The fate of the entire U.S. solar industry could hinge on the whims of one small company in California. If the tariffs being demanded by San Jose–based panel manufacturer Auxin Solar are enacted, it could bring the fast-growing, multibillion-dollar solar sector to a screeching halt.
Earlier this year, Auxin Solar submitted a petition to the U.S. Department of Commerce alleging that Chinese companies are dodging the U.S. tariffs initially imposed by the Obama administration on Chinese and Taiwanese solar cells and modules by building them in Cambodia, Malaysia, Thailand and Vietnam while still using Chinese-built polysilicon wafers and other materials, as well as Chinese intellectual property. In late March, the U.S. Department of Commerce began an investigation into the companies for circumvention of anti-dumping and countervailing duties — and the impact is already causing shockwaves across the solar supply and customer chain.
Mamun Rashid, co-founder and CEO of Auxin Solar, said in an email: “For years, Chinese solar producers have refused to fairly price their products in the U.S. and have gone to significant lengths to continue undercutting American manufacturers and workers by establishing circumventing operations in countries not covered by those duties.”
But the U.S. solar industry relies heavily on those imports to operate, and the majority of industry players in the U.S. and around the world have taken a strong stance against the tariffs.
Solar project developer Ty Daul, CEO of Primergy, said on LinkedIn that “attempts to impose frivolous tariffs on solar manufacturers in Malaysia, Thailand, Cambodia and Vietnam are self-serving and narrow-minded, propped up under the guise of international labor concerns.”
Chinese solar manufacturer Trina Solar took to Twitter, saying: “In just one week, the Biden admin’s tariff case has stopped solar panel supply in the U.S. The industry urges [the Commerce Department] to end this disastrous investigation before its [clean energy] agenda is put out of reach.”
Solar Energy Industries Association CEO Abby Hopper said in a statement that the investigation has unleashed an “existential crisis” in the U.S. solar industry.
The frenzied growth of solar power is a pillar of the U.S. carbon-reduction plan, but now the market’s near-term existence is being threatened by the actions of one lone company. Since more than 90 percent of the world’s solar panels are built in Asia, “We can’t battle climate change without imports,” as Matthew Nicely, a partner at lobbying firm Akin Gump, said in testimony before the U.S. Trade Representative in January 2022.
What is Auxin Solar, and who are the people behind the petition?
Auxin Solar is a minority- and woman-owned manufacturer of solar panels founded in 2008. Sherry Tai is co-founder, along with Mamun Rashid. Its 100,000-square-foot facility hosts 150 megawatts of annual manufacturing capacity. (By comparison, major Chinese solar factories have module production capacities in the 5- to 50-gigawatt range.)
I wanted to get a firsthand look at the company wreaking havoc on the U.S. solar industry, so I stopped by the factory site in San Jose a couple of times over the course of several weekdays. I counted 12 to 20 cars in the parking lot of the rundown industrial building. The loading dock was overgrown with weeds, and a stack of weathered wooden pallets sat at the far end of the lot.
According to the company’s public relations representative, Auxin has a staff of 35 employees. Online estimates put the company’s annual revenue at around $9.7 million.
This relatively minuscule scale and capacity put Auxin firmly in the category of artisanal solar boutique — not even a minor player when it comes to utility-scale solar, which makes up 75 percent of the U.S. market. As SEIA’s Hopper said, “No domestic supplier [with only]…150 megawatts of capacity to make bifacial solar panels would even be allowed to bid on a utility project.”
But current U.S. trade law process allows a $10 million, 150-megawatt-capacity company like Auxin to shut down a $10 billion, 20-gigawatt solar industry just by submitting a basic petition — and ostensibly in the interest of fostering a homegrown solar manufacturing industry.
Do tariffs even work?
Historically, import tariffs have been a blunt instrument with a track record littered with unintended consequences. Trump-era tariffs on Chinese modules (which the Biden administration opted to extend) have contributed to the U.S. having some of the world’s highest utility-scale solar costs.
The Council on Foreign Relations has this to say on the efficacy of tariffs:
“Since the end of World War II, tariffs have largely fallen out of favor in developed economies because they often lead to reduced trade, higher prices for consumers, and retaliation from abroad. […] Most economists find that the bulk of tariff costs are passed on to consumers.”
The Brookings Institute has published similar findings showing that the cost of tariffs historically have been shouldered by “American households and American firms, not foreign exporters.”
But Rhone Resch, president and chief revenue officer of stealth startup Solarlytics and former head of SEIA, told pv magazine last August that the Biden administration may keep the Trump-era tariffs in place as both a show of support for domestic manufacturing and a way to flex its muscles when it comes to competing with China. “The [labor] unions want this, and it gives domestic protection,” Resch said.
