The solar energy industry ‘frozen’ while the Biden administration investigates China

Plans to install 60 square miles of solar panels in Vermont have suddenly been put on hold.

In Maine, a solar farm that can power hundreds of homes is partially built, but it may not be finished.

And a project in Texas that would have driven more than 10,000 homes was weeks away from breaking ground, but has now been postponed to at least next year.

Around the country, photovoltaic companies are delaying projects, scrambling for supplies, shutting down construction sites and warning that tens of billions of dollars – and tens of thousands of jobs – are at risk.

The tumult is the result of a decision by the Ministry of Commerce to investigate whether Chinese companies circumvent US tariffs by moving components to solar panels through four Southeast Asian countries.

Although officials have not yet found evidence of trade violations, the threat of retroactive tariffs has in practice stopped imports of crystalline silicon panels and components from Cambodia, Malaysia, Thailand and Vietnam. These four countries supply 82 percent of the most popular type of solar modules used in United States.

In just a few weeks, 318 solar cell projects in the United States have been canceled or delayed, and hundreds of companies are considering layoffs, according to the Solar Energy Industries Association, which has surveyed more than 700 companies in recent days.

Energy experts warn that the fallout has only just begun. A month-long halt to imports from the four countries could have lasting consequences for the multi-billion dollar solar cell industry and for the Biden administration’s ambitious goal of increasing the development of renewable energy to combat climate change.

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

The Department of Commerce launched its investigation on March 25 after Auxin Solar, a small California-based solar panel maker, filed a petition requesting an investigation into whether China circumvented rules aimed at preventing state-sponsored solar cell parts from flooding. the US market.

Tariffs on Chinese solar panels have been in place since 2012, when the Obama administration introduced them in hopes of promoting domestic production and preventing China from dominating the new global market. In 2018, President Donald J. Trump introduced additional tariffs on certain solar products from China, and Mr. Biden extended those tariffs in February.

For more than a decade, China has dominated the global supply chain for solar panels. Government policies and subsidies have fueled giant factories that secrete 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 have purchased many of their panels from the four Southeast Asian countries. But according to Auxin, many of these panels are made by overseas subsidiaries of Chinese companies and use cells, wafers and other parts sourced from China.

Until now, the Ministry of Commerce had signaled that because the parts coming from China were significantly transformed by the companies in Southeast Asia, these components were not subject to the tariffs.

However, if the Department of Commerce finds that the panels, which come from Southeast Asia, contained Chinese-made parts that should have been subject to customs duties, panels sold in the United States after the start of the investigation could carry high taxes. And the threat of these extra costs has caused shipments of solar panels to stall.

In an interview, Auxin’s founder and CEO, Mamun Rashid, said he filed the petition because he believes existing tariffs are being undermined and hopes this study will help spur domestic production.

“Perhaps the laws of commerce are being violated, that cheating is going on,” said Mr. Rashid. “We decided it would be irresponsible of us not to do anything, not to say no.”

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

The process of evaluating trade disputes is a complex system designed to prevent political interference. Trade Secretary Gina Raimondo said this week that her department was legally obligated to pursue the issue.

“My hands are very tied here,” she said at a hearing on Capitol Hill on Wednesday. “I am required by law to investigate an allegation that companies operating in other countries are trying to circumvent the duties, and I am required by law to have a comprehensive investigation.”

A spokesman for the Department of Commerce said it “drove efforts to strengthen supply chains at the heart of the transition to clean energy, including the solar energy supply chain”, and that it was “obliged to hold foreign producers accountable for playing by the same rules as US producers. “

Last year, the United States installed about 24 gigawatts of new solar power, a record helped by falling panel costs. However, only about one-fifth of these panels were manufactured domestically, while the rest were mainly imported from Malaysia, Vietnam, Thailand and Cambodia.

As the effects of the federal investigation wave over the U.S. solar industry, its proponents become outraged.

“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, CEO of the Solar Energy Industries Association. “The U.S. solar cell market is in chaos. Shipment has stopped, installations have stalled and people are starting to get laid off.”

The sudden freezing of solar panel installations collides with Mr. Biden’s goal of accelerating the annual pace of nationwide solar cell installations to realize his promise to reduce U.S. emissions by at least 50 percent below 2005 levels by the end of this decade.

“For an administration that embraces the development of renewable energy as one of its core objectives, this tariff study has undermined all of this,” said Nick Bullinger, chief operating officer of Hecate Energy, a Chicago-based solar cell company. “The study has a catastrophic negative impact on the renewable energy sector and drives up electricity prices. For every day the customs investigation continues, the country is further lagging behind in achieving our climate goals.”

The disruption affects large and small companies.

NextEra Energy, one of the largest renewable energy companies in the country, said it expected between two and three gigawatts of solar and storage construction – enough to power more than a million homes – would not be completed this year as planned.

“It completely disrupts our solar cell business and also the industry,” said David Reuter, communications manager at NextEra. Shares in NextEra have fallen 15 percent over the past three weeks.

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

“Branching is very important, 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 tough conversations to say, ‘Thank you, but we can not accept deliveries.'”

In total, the Solar Energy Industries Association said its members predicted a 46 percent drop in the number of solar panels they will install through next year.

However, another large solar cell company, First Solar, which manufactures a type of solar panel that is not affected by the tariff dispute, said it supported the study.

“What we are interested in is ensuring a level playing field for domestic producers,” said Reuven Proneca, a spokesman for First Solar. “We feel that the Ministry of Commerce’s decision to continue the investigation is a step in the right direction.”

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

“We have called all the US panel manufacturers we could find and none of them have panels available to us with any expected timeline that will allow us to keep these projects going.,Said Mr. Buckley from Green Lantern Solar.

Some proponents of the solar energy industry have suggested that the Ministry of Commerce have the opportunity to quickly turn the course and put a quick end to the investigation.

“The secretary’s hands are anything but tied,” Heather Zichal, CEO of American Clean Power, wrote in a blog post. “She has a path codified in the statute to stop a meaningless process initiated due to a phantom threat – and she could use those opportunities in the coming weeks to breathe life back into a whipped-up US solar industry. of the actions of her department. “

But Mrs. Raimondo answered a question Wednesday from Senator Jacky Rosen, a Nevada Democrat, that there was only so much she could do. “What I want to commit you to is moving as fast as possible,” she said.

Some analysts have argued that the United States would have to invest far more in domestic production in order to compete with the overseas production of solar products. The Build Back Better Bill in Congress, for example, would provide new tax deductions for solwafers, cells and modules produced at home. But that legislation remains in limbo after Senator Joe Manchin III, a West Virginia Democrat, came out in opposition last year.

While the solar energy industry awaits a decision from the Ministry of Commerce, proponents of renewable energy worry that time is ticking away. The Solar Energy Industries Association estimates that the lost or delayed solar expansion due to the study will lead to a further 364 million tonnes of carbon emissions by 2035, equivalent to keeping 78 million petrol-powered vehicles on the road.

“It will slow down the industry at a time when we need to move faster,” Ms. Stokes. “This can be catastrophic.”

Brad Plumer contributed with reporting.

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