President Joe Biden took a pair of executive actions Monday designed to speed up growth in a slowing solar energy sector and increase the domestic manufacturing of solar panel components, ultimately to reduce dependence on imported products.
Using his executive trade law powers, Biden declared an emergency to exempt Asian solar cell and module products from new tariffs for a two-year period while also invoking the Defense Production Act to increase domestic manufacturing of those products, which are central components in the construction of most solar panel designs.
The actions were hailed by solar and other green energy trade groups, whose members underperformed in the first quarter of the year, while U.S. solar manufacturing interests were sharply critical of Biden for getting out ahead of an active investigation his Commerce Department is undertaking that could result in new tariffs on products from the four Asian countries targeted by his emergency declaration.
PULLING THE EMERGENCY CORD ON SOLAR
Here’s what happened:
What did Biden do?
Biden invoked the DPA, as he’s done already to support critical minerals production and to address the baby formula shortage, in order to increase U.S. manufacturing of solar panel components, including photovoltaic modules, solar cells, and solar glass. The DPA invocation also covered the production of insulation products, transformers and other electric power grid components, and electric heat pumps.
The presidential DPA memorandum provides that “United States industry cannot reasonably be expected to provide the capability for the needed industrial resource, material, or critical technology item in a timely manner.”
Separately, Biden also declared an emergency under the Tariff Act of 1930 to create what the White House described as a 24-month “bridge” designed to exempt solar imports from Cambodia, Thailand, Vietnam, and Malaysia from a specific category of tariffs called antidumping and countervailing duties, or AD/CVD.
The White House said the emergency action was taken “to ensure that we have the reliable supply of components that deployers need to construct grid-strengthening clean energy projects” while manufacturing grows to scale.
Who controls the solar energy supply chain?
Chinese companies currently dominate the global solar energy supply chain. Some 90% of polysilicon, a key input in most solar panel designs, is produced in China, while Chinese companies operating in third countries also command large solar cell and module market share.
The United States has virtually no solar cell manufacturing capacity, and many U.S. manufacturers that make modules import the materials to do so from Asia.
What’s the larger context of the Commerce Department investigation?
The Commerce Department opened an AD/CVD investigation April 1 at the request of California-based solar module manufacturer Auxin Solar. The inquiry covers solar cell and module products from Cambodia, Thailand, Vietnam, and Malaysia.
The department is looking into whether Chinese companies are circumventing existing tariffs on Chinese imports to the U.S. by setting up shop in those four countries to finish products whose life begins in China.
Of particular interest for the department is whether the manufacturing work done on the products in the four Asian countries is “minor or insignificant” or whether significant manufacturing is undertaken in those third countries after components are brought in from China.
Who opposes the department’s investigation?
Solar trade groups have opposed the department’s investigation, arguing the work in the four targeted countries is significant and therefore imports should not be subjected to new duties.
Imports from Cambodia, Thailand, Vietnam, and Malaysia account for around 80% of cell and module imports to the U.S.
A number of congressional Democrats have also put pressure on the Biden administration to end or quickly resolve the investigation, as solar developers have blamed the inquiry’s threat of new tariffs for stunting the industry and compounding setbacks related to supply chain disruptions.
Who supports the investigation?
U.S. solar manufacturers who build solar panel components support the department’s investigation, arguing that the industry needs tariffs to “level the playing field” for companies that are competing against Chinese government-subsidized companies while also reducing reliance on a geopolitical competitor.
Reuven Proenca, global communications head for Arizona-based module manufacturer First Solar, compared the West’s relationship to Chinese solar products to its historic reliance on oil from the Middle East.
“The U.S. and Europe have been subjected to the OPEC cartel … as long as we’ve relied on hydrocarbons,” Proenca told the Washington Examiner. “As the clean energy transition picks up pace, there’s a very real danger that we’re just going to replace OPEC with a dependency on China.”
Some Democrats, including Sen. Sherrod Brown of Ohio, have split with colleagues and backed the investigation, accusing corporate lobbyists of generating “mass hysteria” with their opposition to the department’s investigation.
How were Biden’s actions received, and how do they relate to the investigation?
Groups such as the Solar Energy Industries Association, which represents thousands of companies across the solar industry, including a few China-based manufacturers, praised Biden’s actions to exempt imports from tariffs and use of the DPA.
Abigail Ross Hopper, SEIA’s president and CEO, said on a call with members Tuesday that the reprieve offers the industry “breathing room,” while general counsel John Smirnow reiterated criticisms of the investigation.
“Our country’s ability to generate electricity is being threatened by Auxin’s investigation,” Smirnow said.
Manufacturers, on the other hand, were angered by Biden’s actions, considering them to be an intervention in the department’s active investigation.
“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,” Auxin said in a statement Monday.
One manufacturing-aligned source separately complained that the administration didn’t consult manufacturers and described the announcement as “neutralizing” the investigation itself.
John Helveston, an assistant professor at George Washington University’s engineering school who opposes tariffs, agreed, saying the tariff bridge effectively “eliminated the source of that legal battle.”
Helveston welcomed Biden’s decision as a positive and said the U.S. and China must find ways to align on solar energy.
“This is one where we have to work together because we don’t have an alternative,” Helveston told the Washington Examiner. “We’re the two biggest energy users in the world. We’re the two biggest emitters in the world. Those are the players when it comes to the climate battle and trying to reduce emissions, so you have to engage on this topic.”
What else has the administration said about Biden’s actions and the Commerce Department investigation?
Biden’s emergency declaration on tariffs explained that improving power grid reliability, supporting green energy goals, and reducing energy prices were the basis of the action.
The White House was careful not to link Biden’s actions to the department’s investigation and emphasized that it was not tampering with the investigation.
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“This administration has been steadfast in making sure that the processes around the implementation and enforcement of our trade laws are carried out consistent with those laws [and] with integrity,” a senior administration official told reporters in a call Monday
Secretary of Commerce Gina Raimondo had said before that the department’s hands are “tied” and that it must carry out the AD/CVD investigation under statute.
She said in May that it’s “exceedingly unlikely” that a finding favoring new duties would result in tariffs at a rate of 200% or more, as allowed by statute, something trade groups have worried about.
