In one month, President Biden will decide whether the U.S. solar manufacturing industry will be overrun by Asia, namely China, or continue with existing safeguard protections for another four years. Those measures expire February 6.
It’s a battle. But for now, the International Trade Commission (ITC) sided with American manufacturers on November 24 and sent their report to the White House on December 8. The final decision on the safeguard extension sits with the President.
This week, the Office of the United States Trade Representative (USTR) held a public hearing and heard from four separate panels representing domestic solar module makers, solar importers and installation companies represented by the Solar Energy Industry Association (SEIA), five companies from Canada and Mexico, and trade officials from the embassies of Canada, Mexico, and Vietnam.
The USTR’s Trade Policy Staff Committee managed the hearing. They will use what they gathered from the hearing participants and the USTR will send their view on the safeguard extension to the President.
If this was a sport, you would have the ITC, three local manufacturers, including one that just survived bankruptcy and isn’t manufacturing anything at the moment, versus SEIA, the American Clean Power Association, the massive Akin Gump lobbying firm, five companies representing U.S. installers, three Canadian exporters of solar panels, one Mexican exporter, and three foreign governments (not counting China). So it is three against 15, with China as head coach.
Add in the White House’s climate change policy advisor, John Kerry, as well. He is likely to be opposed to the safeguard extension. He is the Joker’s Wild card in all of this. Will he hold any sway over Biden’s decision?
Kerry, like SEIA, will cite difficulties in reaching climate goals for solar-powered utilities by 2035 if the import penalties remain. Such will be the narrative – followed by inflation, and the fact that domestic supply is still lackluster after years of taking a beating from China. Domestic suppliers told the USTR to cut them some slack as the last two years were a bit unusual, with everyone suffering through a pandemic.
Still, should the beating be allowed to continue, the domestic manufacturers won’t be able to out-innovate in order to gain any decent market share at home. Solar’s future, then, would belong to the Chinese at a time when the U.S. is trying to do away with fossil fuels.
There are two types of tariffs currently helping U.S. solar manufacturers. One is the anti-dumping/countervailing duties on mainland Chinese solar panels and solar cells. That is separate from the Section 201s.
The Section 201s that the ITC recommended remain include 18% tariffs on solar panels and solar cells imported from any country, declining by 0.25% annually. And a tariff-rate quota of 2.5 gigawatts for solar cells. Anything above that gets tariffed.
Also, in 2018 when the tariffs were imposed, President Trump did not include bifacial, or two-sided panels. They were included in 2020 with an 18% tariff.
SEIA sued in the U.S. Court of International Trade and won in November 2021, with the court saying Trump’s proclamation on bifacial panels in 2020 was invalidated. Legally, bifacial panels sit in limbo. In practice, importers are bringing them in tariff-free, inflicting pain on domestic manufacturers. Bifacial panels and mono facial panels are effectively the same market.
Those are the three issues the President will decide on next month.
Around 20% of solar panels in the U.S. are made here. But inside those solar panels sit solar cells that make up the panels. That market is overwhelmingly Asian and dominated by Chinese products or products made by Chinese companies elsewhere in Asia.
Local manufacturers say that without the safeguards, there will be no investment in solar cells and it is also likely that the U.S. would be flooded with cheaper Asian solar panels, most of them made by Chinese multinationals like JA Solar and Jinko.
The installers, and those on SEIA’s side of the debate, argue that if Biden goes along with the ITC, many installers will go broke, or have to reprice projects they agreed to in 2019-2020, under the assumption that the four-year safeguard measures would expire. Canada and Mexico want exemptions from solar tariffs altogether.
If Biden disagrees with them, it would be the first time that a safeguard measure is extended.
CPA thinks the chances are good that the White House continues with the 201s as the ITC has outlined. They want to appear to have a certain amount of anti-China/pro-domestic manufacturing policy and this issue fits.
There is a chance that Kerry convinces the White House to tweak the recommendation whereas tariff rate quotas are increased for solar cells – a positive for some — and bifacial panel tariffs remain excluded from Section 201s, which would give China a huge opportunity to increase U.S sales.
Subsidies and tax credits are not enough. The domestic industry needs protection from China. As Auxin Solar stated, China has reformatted its solar wafers and cells to a different size, forcing U.S. importers who use them for their solar panels to have to reconfigure everything and invest in new equipment.
Companies then need to convince their lenders to lend them more money for new equipment with the financial risk that China will change the format again at a moment’s notice. The risk is high.
Nevertheless, the good news: “The ITC has done a good job in recognizing the importance of climate change technology being manufactured in the United States,” says Jeff Ferry, chief economist at CPA. “Renewable energy is a critical part of the U.S. economy and China’s dominance in solar equipment is so strong, it would be a sacrifice of American self-determination and a huge increase in our dependence on China were the President to abolish the tariffs outright. He needs not only to extend the 201 tariffs but to extend them explicitly to cover bifacial solar panels since they are one and the same market.”
See Part II of this two-part series, U.S. Solar Fends Off Importers; Hopes to Convince Biden to Stick With Them.