Written by Sarah Lozanova
Solar panels have a relatively complex supply chain that often spans the globe. The U.S. Department of Commerce creates laws to help ensure economic growth and has created antidumping laws. These are designed to prevent foreign firms from selling products in the U.S. at below “fair market value.” However, on June 6, the Biden administration announced it will not impose new tariffs for two years as part of the trade case against China.
Solar cells and panels from China are subject to antidumping laws. Earlier this year, a solar manufacturer in California, Auxin Solar, filed a petition that triggered an investigation into whether some solar companies are circumventing U.S. antidumping laws and import tariffs on Chinese solar products. This prompted an investigation into numerous solar panel manufacturers, including Jinko Solar, Hanhwa Q Cells, Canadian Solar, and Trina Solar.
The DOC is examining solar panels manufactured in Cambodia, Malaysia, Thailand, and Vietnam. These countries supply 82% of the most popular module type in use in the U.S., so the implications for the domestic solar energy industry were significant. Thanks to recent actions fromthe Biden administration, this issue has been largely sidestepped while also taking steps to promote domestic manufacturing.
How did the anti-dumping investigation impact the supply of solar panels?
Temporarily, module supply from these four counties was significantly constricted but not completely eliminated. This is because if there was evidence of circumvention, tariffs would set at 50% to 250% and applied retroactively back to November 2021. This fact was causing solar panel manufacturers from Southeast Asia to be cautious in selling products. As a result, there were issues throughout the solar energy industry and constraints on solar panel supply.
For this reason, the Biden administration decided to put a two-year pause on new solar tariffs. The impact of the investigation had sent shock waves throughout the solar panel supply chain, from which it can now recover.
“Today’s actions protect existing solar jobs, will lead to increased employment in the solar industry and foster a robust solar manufacturing base here at home,” said Abigail Ross Hopper, the president and chief executive of the Solar Energy Industries Association (SEIA), in an emailed statement.
“During the two-year tariff suspension window, the U.S. solar industry can return to rapid deployment while the Defense Production Act helps grow American solar manufacturing.”
How did the anti-dumping investigation impact the solar energy industry?
Prior to the announcement to pause new solar tariffs, the investigation was creating shockwaves throughout the industry. The SEIA published a study in April 2022 that examined the impacts of the investigation on the solar industry prior to the announcement from the Biden administration. Of the respondents, four-fifths of respondents are experiencing canceled or delayed solar module supply.
Ironically, even 80% of domestic manufacturers are expecting “severe or devastating impacts.” This is likely due to material sourcing issues, such as solar cells. Even the energy storage industry is impacted because there is such a close connection between the solar photovoltaic (PV) and energy storage industries. Although the ramifications are a bit less than on the solar industry, of the survey respondents, more than 60% report “severe or devastating impacts.”
As part of the announcement by the Biden administration, they said that the president will invoke the Defense Production Act. This will give him expanded power and funding to direct the activities of private businesses, ideally promoting domestic manufacturing efforts.
Unfortunately, the impacts of the investigation and constrained supply were harming all areas of the country and all solar energy market segments. With extremely limited module supply from Vietnam, Cambodia, Malaysia, and Thailand, there were no easy ways to make up for the shortfalls. China has a large solar panel manufacturing capacity but is already subject to high tariffs.
New solar cell and panel manufacturing facilities take years to develop and build, but there was a shortfall in supply meeting demand. As a result, many projects have been delayed or canceled, but many will likely resume after the solar panel supply chain evens out.
Had the administration not taken then action, proceeding with the anti-dumping petition and related tariffs could have led to 34 gigawatts of lost solar deployment over the next four years, according to the SEIA. To put this into perspective, each gigawatt of solar energy capacity is about 1.125 million solar PV panels.
If the tariffs were applied, the SEIA expected U.S. solar energy deployment to be cut in half in 2022 and 2023. Unfortunately, 100,000 jobs could have been lost, including 16,000 to 18,000 solar manufacturing jobs. Many domestic manufacturing jobs are related to other aspects of the industry, such as inverters, racking systems, and trackers, but demand for these products was also disrupted due to canceled or postponed projects.
Strengthening the Solar Energy Industry
Throughout its relatively young history, the solar power industry has been vulnerable to inconsistent policies that made long-term planning difficult. For example, federal tax credits for solar panel systems have come and gone over the years, creating uncertainty for future industry growth. Recently, the pandemic and transportation bottlenecks have created supply chain issues. Then, the anti-dumping investigation was causing doubt and uncertainty regarding the supply and pricing of solar modules.
The Biden administration’s plan to cut carbon emissions relies heavily on the deployment of renewable energy and electrifying transportation. Slowing down solar industry deployment was counterproductive for mitigating climate change and reducing greenhouse gas emissions. Likewise, rising energy costs are difficult for many Americans, especially low-income households.
The cost of natural gas has been increasing recently, which will likely impact electricity rates. But, natural gas-fired power plants produce a lot of electricity in the U.S. and directly compete with solar energy. However, solar energy is now one of the cheapest sources of new electricity and is a great form of energy to help keep utility rates down.
Nationally, electricity rates increased by 8% in January, and Georgia Power has also announced rate increases. This, combined with high gasoline prices and record inflation, will strain pocketbooks across Georgia. At Solar Plus, we applaud the recent efforts to ensure a reliable solar panel supply chain while also fostering domestic solar manufacturing.
Certainly, now is a time when solar energy needs to shine. It is critical to have a stable market for solar panels and components so that the industry can continue its exceptional growth. Solar energy deployment helps slow climate change, promote affordable energy, and create high-quality jobs throughout Georgia and beyond.