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US solar firms spar over trade as Biden tries to cut carbon, boost manufacturing

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The U.S. International Trade Commission is considering whether to recommend that President Joe Biden extend tariffs on solar cells and panels like those used at this solar farm in Massachusetts.
Source: Robert Nickelsberg/Archive Photos via Getty Images

NextEra Energy Inc., one of the world's biggest renewable energy companies, cautioned U.S. trade officials that maintaining import tariffs on solar cells and panels would jeopardize its projects and undermine efforts by President Joe Biden to limit climate change.

NextEra told the U.S. International Trade Commission, or USITC, in an October filing that it will be "forced to reconsider the economics of each of its ongoing and future solar generation projects" if Biden extends safeguard duties that former President Donald Trump slapped on the industry in 2018.

That warning, however, appears at odds with statements the company has made to investors.

A year after Trump levied the taxes, NextEra CFO Rebecca Kujawa said the company had "anticipated the uncertainty that could be in the market in the coming years," including from a potential tariff extension, and "positioned ourselves appropriately so that we could continue executing our development program at attractive returns."

"[We're] continuing to work on capitalizing on what is the best renewables development environment that we've ever seen," NextEra Chair, President and CEO Jim Robo said in September, echoing an assessment that company executives have repeatedly delivered to investors over the past three years.

Neither NextEra nor a lawyer for the company responded to messages seeking comment.

The impact of tariffs on the pace of construction in the U.S. solar market is a pivotal issue as the USITC considers whether to recommend that Biden extend Trump's solar tariffs or allow them to expire as scheduled in early 2022.

Manufacturers pushing for tariffs say project developers are issuing unfounded warnings about the risk of trade duties in order to gain easier access to inexpensive imports from Asia.

"The safeguard duties have been no impediment to [solar] deployment," Diana Quaia, a partner at Arent Fox LLP who represents U.S. solar manufacturers Hanwha Q Cells USA Corp. and Mission Solar Energy LLC, told the USITC during a hearing Nov. 3. Despite current import restrictions, "the [solar] industry has had quarter after quarter of near-record deployment," Quaia said.

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Should solar 'flourish unabated'?

For Biden, who is meeting other world leaders at the U.N. Climate Change Conference in Scotland, the trade case poses a challenge to his dual objectives to boost green energy manufacturing while accelerating solar deployments to cut carbon emissions.

Democrats have called for tax incentives for companies that produce solar and wind components in the U.S., but efforts to date to increase domestic manufacturing have relied on import tariffs. In a June briefing memo to U.S. Trade Representative Katherine Tai, an agency official said there is a "long-term question" about how the administration can bolster domestic manufacturing "while supporting the deployment of solar to combat climate change."

Despite expanding significantly in recent years, U.S. solar manufacturers cannot come close to meeting domestic demand. Between 2018 and 2020, domestic panel production capacity more than tripled to 3.7 GW, according to Suniva Inc., a defunct cell producer that is trying to restart operations after exiting bankruptcy in 2019. Meanwhile, solar installations totaled a record 19.2 GW last year, an increase of 81% from 2018, according to the Solar Energy Industries Association, a trade group that opposes tariffs.

With Biden pushing to grow the country's solar market even faster, the U.S. Energy Department published a report in September outlining how America could meet up to 45% of its electricity demand with solar power by midcentury compared to around 3% last year.

"Now is not the time to extend trade restrictions on these products. Now is the time to eliminate such restrictions and allow solar to flourish unabated," Matthew Nicely, the association's lawyer and a partner at Akin Gump Strauss Hauer & Feld LLP, told the USITC on Nov. 3 "Because of the [existing] duties, solar prices in the United States are still far higher than the rest of the world, which has limited the extent of the increase in solar deployment that would have otherwise occurred."

The fight over Trump's solar tariffs is one of several trade issues hitting the U.S. solar industry. Project developers have said requests to the U.S. Commerce Department to extend a separate set of tariffs on Chinese solar cells and panels to some factories in Southeast Asia are stalling projects as companies struggle to obtain equipment. Those disruptions have compounded supply chain problems caused by snarled trade routes, soaring raw-material costs and the detention of solar panels that U.S. Customs and Border Protection suspects of being linked to alleged labor abuses.

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'Broader goal'

Trump issued the latest round of solar tariffs in 2018 after previous import restrictions failed to stem the flow of low-cost solar panels from Asia.

In response, some manufacturers, including Hanwha Q CELLS, JinkoSolar Holding Co. Ltd. and LG Electronics USA, opened U.S. factories. But in the nearly four years since the tariffs took effect, domestic manufacturers have only been able to claim 14.6% market share at their peak, according to data submitted to the USITC by Auxin Solar Inc., a U.S. panel producer.

Hanwha Q CELLS, LG and Mission Solar said efforts to boost production were hampered by equipment stockpiling before the tariffs were issued; a temporary tariff exemption for bifacial solar panels; the economic impact of the COVID-19 pandemic; underselling by importers; and higher input costs.

"While the industry’s recovery is well underway, it is by no means complete," the companies said.

Their opponents say the failure of domestic manufacturers to meet a large share of U.S. demand is reason to let the tariffs expire.

"NextEra has no choice but to rely on imported modules, because U.S. assemblers of [crystalline silicon solar] modules are able to supply no more than a trivial percentage of NextEra's overall demand," lawyers for the company said in a brief to the USITC.

Solar cell manufacturing — or the lack thereof — further complicates the job of the USITC in deciding how much support domestic producers should be given.

Under Trump's tariffs, the first 2.5 GW of cells imported annually are exempt from duties, and not a single cell to date has been subject to the tax, according to Suniva. Hanwha Q CELLS and other panel makers say they need access to even more tariff-free cells now in order to sustain their operations.

Mamun Rashid, CEO of panel maker Auxin Solar, called that "a very dangerous position to take."

"The broader goal here is to bring the entire supply chain to the U.S., that's what it should be about," Rashid said during the USITC hearing Nov. 3. "We've seen the safeguard work very successfully for the modules. Why wouldn't we want to give the same avenue to the cell producers to be successful?"