Valley startup that filed the anti-circumvention lawsuit, is working with investors on plans to invest in multiple parts of the solar manufacturing supply chain. Newcomer Convalt is investing in a large solar module facility in northern New York state. Convalt, with management staffed partly by military veterans from nearby Fort Drum, says boldly, or should I say hopefully, on its website: “We won’t rest until we bring the entire supply chain back to America.” Smaller U.S. module makers were also planning to increase production. Foreign producers, such as Swiss technology innovator Meyer Burger, were also planning to invest in the U.S., viewing it as a market that was a couple years ahead of the European Union in plans to declare independence from Chinese domination of the global solar equipment market.

Now all those plans are in tatters. The companies are not commenting publicly yet, but it’s clear that they will now need to reconsider their expansion plans. On Monday, the Biden administration effectively announced its surrender to the Chinese solar industry. By taking executive action to suspend any anti-circumvention tariffs for 24 months, the administration effectively gave China and their factories in Southeast Asia a signal to ramp up production to meet the growing needs of the U.S. market.

This executive action may actually multiply the challenges facing the U.S. solar manufacturing industry, because the Chinese equipment makers may respond by building greater production capability in Southeast Asia, largely to get around U.S. tariffs and restrictions on products from China. So the U.S. industry may have to battle against a two-headed monster instead of just one. Asian governments, some of them Communist like Vietnam’s, are eager to grasp the opportunity created by Chinese investment. Incredibly, more than one-third of Vietnam’s gross domestic product of $290 billion already serves as exports to the U.S. market.

Vaguely Defined Manufacturing Initiatives Unlikely to Work

The White House announcement offered two concessions to the U.S. domestic solar manufacturing industry. Both of them seem like window-dressing, unlikely to deliver any significant results. First, the White House said it would authorize the Department of Energy to use the Defense Production Act to “rapidly expand” the production of solar panel components. But it did not explain how this might work and Energy Secretary Granholm confirmed to the media that they will need to go to Congress for any money to do this.

The DPA was passed in the early 1950s at a time when the U.S. was the world’s largest manufacturing power. The original intent of the law was that if a major manufacturer such as an automaker or a steelmaker was not supporting U.S. military needs sufficiently, the White House could order it to prioritize such needs. More recently, the DPA was used during the COVID pandemic to support personal protective equipment (PPE) producers. But those PPE funds were already available, funded by earlier acts of Congress. The 1950s-era idea of switching production into vital U.S. needs is not an option, because solar production capacity is far too small today, hollowed out by two decades of subsidized Chinese imports. In its initial announcement, the White House failed to admit that there are currently no funds to “rapidly expand” U.S. solar production and there is little prospect of Congress agreeing to fund such a vague program. Private sector companies are equally unlikely to increase their investment since they now face the Chinese government-subsidized, slave labor-subsidized, and IP theft-subsidized solar equipment coming from China and Southeast Asia.

Parenthetical note: just as a reminder of Chinese IP theft practices, also this past Monday, a Chinese-owned solar manufacturer, Canadian Solar, agreed to stop importing into the U.S. a type of shingled solar panel following a lawsuit by U.S. solar startup Solaria, which invented and patented the technology. It was a small reminder, for the few who follow the solar industry, that Chinese practice continues to be: burn coal to manufacture polysilicon, employ slave labor to turn it into solar wafers, use stolen technology to manufacture solar cells, ship it all to Southeast Asia to evade current U.S. tariff law.

Undaunted in its support for Chinese solar, the Biden administration also proposed on Monday favoring U.S.-made solar systems for federal procurement, invoking an exciting-sounding term, “Super Preferences,” for this policy. But “Buy American” preferences have existed for years for federal agencies and the military. Agencies have skirted these provisions by contracting with private electricity providers who can and do buy imported solar equipment to generate the power. Without an explicit change to this legal evasion of the Buy American rules, these Super Preferences will be meaningless for America’s solar manufacturers .

The administration went even further. It made the ludicrous claim that despite this week’s cave-in to Chinese interests, the U.S. solar industry is “on track to triple” domestic solar manufacturing capacity by 2024—in just two years. U.S. solar producers won’t publicly say what they think of that prognostication. They are still hoping that Congress will pass Senator Ossoff’s Solar Equipment Manufacturing Act (SEMA) and some sort of higher tariffs or perhaps true enforcement of the Uyghur Forced Labor Prevention Act might materialize to make that goal achievable. Let’s hope so.

But the reality now looks otherwise: U.S. solar installations will continue to rise, reaching 30 Gigawatts this year and more in subsequent years, but a growing share of that equipment will come from Asia. Our dependence on China will grow. An opportunity to relaunch the U.S. industry will be missed. Instead of delivering what the White House called an “American-made clean energy future,” it is delivering a made-in-China energy future. And doing this at a time when commentators and politicians on both sides of the aisle recognize that excessive dependence on Asia and China in many industries has contributed to inflation, endangered our national security, and led to shortages of vital supplies in many industries.

Politicizing the Anti-Dumping/Countervailing Duties Process

Another sad aspect of the administration’s actions this week is to set a precedent that the normal workings of the anti-dumping/countervailing duty (AD/CVD) process can be overridden by the White House as a result of lobbying by a political interest group, even worse in this case because it is heavily funded by Chinese interests. The normal AD/CVD process is handled by the International Trade Commission and the Department of Commerce who engage in objective, detailed fact-finding and analysis of the imports in question. In ITC cases, the final decision is made by the bipartisan group of six ITC Commissioners.

In this case, the Biden administration has short-circuited that process and made it impossible for any tariffs to be levied in the anti-circumvention case for 24 months. By then, some U.S. solar equipment makers may be out of business. And a dangerous precedent may be set, where other importer groups may now try to short-circuit and undermine future AD/CVD cases.

The administration cave-in is due partly to clever tactics by the Chinese solar suppliers. As we documented six weeks ago, they held the Biden administration to ransom by refusing to export solar panels from Southeast Asia to the U.S. pending a decision in the Auxin anti-circumvention suit. Their lobbying group, the Solar Energy Industries Association, blamed the lack of solar imports on the threat of high anti-circumvention tariffs but comments by solar installers like NextEra revealed that the policy was in fact coordinated and driven by the Chinese suppliers.

Vociferous opposition to anti-circumvention tariffs was also supported by U.S. solar installers. While publicly they claim they are dedicated to addressing the climate dangers facing the planet by installing as many watts of solar as they can, in private, many are desperately trying to hold their businesses together. Many of these businesses float on a sea of red ink. For example, Sunrun, the largest residential installer in the U.S., reported a cash outflow from operations in its first quarter of $256 million. Despite a booming U.S. solar market, Sunrun has not generated positive cash from operations in years. It’s a similar story for Sunnova, another residential installer, which saw a cash outflow of $92 million in the March quarter, with only $66 million of revenue! These companies borrow money from banks to build expensive solar facilities on homeowners’ roofs, and have to wait years for payback. Their upside-down financial statements will look increasingly dangerous in 2022 and next year, as interest rates rise and bankers show a preference for companies that can actually make money. Expect to see more mergers, acquisitions, and bankruptcies among solar installers, even despite the Biden lifeline.

Contrast that with businesses like First Solar or Q Cells, which employ hundreds of Americans to build solar panels, pay them good wages and salaries with benefits, make money on every panel they sell, invest in America’s future, and contribute to our national security.


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