@pinaki_kkkm Can you please follow us so we can DM? Thank you!
US solar industry wins tariff breathing room with reprieve over SE Asian suppliers
President Joe Biden warded off a supply chain crisis raging through the US solar industry on 6 June by allowing developers to source modules and cells from four Southeast Asian nations for 24 months absent the fear of anti-circumvention tariffs.
Cambodia, Malaysia, Thailand, and Vietnam provide 80% of all US solar imports and an ongoing Department of Commerce investigation—prompted by a petition from Auxin Solar—threatened to cut utility-scale American developers off from much-needed inventory.
In its 8 February petition, Auxin argued exporters from the four Asian nations assemble solar cells and modules, but do not produce polysilicon ingots or wafers. Instead, the company said these components are sourced from China. The US has had antidumping and countervailing duties in place against Chinese producers since 2012.
This is not the first time the Commerce Department has been asked to take action against companies manufacturing solar panel components that are based in Southeast Asia. In November, Commerce dropped an investigation brought on similar grounds against companies operating in Malaysia, Thailand, and Vietnam.
The threat of action by Commerce on the most-recent petition had already "paralyzed" the industry, according to one trade organization.
In April, the US Solar Energy Industries Association (SEIA) said installation forecasts for 2022 and 2023 were being cut by 46% due to the circumvention case. SEIA said planned solar capacity would decrease by 24 GW over the next two years as a result and 100,000 job losses were on the cards.
SEIA estimated the tariffs would see solar capacity falling 75 GW short of what would be required to reach renewable energy targets set by Biden—or the size of the US solar market prior to 2020.
The White House said 6 June the tariff reprieve would "ensure the US has access to a sufficient supply of solar modules to meet electricity generation needs while domestic manufacturing scales up."
Pausing the introduction of tariffs sought by Auxin will dramatically shift deployment assumptions, and the impact of the uncertainty since the San Jose, California-based company filed its petition would be mostly confined to 2022, S&P Global Commodity Insights Senior Research Analyst Eric Wright told Net-Zero Business Daily on 6 June.
Biden's decision to step in this early in the year is likely to give many project developers time to procure modules and meet 2022 installation deadlines, Wright said, adding that the annual cycle for solar deployment is typically backloaded, with a larger share of projects completed in the final three months of a year than other quarters.
"If shipments can resume relatively soon, even with lead times of 12-14 weeks, more projects will reach completion this year than originally anticipated, but total installations will inevitably still be below what they could have been had the investigation not been initiated to begin with," he said.
Alongside the supply-side breathing room for the US solar sector, Biden promised actions to help scale up domestic manufacturing while imports continue to flow to American shores.
Part of the stimulus for a US solar manufacturing sector beaten down by relentless overseas competition will be the deployment of powers last used to increase production of infant formula and COVID-19 vaccines and introduced in 1950 to mobilize military infrastructure for the Korean War.
In its latest deployment, the Department of Energy will use the Defense Production Act (DPA) of 1950 to "rapidly" expand American manufacturing of five critical clean energy technologies, including solar panel parts like photovoltaic modules and module components, the White House said.
The other four technologies are building insulation; heat pumps for heating and cooling buildings more efficiently; equipment for making and using clean electricity-generated fuels, including electrolyzers, fuel cells, and related platinum group metals; and power grid infrastructure like transformers.
In order to aid the demand side of the equation, the Biden-Harris administration also called for the development of master supply agreements for domestically manufactured solar systems, which it argued would "increase the speed and efficiency with which domestic clean electricity providers can sell their products to the US government."
The US government will also develop what it termed "super preferences," meaning federal agencies' solar purchases will include domestic content standards going forward. The White House expected its demand-side measure to stimulate government purchases of up to 1 GW of domestically produced solar modules in the "near term," and up to 10 GW over the next decade.
Sigh of relief
Both the tariff relief and plan to use the war-time measures found widespread support in the solar sector and beyond.
Abigail Ross Hopper, SEIA CEO, said in a statement: "We applaud President Biden's thoughtful approach to addressing the current crisis of the paralyzed solar supply chain. The president is providing improved business certainty today while harnessing the power of the Defense Production Act for tomorrow."
Evergreen Action Senior Advisor Sam Ricketts added that the tariff pause would provide clarity and stability, noting "we can't afford to plunge businesses delivering one of the leading renewable technologies into chaos."
Looking at the wider picture, Jean Su, director of the Center for Biological Diversity's Energy Justice program, said use of the DPA was a turning point for the Biden administration in its much-touted all-of-government approach to confronting climate change.
Part of that approach was on display last week when the Department of the Interior's Bureau of Land Management (BLM) said it would reduce rents and fees to promote the greatest use of wind and solar resources on public lands. On average, BLM expects rents and fees to decrease more than 50% due to lower acreage rents and a standard megawatt fee that promotes more efficient wind and solar or hybrid projects on public lands.
The government is also opening up more offshore waters to renewable power generators. On 26 May, Interior unveiled details on the first offshore wind lease sale off the US West Coast. The Proposed Sale Notice includes three proposed lease areas in the Morro Bay Wind Energy Area off central California and two proposed lease areas in the Humboldt Wind Energy Area off northern California that could see more than 4.5 GW of capacity developed.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
- IRENA report offers proposal for renewables’ price cannibalization headache
- A half-century of countries with floating offshore wind by mid-century?
- Equinor eyes 1-GW Norwegian floating offshore wind farm to help decarbonize oil production, cut costs
- Indonesia prepares “grand” renewables strategy; doubts remain over policy design, execution
- BP bets big on renewables, green hydrogen in Australia’s Pilbara
- Fossil fuel boom profits not being taxed to fund transition: study
- China restricts solar, wind power projects in inland waters, cites flood control
- EU's REPowerEU renewables aim presents banks with “big question mark”