Upon taking office, President Biden set a goal for the US to reach 100 percent carbon pollution-free electricity by 2035. That goal has been aided by explosive growth in solar generation capacity, with an estimated 21.5GW of utility-scale solar generation capacity added to the country in 2022 alone, according to the Department of Energy.
But this progress is in jeopardy. In March, the Department of Commerce opened an investigation into alleged dumping of highly subsidised solar panels from China via Southeast Asian manufacturers, following a complaint from Auxin Solar, a US-based manufacturer. After a 24-month stay by the Biden administration, said investigation concluded last week, with the Department of Commerce deciding to impose tariffs on offending companies after 2024.
Will this be catastrophic for the industry? Jillian Ashely, a partner at law firm Allen & Overy specialising in energy, wouldn’t go that far. However, she does think the overall impact will be negative. “This is bad for the industry,” she said. “We need access to solar panels. The ability to have that supply at relatively reasonable costs is what has allowed the overall cost of building these solar projects to decrease dramatically over the last decade, close to parity or at parity with the cost of building out other sources of energy.”
Nevertheless, a worst-case scenario was avoided, with the Department of Commerce electing not to apply tariffs retroactively and to only apply tariffs to imports from select companies, not the entire Southeast Asian region. For Ashley, this is reason for hope: “President Biden’s waiver declaration postponed the impacts of this tariff till mid-2024, giving the industry some breathing room. That has certainly been helpful, as there is now clarity that this is forward-looking and not retroactive.”
She continued: “When this tariff enforcement was announced it immediately froze things. People didn’t know if the tariffs would be retroactively imposed, so there were immediate potential impacts on deals happening then.”
Also helpful to solar developers is the Inflation Reduction Act, which provided clarity around tax credits for the next decade.
Whether this will be enough to counterbalance the US’s limited ability for its domestic supply chain to step up and fill in the gap of Asian imports is doubtful. About 80 percent of US solar panel shipments were imported, primarily from Asia, according to the Energy Information Administration.
‘Behind the ball’
“We’re behind the ball and two years isn’t enough time to get things where they need to be,” Ashley said. “We will make progress in bringing the supply chain onshore, though.”
Progress thus far has included Biden’s invocation of the Defense Production Act and a $6 billion commitment from a consortium of top industry players. But Ashley maintains that this is not enough: “The $6 billion put forward by the consortium is great, but it is not enough to get the supply chain where it needs to be. A concerted effort needs to be made by multiple parties to build out multiple supply sources.”
Ashley also encouraged other renewable energy developers to take the solar tariffs as a warning. “What’s happening in solar could happen in other energy transition sectors,” she said. “We need to take a hard look on where we’re getting our supplies from when building out this critical infrastructure.”
The Department of Commerce’s decision is expected to be finalised in May of next year.