Solar industry ‘frozen’ as Biden administration investigates China

Plans to install 60 square kilometers of solar panels in Vermont are suddenly on hold.

In Maine, a solar farm that would power hundreds of homes is partly built but may not be completed.

And a project in Texas that would have powered more than 10,000 homes was weeks away from launching but has now been delayed until at least next year.

Across the country, solar companies are delaying projects, scrambling for supplies, closing construction sites and warning that tens of billions of dollars — and tens of thousands of jobs — are at risk.

The uproar is the result of a Commerce Department decision to investigate whether Chinese companies are circumventing U.S. tariffs by moving components for solar panels across four Southeast Asian countries.

Although authorities have yet to find evidence of trade violations, the threat of retroactive tariffs has effectively halted imports of crystalline silicon panels and components from Cambodia, Malaysia, Thailand and Vietnam. These four countries supply 82% of the most popular types of solar modules used in the United States.

Within weeks, 318 solar projects in the United States have been canceled or delayed, and hundreds of companies are considering layoffs, according to the Solar Energy Industries Association, which surveyed more than 700 companies in recent days.

Energy experts warn that the fallout is just beginning. A months-long halt to imports from the four countries could have lasting ramifications for the multibillion-dollar solar industry and for the Biden administration’s ambitious goals of accelerating renewable energy development to combat climate change. climatic.

“The industry is essentially frozen,” said Leah Stokes, a political scientist who studies climate at the University of California, Santa Barbara. “It’s already causing layoffs, not to mention impacting our climate goals.”

The Commerce Department opened its investigation on March 25 after Auxin Solar, a small California-based solar panel maker, filed a petition asking for an investigation into whether China was circumventing rules aimed at preventing subsidized solar parts from the state to flood the American market.

Tariffs on Chinese solar panels have been in place since 2012, when the Obama administration imposed them in hopes of promoting domestic manufacturing and preventing China from dominating the emerging global market. In 2018, President Donald J. Trump imposed additional tariffs on certain solar products from China, and Mr. Biden extended those tariffs in February.

For more than a decade, China has dominated the global solar panel supply chain. Government policies and subsidies have nurtured giant factories producing materials like polysilicon and components like solar cells that absorb energy from the sun and convert it into electricity.

To avoid trade problems, US solar installers sourced many of their panels from the four Southeast Asian countries. But according to Auxin, many of these panels are made by foreign subsidiaries of Chinese companies and use cells, wafers and other parts originating in China.

Until now, the Commerce Department had reported that because parts from China were substantially processed by Southeast Asian companies, those components were not subject to the tariffs.

But while the Commerce Department finds that panels from Southeast Asia included parts made in China that should have been subject to tariffs, panels sold in the United States after the investigation began could be subject to high duties. And the threat of these additional costs has halted solar panel shipments.

In an interview, Auxin Founder and Managing Director Mamun Rashid said he filed the petition because he believes existing tariffs are being undermined and hopes the investigation will help boost domestic manufacturing.

“Maybe the trading laws are being violated, the cheating is going on,” Mr Rashid said. “We decided it would be irresponsible for us not to do anything, not to talk.”

Mr Rashid said he acted on his own and was not working in concert with other energy companies, investors or industry groups.

The trade dispute assessment process is a complex system designed to prevent political interference. Commerce Secretary Gina Raimondo said this week that her department was legally obligated to pursue the matter.

“My hands are very tied here,” she told a Capitol Hill hearing on Wednesday. “I am required by law to investigate an allegation that companies operating in other countries are attempting to circumvent rights, and I am required by law to conduct a full investigation.”

A Commerce Department spokesperson said it is “leading efforts to strengthen supply chains at the heart of the clean energy transition, including the solar supply chain,” and is “committed to hold foreign producers accountable for abiding by the same rules”. as American producers.

