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You may have seen solar climbing its way to headlines in political news. But why? Solar panels, among many other imports, are monitored closely by the United States Government. Everything from the materials they’re made of to how they’re manufactured is taken into consideration when considering the guidelines they should fall under.
The recent controversy on solar tariffs stems from Chinese manufactured cells. In 2012 and 2015, the U.S. placed its first and second set of tariffs on Chinese cells and modules due to unfair trade practices. After the tariffs were placed, Chinese companies began manufacturing their low-cost cells and modules in neighboring countries that did not have the same duties (tariffs). Even though the panels were marked as imports from those neighboring countries, most of the material used to make cells and modules was coming from China.
In 2018, the U.S. government put in place the Section 201 tariff. This tariff gave domestic solar panel manufacturers great opportunity for production by temporarily slowing down the competition- much lower-cost panels imported from China and its neighboring countries.
“The duties began at 30 percent on most imported modules, decreasing 5 percent each year until 2022, when the rate dropped to 15 percent. PV cells were also subject to these duties, but the first 2.5 gigawatts of imported cells were exempt to allow companies that assemble modules some relief while encouraging PV cell manufacturing in the U.S.
“Modules produced from cadmium telluride, rather than crystalline silicon, were also exempt, and in 2019 bifacial modules — designed with a clear backing so that energy is produced when light hits the front or the back of the panel — also became exempt. Both are used primarily for large solar farms.
-Greenbiz
However, the tariffs were not successful. Because Section 201 tariffs did not apply to the first 2.5 gigawatts of imported cells, a the cap was never reached and, nearly all cells bought in the U.S. have been free of Section 201 tariffs. The production of domestic solar panels did not increase.
The tariffs were also less effective because they were put in place during a period when PV module prices were already falling. So, while there was a general run-up in price when the tariffs were first proposed, U.S. panel prices have since trended downward and are lower than before the tariffs took effect, although they remain above global average prices. In fact, more solar capacity was installed in the U.S. during the Section 201 tariffs than at any other time in history, in large part because of the low cost.
Not only were the tariffs unsuccessful in increasing domestic production, Solar Energy Industries Association (SEIA) also claims that the U.S. would have installed 11 percent more solar, employed 62,000 more people, and had $19 billion more in investment without the tariffs.
“Most U.S. solar jobs are associated with building projects, not manufacturing equipment, and developers have said the higher prices forced them to delay or cancel solar projects. At the end of 2020, of 231,000 U.S. solar jobs, only 31,000, 13 percent, were in manufacturing.” - Greenbiz
In late March of 2022, just after Section 201 tariffs had decreased to 20%, the Department of Commerce opened an investigation into solar imports from Cambodia, Malaysia, Thailand and Vietnam (CMTV). The investigation began after suspicions of circumventing the existing antidumping and countervailing tariffs on imports of solar cells and modules from China.
These types of investigations happen when the Department of Commerce finds that “imported merchandise was sold in the U.S. at an unfairly low or subsidized price, to level the playing field for U.S. companies injured by these unfair trade practices, CBP (Customs Border Protection) is responsible for collecting the Antidumping and Countervailing Duties (AD/CVD) in a timely manner.” - CBP
In simpler terms, high taxes (aka tariffs) are applied to imported products that are significantly cheaper than domestic products to keep American manufacturers on somewhat level playing grounds. It appears that China and its neighboring countries found a way around these taxes and are now being investigated to determine what is true. During the investigation, the high tariffs are being placed on the imported products.
Due to these tariffs being applied to crucial solar products, the U.S. solar industry had its lowest quarter of installations since the start of the coronavirus pandemic. Price increases and supply chain constraints continued to suppress the solar market as the industry installed 24% less solar capacity than Q1 2021. Over the last nine months, 2022 forecasts have been cut in half due to continued supply chain challenges and the anti-circumvention inquiry.
The White House recently took action to provide a two-year suspension of any new solar tariffs gives businesses certainty to accelerate projects delayed by the Department of Commerce’s anti-circumvention investigation. Without this action, massive project delays and cancellations would have continued throughout 2022, putting President Biden’s climate goals at risk.
“The solar industry is facing multiple challenges that are slowing America’s clean energy progress, but this week’s action from the Biden administration provides a jolt of certainty businesses need to keep projects moving and create jobs,” said SEIA president and CEO Abigail Ross Hopper. “President Biden has clearly taken notice of how drags on the industry are hampering grid resiliency. By acting decisively, this administration is breathing new life into the clean energy sector, while positioning the U.S. to be a global solar manufacturing leader.”
This resolution shows us just how important clean energy is to the current administration. It gives us great certainty that the cost and speed of solar projects are top of mind for law makers and they will do what is necessary to keep the industry growing. When you invest in solar, you can rest easy knowing that decision makers and people in power have your investment as one of their top priorities.
Learn more by talking to one of our experts today.
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