Biden’s US solar Band-Aid offers ray of hope

The president’s short-term political move should allow solar to continue being a cost-effective energy transition measure.

What do the Korean War and the US solar market have in common? Very little, as you’d imagine. Until last week, that is, when president Joe Biden used the Defense Production Act of 1950 – legislation originally designed to mobilise war efforts at the start of the Korean conflict – to put a Band-Aid over some of the scars suffered by the solar industry in recent months.

The industry had been crying out for a solution to the problem of panel supply after the Department of Commerce earlier this year began investigating the dodging of tariffs placed on solar panels coming from Chinese manufacturers. Manufacturers were said to be building most of their products in China, before completing and shipping them through Malaysia, Thailand, Vietnam and Cambodia.

Panel supply dried up and developers were unable to build out what is a booming industry – solar continues to take the largest share of new US generation capacity. The DOC seemed in no hurry to settle the issue, saying an interim decision would be made in August, but that actually the full investigation could last until next summer. Even those with completed projects were left sweating at the prospect of retroactive tariffs.

As natural gas prices skyrocket, what should be a cheaper form of electricity was left in limbo. President Biden, recognising this fact, alleviated the pressure by allowing an up to 24-month tariff-free importing of panels from the aforementioned countries, while using the DPA to rapidly boost domestic production.

Some posit that the measures are the acts of a president with unfavourable polling trying to please as many as possible ahead of midterms later this year – a president who may not even stand for re-election in two years, thus making the issue someone else’s problem when those 24 months are up.

In the meantime, it’s hoped that domestic production can get to a level where panel supply will no longer be a significant worry.

That is some hope. As one fund manager with a substantial US solar presence indicated to us, two-thirds of its panels come from the Southeast Asian countries targeted by the DOC, with other mainstream solar players understood to have similar ratios. It’s worth noting that those panels are 30-40 percent cheaper than those made in the US.

Are two years enough, with the help of the DPA, to get domestic solar production up and running to the scale the US needs? Probably not, but it is likely enough for a developer building a project to press on with plans in the confidence it can get the panels and still claim solar as the cheapest form of power, even if natural gas prices climb down in that timeframe.

Good news for the backlog of solar projects. Less positive for First Solar, the major US panel manufacturer, whose spokesperson told CNN that Biden’s measures “directly undermine American solar manufacturing by giving unfettered access to China’s state-subsidised solar companies for the next two years”.

Regardless, with the noose slightly loosened, now is the time to press on with tackling another bottleneck: improving the US transmission grid to something capable of holding such projects.