The White House will try to calm the turmoil in America’s solar industry by exempting it for two years from crushing tariffs on certain panels manufactured abroad, a move the administration hopes will get hundreds of stalled projects back on track.
“Diversifying our energy sources and responding to the climate crisis have never been more urgent, and solar energy is an essential component of meeting those needs,” Commerce Secretary Gina Raimondo said in a statement Monday. “The President’s emergency declaration ensures America’s families have access to reliable and clean electricity while also ensuring we have the ability to hold our trading partners accountable to their commitments.”
The pause on tariffs was welcomed by an industry that has been lobbying aggressively for the White House to intervene in a Commerce investigation that has driven the market for large solar installations in the United States into chaos. But it also creates new challenges for the White House, which is promising to protect American manufacturing.
The administration also announced Monday that it will invoke the Defense Production Act to boost domestic clean-energy companies, particularly the U.S. solar panel and cell manufacturers struggling to compete with Asian imports.
“The president’s action is a much-needed reprieve from this industry-crushing probe,” said a statement from Abigail Ross Hopper, president and chief executive of the Solar Energy Industries Association.
Hundreds of big solar projects in the United States have been frozen or substantially delayed as investors became unnerved by the prospect of having to pay steep penalties retroactively.
Eighty percent of U.S. solar firms say the investigation has jeopardized at least half the projects they planned to complete in 2022, according to an industry survey. The tariffs under consideration by Commerce could exceed 50 percent of the price of panels.
The administration said that the Commerce investigation will continue unfettered and that tariffs could ultimately be applied to the targeted manufacturers. Officials said trade law allows the president to invoke emergency actions such as the temporary reprieve from tariffs.
“This is the exercise of a specific emergency authority the president has under the Tariff Act that applies broadly to the implementation of the trade laws as a general matter,” said a senior administration official, speaking on the condition of anonymity as part of the ground rules for a call with reporters. “He is exercising that authority.”
Even so, analysts warn that it is not clear the president has that authority. The move probably will be met with legal challenges and could be overturned in court.
“President Biden is significantly interfering in Commerce’s quasi-judicial process,” said a statement from Mamun Rashid, chief executive of Auxin Solar, the San Jose solar manufacturing firm that asked for the Commerce probe. “By taking this unprecedented — and potentially illegal — action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law.”
Rashid said his struggling small solar firm has been in the process of scaling up to meet domestic demand as installers looked for products to replace those from the countries targeted by the Commerce investigation. America’s largest manufacturer of solar panels, First Solar, was also heavily critical of the White House action.
“This sends the message that companies can circumvent American laws and that the U.S. government will let them get away with it as long as they’re backed by deep-pocketed political pressure campaigns,” Samantha Sloan, the company’s vice president for policy, said in a statement.
She criticized the administration’s reliance on the Defense Production Act to help domestic panel- and cell-makers, calling it an “ineffective use of taxpayer dollars” that will not go far in boosting American production.
But as American companies such as Auxin and First Solar argue that Biden is undermining domestic manufacturing, firms that develop big solar projects say the smattering of American companies making cells and panels produce nowhere near enough to meet the surging demand.
The American Clean Power Association says that the president’s plan will enable solar installations to get back on track while seeding the scale-up of a robust domestic manufacturing industry.
The plan to use the act to boost availability of solar and other clean energy comes as Americans face soaring prices for gas and oil, and as the administration is struggling to show it is acting to bring down energy costs. Clean energy companies have struggled to quickly provide consumers with more economically attractive alternatives to costly fossil fuels as they face the Commerce investigation and other head winds, such as strained supply chains and inadequate infrastructure.
In addition to solar panels and cells, the Defense Production Act is being invoked to spur domestic output of heat pumps that enable more efficient heating and cooling in buildings; equipment used to make low-emission fuels; and parts needed to shore up the nation’s power grid.
The White House is also vowing to step up federal government purchases of clean power.
But the most significant action the administration is taking for the green energy industry Monday is the pause on solar tariffs. The administration has vowed not to interfere in an investigation demanded by Auxin and backed by a group of bipartisan lawmakers who warned of potential “rampant trade violations” by Chinese solar companies.
The Chinese firms are accused of dumping heavily government-subsidized solar panels and cells into the American market. Investigators are examining whether manufacturers in Malaysia, Thailand, Vietnam and Cambodia have become conduits for such Chinese materials. Executives from Chinese solar companies say the allegations are baseless, noting hundreds of millions of dollars are being invested locally in their Southeast Asia subsidiaries on solar technology and operations, making the case that the factories are not merely pass-throughs.
But as the investigation began to unfold, the extent to which it paralyzed the American solar industry alarmed lawmakers and climate advocates inside the White House. Administration officials, including Energy Secretary Jennifer Granholm, warned they had grown deeply concerned that the disruption it created had imperiled the administration’s goal of reaching 100 percent clean energy by 2035.
Several Democratic senators expressed alarm on a call with top White House officials late last month, during which they pressured the White House to intervene. The administration had taken a cautious approach, trying to balance Biden’s ambitious climate agenda with his pledge to restore the integrity of federal agencies and his promises to stand up for American manufacturing.
“I’m glad the Biden administration is now taking concrete action,” said Sen. Jacky Rosen (D-Nev.), who has lobbied the White House to bring relief to the industry.
The administration framed the temporary tariff exemption as a “bridge” to hasten the availability of cells and panels while the investigation proceeds. The solar parts from countries targeted in the investigation can be imported without risk of the threatened tariffs for 24 months, the administration said in a fact sheet, “to ensure the U.S. has access to a sufficient supply of solar modules to meet electricity generation needs while domestic manufacturing scales up.”
“We need to boost short-term solar panel supply to support construction projects in the United States right now,” the administration statement said. “Grid operators around the country are relying on planned solar projects to come online to ensure there is sufficient power to meet demand.”