Biden pauses tariffs on solar imports, invokes Defense Production Act to spur solar production

Published on June 06, 2022 by Dave Kovaleski

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U.S. President Joe Biden on Monday invoked the Defense Production Act and paused new tariffs on imports of solar panels to increase the production of solar energy in the United States, a move that garnered praise from clean energy organizations.

Biden authorized the Defense Production Act (DPA) to accelerate domestic production of various clean energy technologies, including solar panel parts like photovoltaic modules and module components; building insulation; heat pumps; equipment for making clean electricity-generated fuels; and critical power grid infrastructure like transformers. The White House and the Department of Energy will soon convene relevant industry, labor, environmental justice, and other key stakeholders to maximize the impact of the tools made available through the DPA.

In addition, Biden paused tariffs for certain solar imports for 24 months to ensure a reliable supply of components that U.S. solar deployers need to construct clean energy projects. Specifically, the 24-month bridge temporarily facilitates the ability of U.S. solar deployers to source from Cambodia, Malaysia, Thailand, and Vietnam – four of the largest importers of solar panels and modules into the United States. These four countries account for more than 80 percent of crystalline silicon photovoltaic (CSPV) solar products imported to America. This bridge allows these countries to import components free of certain duties for 24 months while domestic manufacturing scales up.

This is a major development for the U.S. solar industry because solar imports from these countries slowed significantly after the Commerce Department launched a circumvention case in late March involving these four Asian nations. The investigation is to determine whether solar producers in China are illegally circumventing solar tariffs by routing operations through these four countries.

Back in April, a survey by the Solar Energy Industries Association (SEIA) found that roughly 75 percent of solar companies said that panel deliveries have been canceled or delayed due to the investigation. Further, 90 percent of respondents said the Commerce Department’s actions were having a severe impact on their bottom line and, all totaled, could result in the loss of one-third of the 231,000 solar industry jobs in the U.S. Another analysis by Wood Mackenzie found that the circumvention case could eliminate 16 gigawatts of solar panels from the U.S supply chain, which amounts to two-thirds of all panels installed in 2021.

Some electric utility companies had also warned the solar tariff inquiry would result in delays to their solar projects.

Clean energy company NextEra Energy, which owns Florida Power & Light, among other subsidiaries, expressed support for the executive action on Monday.

“The Biden administration’s announcement of a two-year pause on new solar tariffs is an important step to help the solar industry recover from the uncertainty of the last three months,” John Ketchum, president and CEO of NextEra Energy and NextEra Energy Partners, said. “I want to thank the administration for recognizing the challenges that trade uncertainty presents to our industry and the country and for taking this important action. NextEra Energy has and will continue to use our industry leadership to support more U.S. solar manufacturing.”

SEIA also hailed the actions to address the solar supply chain crisis and increase production.

“The president is providing improved business certainty today while harnessing the power of the Defense Production Act for tomorrow. Today’s actions protect existing solar jobs, will lead to increased employment in the solar industry and foster a robust solar manufacturing base here at home,” Abigail Ross Hopper, president and CEO of SEIA, said. “While the Department of Commerce investigation will continue as required by statute, and we remain confident that a review of the facts will result in a negative determination, the president’s action is a much-needed reprieve from this industry-crushing probe. During the two-year tariff suspension window, the U.S. solar industry can return to rapid deployment while the Defense Production Act helps grow American solar manufacturing.”

Currently, the Biden Administration is on track to triple domestic solar manufacturing capacity by the end of 2024 from 7.5 gigawatts to 22.5 gigawatts.

The American Council on Renewable Energy (ACORE) also welcomed the announcement to provide relief to the solar sector.

“Now that we have a reprieve from the destructive impacts of the Commerce inquiry, we look forward to working with the administration and our allies in Congress to secure the enactment of policies that strengthen our domestic supply chain, such as the clean energy tax package currently being negotiated that provides advanced manufacturing tax credits and long-term tax incentives for renewable power,” Gregory Wetstone, president and CEO of ACORE, said.

Meanwhile, on Monday the Biden administration also directed the development of master supply agreements to increase the speed with which domestic clean electricity providers can sell their products to the U.S. government. This includes establishing “super preference” status for federal procurement of solar systems. This measure can stimulate demand for up to a gigawatt of domestically produced solar modules in the near term and up to 10 gigawatts over the next decade – from U.S. government demand alone. In addition, the administration will partner with state and local governments and municipal utilities to increase the potential market impact over the next decade to as much as over 100 gigawatts.