Ruling in Auxin trade case revives tariff threat for US solar

Today the U.S. Department of Commerce issued a preliminary decision to reinstate tariffs on certain Asian-built solar modules, a move that could (once more) thwart the growth of the fast-growing domestic renewable energy industry.

The duties are intended as a punitive measure against Chinese-government-supported solar manufacturers that are now assembling modules in any of four Asian countries (Vietnam, Thailand, Malaysia and Cambodia) in order to dodge (or ​“circumvent,” in Commerce’s parlance) duties imposed on them. The duties were first imposed by the Obama administration, then were amplified by Trump and continued by Biden.

While the recently passed Inflation Reduction Act has the potential to jump-start American manufacturing, it is unlikely that sufficient factory capacity will be in place by June 2024 to satisfy domestic demand for solar modules. So if the tariffs are enacted, supply-chain failures and parts shortages could debilitate U.S. utility-scale solar.

Industry leaders immediately took to Twitter (and my inbox) to voice their condemnation of the preliminary decision. George Hershman, CEO of Solv Energy, a large utility-scale solar installer, had this to say in an emailed statement: ​“I remain concerned that the Commerce Department chose a path that could jeopardize the solar industry’s ability to hire more workers and construct the clean energy projects needed to meet our country’s climate goals. […] The upside is that Commerce took a nuanced approach to exempt a number of manufacturers rather than issuing a blanket ban of all products from the targeted countries.”

Tariff origins: Auxin Solar

Last spring, Auxin Solar, a tiny California-based maker of solar panels, convinced the U.S. Department of Commerce to investigate whether new tariffs should be imposed on panel manufacturers in Southeast Asia for allegedly circumventing existing tariffs on Chinese solar companies. The threat of potential new tariffs, which could have been made retroactive, stopped the industry in its tracks and led to many projects being put on hold.

In June, a panicked U.S. solar industry was given a tariff reprieve by a Biden executive order — the industry had characterized the tariffs as an ​“existential threat” at the time. Today’s preliminary finding by Commerce means that the tariffs will be imposed (but not retroactively) in June 2024. The existential threat to the industry has returned.

The reality is that today’s fast-expanding utility-scale solar industry is dependent on inexpensive imported solar panels — at least until the U.S. develops its own domestic manufacturing sources.

The supply chain has begun to recover from Covid and tariff threats, but there’s still significant uncertainty in the sector, and project development companies with thin margins that depend on tax-equity financing don’t tolerate uncertainty well.

“Ultimately, we need to put an end to harmful trade barriers and instead focus on creating jobs and bolstering our energy independence,” said Hershman.

J.C. Sandberg, interim CEO of the American Clean Power Association, issued the following statement: ​“Today’s announcement from the Department of Commerce is a step backward for the United States. This decision upends a decade of precedent that Commerce itself established, undercutting any sense of business certainty that American companies rely on to continue investing in America’s clean energy future and impacting our ability to reduce our dependence on foreign energy sources.”

Research analyst James West at Evercore suggests, ​“The administration could simply end the tariffs.”

The final determination is expected to be made in May.

Read more of Canary’s past coverage of the Auxin Solar trade case.

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