President Joe Biden has invoked Cold War-era legislation in a bid to end the supply chain troubles affecting the US solar market.
The White House announced this week it would be using the Defense Production Act to boost the domestic supply of solar panel parts, as well as heat pumps and electrolysers. This includes the use of what it called Master Supply Agreements, which would increase the speed at which manufacturers could sell solar panel products to the US government, and “super preference status” to ensure local content is applied to such products via the Build America Act.
In addition, it announced 24-months of tariff-free importing of solar cells from Southeast Asia – excluding China – that the White House said would continue the development of solar projects, “while reinforcing the integrity of our trade laws and processes”.
The measures are in response to a standstill in the US solar sector, in part caused by an investigation announced by the Department of Commerce in March to explore the dodging of tariffs placed on solar panels coming from Chinese manufacturers through Malaysia, Thailand, Vietnam and Cambodia. While an interim decision is expected in August, the full investigation could go on until summer 2023.
The DPA was first used during the Korean War in 1950 by President Harry Truman, introducing price controls in defence industries and enabling the US government to direct the flow of domestic manufacturing towards aiding the war effort. It was later used in the Cold War to direct US energy supplies. It has since been used by Presidents Donald Trump and Biden to help with covid-19 relief efforts.
“It was not something I was anticipating coming out yesterday, but I was anticipating the administration would do what it could to create certainty for the industry,” Todd Alexander, partner at law firm Norton Rose Fulbright, told Infrastructure Investor, responding to both the use of the DPA and the halt on tariffs.
“It was in nobody’s best interest in the short term to leave the industry in limbo in the way it was. Regardless of whether you support measures that support domestic production, that’s not going to happen overnight.”
Since May last year, the Biden administration had been planning on reaching net-zero carbon emissions in the grid by 2035. However, despite 2021 marking the third year in a row in which solar made up the largest share of new US electricity capacity, the Solar Energy Industries Association in April cut forecasts for 2022 and 2023 by 46 percent following the launch of the DOC’s investigation.
In a statement, SEIA chief executive Abigail Ross Hopper hailed Biden’s move, saying that “the president’s action is a much-needed reprieve from this industry-crushing probe” by the DOC.
“There has been extensive pressure from people in Congress to create more certainty because the status quo before this executive order has caused a paralysis for a large segment of this industry,” added Alexander.
The measures could potentially stimulate demand for up to 1GW of domestically produced solar modules in the near term, the White House said in its statement. This could increase to 10GW over the next decade from US government demand alone, it added, excluding that of private sector players.