The Biden administration will temporarily lift the threat of tariffs and harness the federal government's powers to boost U.S. manufacturing of solar energy components to contain the fallout from a trade investigation launched by the Commerce Department.
President Joe Biden will invoke the Defense Production Act to "accelerate domestic production of clean energy technologies," including solar panel parts, building insulation, heat pumps, grid equipment such as transformers, and electrolyzers, the White House said in a four-page fact sheet released June 6.
Biden will also mandate that solar cells and panels from Malaysia, Vietnam, Thailand and Cambodia can be imported free of certain tariffs for two years to ensure project developers have access to equipment while domestic manufacturers ramp up operations, a senior administration official told reporters on June 6.
The president is focused on "making sure that we have a reliable and resilient supply chain, and that very rapidly it's a supply chain made here in the United States," the senior administration official said.
READ MORE: A decade into tariffs, US solar manufacturing is still deep in Asia's shadow
The actions are aimed at jump-starting a solar market that has been bogged down by a Commerce Department investigation into whether manufacturers moved some operations to Southeast Asia in recent years to circumvent tariffs on imports from China.
Threatened with retroactive tariffs, some manufacturers have pulled back from the U.S. market, jeopardizing nearly half of the solar capacity the U.S. was expected to install in 2022 and 2023, according to the Solar Energy Industries Association, a lobbying group.
Analysts at Oppenheimer & Co. Inc. said the White House intervention should help get delayed projects "back on track."
"While the Department of Commerce investigation will continue as required by statute, and we remain confident that a review of the facts will result in a negative determination, the president's action is a much-needed reprieve from this industry-crushing probe," SEIA President and CEO Abigail Ross Hopper said in a 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," Hopper said.
Congress is also considering tax credits for domestic manufacturing.
Depending on available incentives, the U.S. could triple its panel-making capacity to 22 GW — close to total U.S. demand in 2021, according to an analysis of project announcements in 2021 by the National Renewable Energy Laboratory.
"The U.S. solar industry is actively making investments to further increase the scale of the domestic manufacturing sector, including recent announcements to expand U.S. module production facilities, create new manufacturing plants for components like steel trackers, and work with allied trading partners to unlock the potential for inputs (like polysilicon) from the United States," American Clean Power Association CEO Heather Zichal said in a statement.
However, Biden's actions drew criticism from manufacturers that have called for the U.S. to crack down on alleged violations of the country's trade laws.
"By taking this unprecedented — and potentially illegal — action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law," said Mamun Rashid, CEO of Auxin Solar Inc., which requested the Commerce Department investigation.
First Solar Inc., whose thin-film technology does not rely on the same supply chains that the Commerce Department is investigating, added that the Defense Production Act will be insufficient to boost U.S. manufacturing.
"Quite simply, the administration cannot stick a band-aid on the issue and hope that it goes away," Samantha Sloan, vice president of policy at First Solar, said in a statement. "Had the administration consulted with America's solar manufacturers, they would have known as much."
The president is authorized to take emergency action to facilitate trade, the senior administration official said, adding that Biden's executive actions were subject to an interagency legal review.
Using the Defense Production Act to boost domestic production of solar panels and other energy technologies would strengthen the country's economic security, the Biden administration said.
"For too long the nation's clean energy supply chain has been over-reliant on foreign sources and adversarial nations," Department of Energy Secretary Jennifer Granholm said in a news release.
Along with the tariff and Defense Production Act efforts, the White House said June 6 that it would boost federal procurement of clean energy through "master supply agreements" for domestically made solar systems and "super preferences" for solar energy that meets domestic content standards. The federal procurement measures can stimulate demand for up to 10 GW of domestically produced solar modules in the next decade, the fact sheet said.
S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.
