In Biden solar tariff compromise, installers win

When President Joe Biden intervened this week in the tariff battle roiling the U.S. solar industry, he did so in a typically Biden way. He tried to chart a middle path between opposing camps. 

Biden recognized that more needs to be done to help American solar manufacturers. They have struggled to compete with China, which buoyed its own manufacturers so much that the U.S. Commerce Department imposed tariffs on their output a decade ago. Biden laid out several executive actions Monday to ​“accelerate domestic production of clean energy technologies, including solar panel parts.”

At the same time, he gave solar developers and installers something they’d desperately sought: safe harbor (at least for the next two years) from potential duties on products from four Southeast Asian countries that supply some 80 percent of U.S. solar panel imports. 

Both sides’ interests got recognition in the executive action. But if, as Larry David says, a good compromise is when both parties are dissatisfied, this is something else. Developers and installers praised the outcome while the pro-tariff faction fumed.

Why Auxin and First Solar are upset

Not many clean energy companies or groups have publicly supported the Commerce Department’s investigation into potential tariff violations by solar manufacturers in Cambodia, Malaysia, Thailand and Vietnam. The inquiry was kicked off by a petition from Californian panel producer Auxin Solar — an unlikely figurehead given its relatively small scale of production and the quantity of abandoned refuse sitting in its parking lot. But First Solar, a large and successful U.S. manufacturer, has been on Auxin’s side. 

“By taking this unprecedented — and potentially illegal — action, [President Biden] has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law,” Auxin CEO Mamun Rashid said in an emailed statement.

First Solar did not respond to a request for comment, but in a statement circulated to the press, it accused Biden of acting without consulting American solar manufacturers.

“Such a proclamation directly undermines American solar manufacturing by giving unfettered access to China’s state-subsidized solar companies for the next two years,” Samantha Sloan, First Solar’s vice president of global policy, said in the statement. ​“It 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 run by lobbyists.”

The dig at campaigns run by lobbyists is a bit of a red herring; both sides shelled out for the inside game here. 

And though pro-tariff lobbyists made much of the fact that a few Chinese manufacturers sit on the board of the anti-tariff trade group Solar Energy Industries Association (SEIA), far more American jobs were threatened by new tariffs than would plausibly be saved by them.

The pro-tariff camp’s more incisive critique is that Biden is acquiescing to unfair competition from China. That’s a premature claim, in that the nonpartisan evaluators at the Commerce Department are still conducting their independent, quasi-judicial inquiry on whether tariff circumvention is happening. But Biden’s action this week sets up two possible outcomes:

• If Commerce concludes that all the investment and effort that go into making solar cells and panels in the four Southeast Asian countries is major and substantial enough, then there’s no circumvention, and the two-year reprieve from tariffs doesn’t nullify anything.
• If Commerce decides manufacturers in those countries are circumventing tariffs, then the U.S. government will have identified violations of trade law but chosen not to do anything about it for up to two years. Violators could take that time to minimize exposure to tariffs before the grace period ends.

It’s easy to see why the latter situation would be frustrating to people who care more about the principles of fair trade than about buying cheap solar panels. Indeed, the message would be that, if the U.S. becomes so dependent on unfairly subsidized foreign products that actually enforcing trade law causes a national supply crisis, then it won’t enforce trade law. That doesn’t jibe well with Biden’s stated goal of using all powers available to him to strengthen American manufacturing.

Setting aside whether tariffs are an effective remedy here, Auxin correctly flagged that the U.S. currently depends on Chinese supply chains for many of the precursor ingredients to solar panels. China absolutely dominates the global supply of polysilicon, silicon ingots and silicon wafers. 

Even the major new U.S. solar factories that opened in recent years — JinkoSolar in Florida and Hanwha Q Cells in Georgia — assemble panels from photovoltaic cells imported from Asia. (First Solar is the rare company that does not rely on this supply chain because it uses a different thin-film solar technology.)

Tariffs on Chinese solar panels have been in place for a decade and have clearly raised prices in the U.S. without spurring a thriving domestic supply chain. Doing more of the same won’t actualize an American solar manufacturing renaissance, but proponents see tariffs as a necessary baseline to build upon.

The one thing the pro- and anti-tariff camps agree on

Spicy rhetoric and accusations are flying to and fro on the tariff question. So it’s striking that both sides of the tariff debate actually agree on how to incubate sustained growth in domestic solar manufacturing: pass the Solar Energy Manufacturing for America Act, or SEMA. 

SEIA President Abigail Ross Hopper, after applauding the two-year tariff reprieve, added this: ​“Today’s announcement is a great step, and enactment of the Solar Energy Manufacturing for America Act will provide an even greater boost.”

First Solar, after decrying the same reprieve, called SEMA a more ​“durable solar industrial policy” than the procurement actions the White House promised.

South Korea–based manufacturer Hanwha Q Cells is uniquely situated in the debate, as a non-Chinese company doing business in the Southeast Asian countries caught up in the tariff inquiry, while also operating a module assembly plant in Georgia that stands to benefit from tariffs. When Canary Media solicited comment on the White House decision, Scott Moskowitz, the company’s head of market strategy and public affairs for North America, said, ​“Overall, this puts existential importance on getting reconciliation done and passing the Solar Energy Manufacturing for America Act.”

The bill, sponsored by Georgia Senator Jon Ossoff (D), would provide tax credits through the 2020s for domestic producers of components all along the solar supply chain — polysilicon, wafers, cells and panels. It’s been passed by the House, but not by the Senate, where it got tangled up in stalled negotiations over the Democrats’ Build Back Better budget reconciliation bill. 

The White House supports SEMA but has not had success breaking through the logjam (read: Senator Joe Manchin) holding up this and other components of the president’s climate agenda. So the Biden administration is now trying to do what it can for solar manufacturing via executive action, without Congress. 

Among the moves announced on Monday, the White House said it will use federal procurement to ​“stimulate demand” for up to a gigawatt of domestic solar panels in the short term. But the U.S. already has considerably more than 1 gigawatt of production capacity, so it’s hard to say if this would incentivize new factory construction.

Companies want long-term certainty before they invest in new manufacturing facilities. Executive actions are, by nature, susceptible to change every four years. And it’s hard to build a business plan around federal procurement that hasn’t happened yet.

Moskowitz made these same points about procurement in a Twitter thread on Monday. 

That’s why players across the tariff debate are talking up SEMA. Last year, before Auxin spearheaded the divisive tariff petition, the company joined SEIA in supporting the bill’s introduction.

The most likely pathway to passing SEMA is through the Democrats’ budget reconciliation bill, and the only pathway to passing that bill is to get every last Democrat in the Senate to say yes. That hasn’t happened yet. In that light, the tariff debate that has consumed the solar industry for much of this year is evidence of the frustrations that come from attempting long-term industrial policy without legislative action.