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 partially built but may not be completed.

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

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

The turmoil stems from a decision by the Commerce Department to investigate whether Chinese companies are evading US tariffs by moving components for solar panels across four Southeast Asian countries.

While officials have yet to find any 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 type of solar modules used in the US

In a matter of weeks, 318 solar projects in the US have been canceled or postponed, 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 consequences are just beginning. A month-long halt in imports from the four countries could have lasting ramifications for the multibillion-dollar solar industry and the Biden administration’s ambitious goals to accelerate the development of renewable energy to combat climate change.

“The industry is essentially frozen,” said Leah Stokes, a political scientist who studies climate at the University of California, Santa Barbara. “It is already leading to layoffs, not to mention the impact on our climate targets.”

The Commerce Department began its investigation on March 25 after Auxin Solar, a small California-based solar panel maker, filed a petition calling for an investigation into whether China was circumventing rules designed to prevent subsidized solar parts from state to flood the US 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 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 fueled giant factories that produce materials like polysilicon and components like solar cells that absorb energy from sunlight and convert it into electricity.

To avoid trade problems, US solar installers purchased 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 sourced from China.

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

But if 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 US after the investigation began could be subject to hefty tariffs. And the threat of these additional costs has brought solar panel shipments to a halt.

In an interview, Auxin founder and chief executive Mamun Rashid said he filed the petition because he believes existing tariffs are being undermined and hopes this investigation will help spur domestic manufacturing.

“Maybe trade laws are being violated, this cheating is happening,” Rashid said. “We decided that it would be irresponsible of us not to do something, not to speak up.”

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

The commercial dispute assessment process is a complex system designed to avoid political interference. Secretary of Commerce Gina Raimondo said this week that her department was legally obligated to investigate 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 trying to circumvent obligations, and I am required by law to have a full investigation.”

A Commerce Department spokesperson said it was “directing efforts to strengthen supply chains at the heart of the clean energy transition, including the solar supply chain” and that it was “committed to holding foreign producers accountable for following the same rules.” as US 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 manufactured in the country, while the rest were mainly imported from Malaysia, Vietnam, Thailand and Cambodia.

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

“It is an absurd result that the mere request of one company can bring the industry to its knees in this way,” said Abigail Ross Hopper, chief executive 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.”

The sudden freeze in solar panel installation is clashing with Biden’s goal of accelerating the annual pace of solar installations across the country to deliver on his pledge to reduce US emissions by at least 50% below 2005 levels by the end. of this decade.

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

Disruption is hitting companies large and small.

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

“This is disrupting our solar business and the industry as well,” said David Reuter, NextEra’s director of communications. NextEra shares are down 15% in the last three weeks.

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

“The ramification is very significant, not just for Green Lantern, but for all of our contractors,” said Scott Buckley, president of Green Lantern. “We had to call all our suppliers and have extremely difficult conversations to say, ‘Thanks, but we can’t take deliveries.’”

In total, the Solar Energy Industries Association said its members were predicting a 46% decline in the number of solar panels they will install by next year.

However, another major solar company, First Solar, which makes a type of solar panel unaffected by the tariff dispute, said it supported the investigation.

“What we’re interested in is ensuring that there is a level playing field for domestic manufacturers,” said Reuven Proneca, First Solar’s spokesperson. “We think the Commerce Department’s decision to proceed with the investigation is a step in the right direction.”

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

“We called every American panel manufacturer we could find, and none of them have panels available to us with any anticipated timeline that would allow us to keep these projects moving forward.,” said Mr. Buckley from 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,” wrote Heather Zichal, chief executive of American Clean Power, in a blog post. “She has a codified path in the statute to stop a futile lawsuit initiated by a phantom threat – and she can use those options in the coming weeks to bring an American solar industry crippled by her departmental actions to life.”

But Mrs. Raimondo, responding to a question Wednesday from Senator Jacky Rosen, a Democrat from Nevada, said there was a lot she could do. “What I’m going to commit to you is to move as quickly as possible,” she said.

Some analysts argue that the United States would have to invest much more in domestic manufacturing 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 panels, cells and modules. But that legislation remains in limbo after Senator Joe Manchin III, a Democrat from West Virginia, opposed it last year.

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

“It’s going to slow the industry down at a time when we need to move faster,” Stokes said. “This could be catastrophic.”

Brad Plumer contributed reports.

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