Last year, the United States installed about 24 gigawatts of new solar capacity, a record helped by falling panel costs. But only about a fifth of these panels were made domestically, while the rest were imported mainly from Malaysia, Vietnam, Thailand and Cambodia.

As the effects of the federal investigation ripple through the US solar industry, its supporters are furious.

“It’s an absurd outcome that the mere request of one company can bring the industry to its knees in this way,” said Abigail Ross Hopper, CEO of the Solar Energy Industries Association. “The US solar market is in chaos. Shipments have stopped, facilities are at a standstill, and people are starting to be laid off.

Sudden freeze on solar panel installation clashes with Biden’s goal of accelerating the annual pace of nationwide solar installations to meet his pledge to cut U.S. emissions by at least 50% below 2005 levels by the end of this decade.

“For an administration that considers renewable energy development one of its primary goals, this tariff inquiry has undermined all of that,” said Nick Bullinger, chief operating officer of Hecate Energy, a Chicago-based solar company. . “The investigation is having a catastrophic negative impact on the renewable energy sector and driving up electricity prices. Every day the tariff investigation continues, the country falls further and further behind in achieving our climate goals.

The disruption is hitting businesses large and small.

NextEra Energy, one of the nation’s largest renewable energy companies, said it expects between two and three gigawatts of solar construction and storage – enough to power more than a million homes – are not completed this year as planned.

“This is absolutely disruptive to our solar business as well as that of the industry,” said David Reuter, director of communications at NextEra. NextEra shares have fallen 15% in the past three weeks.

At Green Lantern Solar, a Vermont-based private solar installer, work on projects in Vermont and Maine has stalled.

“Branching is very important, not just to Green Lantern but to all of our contractors,” said Scott Buckley, president of Green Lantern. “We’ve had to call all of our suppliers and have extremely difficult conversations to say, ‘Thank you, but we can’t take deliveries.'”

In total, the Solar Energy Industries Association said its members expect a 46% drop in the number of solar panels they install next year.

However, another major solar company, First Solar, which makes a type of solar panel not affected by the tariff dispute, said it supported the investigation.

“We are interested in ensuring a level playing field for domestic manufacturers,” said Reuven Proneca, spokesman for First Solar. “We believe the Commerce Department’s decision to continue the investigation is a step in the right direction.”

For American companies looking for solar panels, there are few easy substitutes for products from Cambodia, Malaysia, Thailand and Vietnam.

“We’ve called every U.S. panel maker we could find, and none of them have panels available to us with an expected timeline that will allow us to move these projects forward.,said Mr. Buckley of Green Lantern Solar.

Some solar industry advocates have suggested that the Commerce Department has the ability to quickly reverse course and quickly end the investigation.

“The secretary’s hands are anything but tied,” American Clean Power chief executive Heather Zichal wrote in a blog post. “She has a path that is codified in law to stop an unnecessary process initiated on a phantom threat – and she can use those options in the weeks to come to revive a US solar industry broke by the actions of her department.”

But Ms. Raimondo, responding to a question on Wednesday from Sen. Jacky Rosen, a Democrat from Nevada, said there was little she could do. “What I’m going to commit to you is to go as fast as possible,” she said.

Some analysts have argued that the United States should invest significantly more in domestic manufacturing in order to compete with foreign production of solar products. The Build Back Better bill in Congress, for example, would provide new tax credits for home-produced solar wafers, cells and modules. But that legislation remains in limbo after Sen. Joe Manchin III, a Democrat from West Virginia, walked out in opposition last year.

As the solar industry awaits a decision from the Commerce Department, renewable energy advocates fear time is running out. The Solar Energy Industries Association estimates that the lost or delayed solar deployment resulting from the survey will result in an additional 364 million metric tons of carbon emissions by 2035, the equivalent of keeping 78 million gasoline vehicles on the road.

“It will slow down the industry at a time when we need to move faster,” Ms Stokes said. “It could be catastrophic.”

Brad Plume contributed report.

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