Governors of two states and a bipartisan group of 22 U.S. Senators are urging Commerce Secretary Gina Raimondo to reject a solar-component tariff petition they say already has impacted completion of solar energy projects across the country that are needed to meet clean power deployment targets.
At issue in the solar dispute is the administration’s March 28 decision to investigate a complaint by U.S.-based solar panel manufacturer Auxin Solar that retroactive tariffs are needed for crystalline silicon photovoltaic (CSPV) cells used in projects that are assembled in Malaysia, Thailand, Vietnam and Cambodia using parts and components from China. The countries are the source of more than 80% of U.S. solar imports. Tariffs against components from China have been in effect in 2012.
Auxin Solar, based in San Jose, Calif., claims the component-delivery arrangement circumvents the Chinese tariffs and that some component manufacture in China involves labor abuses.
“The original antidumping and countervailing duty cases worked against products from China, but while Chinese imports decreased to almost nothing, imports from Malaysia, Thailand, Vietnam, and Cambodia have increased 868% and replaced Chinese imports completely," said Auxin CEO Mamum Radhid. "The major producers in these countries are all affiliated with Chinese producers of upstream inputs and their cost structure and pricing is no different than if they still produced in China for the U.S. market.”
Politicians Seek End to Market Haze
In their May 1 letter to President Joe Biden, the Senate group urged Biden "to carefully consider the significant policy ramifications and reject the petitioner's request for retroactivity." They voiced concern that added utility costs would be passed to ratepayers. At press time, solar industry advocacy group sources said that some House members also were believed to be preparing similar statements of concern.
In a letter to Raimondo sent April 27, California Gov. Gavin Newsom (D) said the petition already has upended the state’s energy transition by delaying at least 4,350 MW of solar energy and storage projects needed in the next two years. Also, in an April 28 letter, Indiana Gov. Eric Holcomb (R) urged a decision soon to bring "clarity and certainty" to the market, noting the state has 4,900 MW of solar energy projects in development.
Solar developers in California report $7.9 billion in utility-scale projects are at risk there—and $52 billion in jeopardy nationwide—in what they project could be a 46% drop in installations this year and next if retroactive tariffs are implemented.
The Newsom letter cites estimates from energy research firm Wood McKenzie that solar deployment will fall by 16.6 GW annually "if the current situation persists and tariffs are ultimately imposed," including the possible loss of more than 100,000 U.S. jobs.
“Delays and interruptions of this magnitude hinder our efforts to combat climate change and threaten our ability to maintain energy reliability ahead of the retirement of 6,000 MW primarily generated by aging gas-powered plants,” Newsom said, adding that the state cannot abide any new uncertainties and the potential loss or delay of solar power capacity, plus storage projects, caused by the inquiry.
Commerce Sec: 'Hands are Tied'
“My hands are very tied here,” said Raimondo at a Capitol Hill hearing on April 27. “I’m required by statute to investigate a claim that companies operating in other countries are trying to circumvent the duties.”
Commerce on May 5 clarified some aspects of its probe focus, but American Clean Power Association CEO Heather Zichal said it still “perpetuates the market confusion that is currently stifling the US solar industry.”
Raimondo is not set to make a preliminary ruling on the Auxin petition until August, with a final ruling that is expected to extend into 2023. She dismissed a similar claim last year by three US solar manufacturers because the filers were anonymous. Auxin reportedly was one of them.
Indiana utility Northern Indiana Public Service Co. said on May 4 that it will delay for two years—until 2025—retiring its largest coal-fired power plant due to the tariff probe, which is creating new uncertainty for solar and storage projects planned for this year and 2023 as an energy replacement source.
But the firm, which operates in northwest Indiana, said its exit from coal by 2028 and carbon reduction goals, won't change.
In comments to investors on May 7, Duke Energy CEO Lynn Good acknowledged the solar market issues, but said the firm would complete its solar projects scheduled for this year by shifting a number of them to 2023, although she could not predict the same outcome for those projects and later ones.
California: Extend Diablo Canyon Life?
Newsom told the Los Angeles Times on April 28 that the possibility of stiff tariffs on solar modules and the effect on state power supplies “is serious,” and that the state would be remiss if it did not consider keeping open the Diablo Canyon nuclear plant in southern California, which operating utility PG&E had planned to decommission in 2024 and 2025.
The governor had begun considering a life extension for the state's largest power source after rolling blackouts in 2020 that were caused by high temperatures after sundown when solar farms stopped producing power.
Newsom said the state would seek a share of $6 billion in federal funds earmarked in the federal infrastructure law that are intended to prolong the use of rescue nuclear reactors facing closure, money the administration announced in April. Diablo Canyon generated 6% of state power last year. The state must apply for the federal funding by May 19.
A decade ago, the U.S. found that dumped and subsidized imports of photovoltaic cells and modules from China caused material injury to the U.S. solar panel manufacturing industry, which today still cannot support the growing domestic development sector in manufacturing capacity and supply chain support, say industry advocates.
“But instead of fairly pricing their CSPV cells and modules for export to the United States, Chinese producers continued their assault on domestic producers—this time from third-country export platforms,” Auxin said in its petition to the Commerce Dept. filed in February
Newsom said he recognizes the need to have U.S. tariffs implemented effectively while also increasing the domestic manufacturing of clean energy.
Solar Deployments 'Frozen'
The threat of tariffs has effectively “frozen” solar deployment around the country, said George Hershman, CEO of SOLV Energy, a company formed last year by the spinoff of Swinerton Construction’s renewables unit, which he headed, and sector O&M firm SOLV Inc.
“The tariffs would affect more than 80% of solar imports and there are not enough domestically produced panels to meet the demand of SOLV Energy alone, never mind the U.S. market,” he said.
Tariff-induced uncertainty is major on projects such as those his firm handles, which can exceed $300 million in value, with module prices making up 50% of the cost or more, he told PV magazine, a sector publication.
"We stand with this bipartisan group of Senators strongly urging the administration to make an expedited preliminary determination that rejects the petitioner’s request,” said Gregory Wetstone, president and CEO of the American Council on Renewable Energy.
The Solar Energy Industry Association said in an updated survey of 700 member firms that utility-scale solar developers are reporting massive disruptions due to the Commerce Dept. probe, and many do not know when they might be able to get modules.
About 42% of the known utility-scale solar pipeline is disrupted, the association said, including 318 projects representing 50,800 MW of solar and 5,800 MW of battery storage. But that is “only a fraction of likely impacts,” it added, expecting forecasted installations to be cut nearly in half this year and next if tariffs are applied. The group estimates the duty on solar components from the four countries could range from 50% to 250%.
About 83% of survey respondents representing smaller projects reported that delayed or cancelled module supplies have placed at least half their workforce at risk, with 200 companies claiming similar risk to their entire workforces. Some 80% of domestic manufacturers also expect “severe or devastating” effects from the investigation, costing 18,000 solar manufacturing jobs, SEIA said.
“This case is destroying clean energy and needlessly taking down American businesses and workers in its wake,” Group President and CEO Abigail Ross Hopper said in a statement.
SOLV Energy's Hershman, also an SEIA board member, supports “robust tax credits” to scale up the U.S. manufacturing industry such as those outlined in the Solar Energy Manufacturing for America Act and the Build Back Better bill, but both now are stalled in the US Senate.
“Without investments in solar manufacturing and legislative action from Congress, the industry will only be able to deploy less than half of the solar needed to reach President Biden’s 2035 clean-energy goals,” Hershman said,
Added Auxin's Rashid: The petition “crystallizes the need to completely on-shore the solar supply chain and to stop putting our country’s clean energy future in the hands of the Chinese.”