Rebuilding a domestic solar industry
With or without tariffs, the U.S. solar industry is unlikely to regain its production mojo anytime soon.
As Canary Media has previously reported, U.S. solar manufacturers have largely lost out to China in the race for global market domination. Wood Mackenzie’s latest findings indicate that the U.S. currently has a meager 7.5 gigawatts of PV module production out of a global capacity of nearly 400 gigawatts.
Some U.S. policymakers are trying to advance legislation implementing subsidies that could spur domestic solar manufacturing and tap its power as a potential jobs engine. The Solar Energy Manufacturing for America Act, introduced last year by Senator Jon Ossoff (D) of Georgia, would create a generous tax credit for domestic solar production at all steps of the solar module supply chain to bring some of that offshore manufacturing back onshore.
However, Clean Energy Associates policy analyst Christian Roselund noted in an interview that current U.S. production is simply not sufficient to meet market demand. “It’s nowhere close. Even under the best-case scenario, it will take many years to develop the capacity to meet our demand,” he said. “Even with Ossoff’s Solar Energy Manufacturing for America Act in place, it’s still going to take a number of years.”
Roselund added, “I’m not sure that policymakers fully understand exactly what would be required to rebuild solar value chains in the United States, particularly at the wafer and cell level. We’re just not going to be able to replace this with domestic manufacturing anytime soon.”
Roselund also pointed out that China has much better proximity to supply chains, skilled labor and manufacturing clusters. “We had an ecosystem for that in the United States, but that has been hollowed out over the last decade.”
“Previous rounds of tariffs did little to spur any new U.S. manufacturing,” he said. “We saw a few factories relocate…but overall, [domestic] modules still make up a small fraction of total U.S. solar deployments.”
The political landscape
Two U.S. senators from Ohio, Sen. Rob Portman (R) and Sen. Sherrod Brown (D), have thrown their support behind Auxin’s petition. Ohio is, not coincidentally, home to First Solar, the largest U.S. manufacturer of solar panels and a thin-film solar technology leader that has benefited from the tariffs enacted during the Trump administration.
However, a different bipartisan coalition of U.S. senators is opposed to more tariffs and is urging the Commerce Department to reconsider its decision to investigate Auxin’s petition. A March letter to the department signed by 14 U.S. senators contends that “the tariffs would have a direct impact on the almost 90% of solar jobs in the United States that are not in the manufacturing sector.”
Crisis or case dismissed?
Which of the contradictory aims of Biden’s Commerce Department will prevail? The one that wants to help realize Biden’s target of transitioning the nation’s electrical grid to 100 percent renewable power by 2035? Or the one that has continued to roil the market with tariffs that increase the price of solar and electricity to the consumer, hindering the country’s energy transition?
Just the looming threat of tariffs has already caused severe fallout. Since the Commerce Department investigation began, anecdotal reports suggest that solar power-purchase agreement prices are on the rise and larger developers with a higher level of risk tolerance are now taking on the lion’s share of new projects.
As reported in E&E News, Auxin warned Commerce that its petition had triggered a rush to import and stockpile solar panels and cells made in the four named Asian countries, so the company wants to see the Commerce apply tariffs retroactively. This has already prompted many Asian manufacturers to halt shipments to the U.S.
And the few remaining American manufacturers of crystalline-silicon solar modules are feeling immediate harm since these firms are dependent on imports of silicon solar cells and other components.
Analyst firm Raymond James predicts that the case will not be upheld. “Above and beyond the merits of the individual case,” the firm’s industry brief states, “it would be mind-boggling for the Biden administration to impose severe tariffs on 75% of the modules being installed in the U.S. without considering the impact on the market.”
The Department of Commerce will present the investigation’s preliminary findings on August 30, 2022, when it publishes a preliminary duty rate for importers of all products. This will serve as the basis for deposits until it issues a final decision on January 26, 2023.
The Solar Energy Industries Association does not want to wait that long. CEO Abby Hopper said in a statement, “We are calling on the Department of Commerce to immediately issue a negative determination, which essentially means to dismiss the case.”
Scott Wiater, CEO of Standard Solar, agrees: “The [Commerce] Department has a choice now: move forward with a baseless petition that will result in massive job losses and set back our clean energy goals, or fix its mistake by immediately issuing a negative preliminary determination.”
If Commerce does persist with the investigation, Roselund said, “We’re going to see shipments stop overnight. We’re talking about freezing the largest sources of supply for the U.S. market. […] It’s going to be madness: Projects will be delayed; projects will be canceled; prices will go up.”
Listen to Eric Wesoff discuss this article and the Auxin Solar trade case on The Carbon Copy podcast: