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Friday, December 02, 2022

Biden threw the US solar industry a lifeline with tariff relief, but could the stimulus bring manufacturing back?

The Biden administration announced that it is putting a two-year moratorium on the threat of new solar tariffs, throwing a lifeline for US solar installers — and likely the country’s ability to meet its climate goals.

The tariff threat involved imported solar panels and components from four Asian countries that supply nearly 80% of the photovoltaic cells and modules used in the U.S. The administration ramped up industries to use the Defense Production Act on June 6, 2022. Also announced new plans to help bring Production of solar panels in the US and other incentives to US solar manufacturers through federal purchases.

We asked energy researcher Emily Beagle to explain those changes and their impact.

Part of President Joe Biden’s announcement is to boost US solar manufacturing. How big is that part of the industry today?

In 2020, the entire US solar industry employed more than 231,000 people. About 31,000 of those jobs – about 13% of all solar jobs – were in manufacturing.

Those jobs, including manufacturing solar panels and components, supported 7.5 gigawatts of manufacturing capacity in 2020. This is only a small fraction of global manufacturing capacity.

The majority of the rest of America’s solar workforce, 67% of it, work in installation and development. And most of the cheap solar cells in the panels they installed came from Asia — specifically, about 80% of solar panel imports came from the four Asian countries addressed in Biden’s order.

What was the impact of the threat of new tariffs on solar installations and Biden’s climate goals more broadly?

The first silicon solar cells were developed at Bell Labs in the US in the 1940s and 1950s, and the US was an early manufacturing leader. But foreign competition and differing energy and research priorities and policies largely left the industry out. China has dominated solar manufacturing for the past decade.

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Two Women In Clean-Suits, Hats And Gloves Lean On A Table With Solar Modules.
Most solar cells and modules are currently manufactured overseas.
Si Wei / VCG via Getty Images

In recent years, the federal government has imposed tariffs on solar imports to fuel the growth of American manufacturing. Tariffs raised some prices but did not stop the growth of solar installations. Then the US Department of Commerce announced in March 2022 that it had opened an investigation into solar imports from Cambodia, Malaysia, Thailand and Vietnam. The issue was whether solar components from China – which faced tariffs – were being shipped through those countries. If the investigation leads to new tariffs, the Commerce Department could make them retroactive, which could significantly increase costs for US buyers.

That threat cut US solar installation forecasts for 2022 and 2023 by 46%, according to the Solar Energy Industry Association.

More than 300 projects have been delayed or canceled since the matter came to light. These canceled or delayed projects have 51 gigawatts of solar capacity and 6 gigawatt-hours of attached battery storage capacity. This will more than double all solar capacity installed in the US in 2021, which stood at 23.6 gigawatts.

Rapid installation of solar power to reduce emissions from the power sector is a key pillar of the Biden administration’s climate goals. To stick with the administration’s climate goal of reducing emissions by 50%-52% by 2030, the US needs to install about 25 gigawatts of new solar capacity each year for the next decade. By imposing tariffs, solar capacity could reach only 70%-80% of that target.

Could Biden’s order to use the Defense Production Act and provide other aid give American manufacturing enough of a boost to succeed?

Biden’s order does a number of important things, including addressing the threat to the US solar industry and expanding other critical technologies to meet the administration’s climate goals.

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In the short term, the order addresses the solar tariff threat by temporarily allowing solar imports from specific countries. Specifically, this 24-month “bridge” allows US solar deployers to purchase solar parts free of some duty from Cambodia, Malaysia, Thailand and Vietnam.

This is important to the Biden administration’s climate goals because it will help ensure the US has the necessary solar components in the immediate term to continue building new solar capacity when domestic production ramps up.

The president is authorizing the use of the Defense Production Act not only to expand U.S. domestic manufacturing of solar panel components, but also to promote a number of other important climate technologies, including insulation, heat pumps, clean hydrogen and power grids. Including building infrastructure.

Workers Build Solar-Paneled Roofs On Two New Homes In The Neighborhood, Behind Which Other Homes Have Solar Roofs.
California now requires most new homes to be solar-ready, but the cost of the system and how quickly it will pay off is a significant concern.
Will Lester / Inland Valley Daily Bulletin via Getty Images

Another important part of that order is the use of federal procurement provisions to market to US solar manufacturers.

Federal procurement provisions, such as Buy American, use the federal government’s vast purchasing power to create demand for American-made goods. The purchase provisions in Biden’s order, which include a master supply agreement and “super priorities,” would provide certainty and a guaranteed buyer for new solar products manufactured here in the US — the federal government —

While a step in the right direction, whether the new efforts will be able to build out the US solar manufacturing industry and make it competitive remains to be seen. Not only does the biggest potential impact on addressing challenges in the solar industry, but the U.S. climate goal more broadly lies with Congress, which may still pass landmark climate legislation.

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