Biden announces tariff reprieve for solar industry
The White House announced Monday morning that no new tariffs will be imposed on solar imports for at least two years, bringing immediate relief to solar developers in New Mexico and elsewhere.
Domestic industry was thrown into crisis in April, after the U.S. Commerce Department began investigating solar manufacturing operations in some Asian countries to determine if companies there are circumventing import tariffs by incorporating Chinese equipment and components in their products that would otherwise face U.S. trade restrictions imposed on China.
The inquiry – inspired by a complaint from a small solar manufacturing company in California – won’t conclude until early 2023, and it could culminate in new tariffs of up to 250% on imports from Malaysia, Thailand, Vietnam and Cambodia, which together supply more than 80% of the solar modules used in U.S. installations. In addition, at the start of the investigation, the Commerce Department said that if new tariffs are imposed, they could be made retroactive to November 2021.
As a result, solar developers have postponed or canceled hundreds of large-scale projects across the country since April, virtually paralyzing the industry because investors could no longer calculate development costs going forward. Industry leaders warned that some 70,000 U.S. jobs could be lost, including many in New Mexico.
Affordable Solar, New Mexico’s largest installation company, laid off many employees in May after losing all of its utility-scale contracts almost overnight. And Array Technologies, a local solar-tracker manufacturer that employs about 350 people, projected it could lose up to $250 million in revenue this year from the industry slowdown.
Now, however, the new White House announcement could rapidly revive the industry, said Gregory Wetstone, president and CEO of the American Council on Renewable Energy.
Under President Joe Biden’s executive order, the Commerce Department will continue its investigation. But now, if Commerce does decide new tariffs are warranted, they can’t be implemented until at least mid-2024, and retroactive application is off the table.
“The industry was facing the threat of retroactive tariffs of up to 250%, which created paralyzing uncertainty that no sector of the American economy could withstand,” Wetstone told the Journal. “The president’s action changes that dynamic. It eliminates the threat of retroactive tariffs while also pushing off any new potential tariffs by two years to allow companies to prepare.”
The president also authorized use of the Defense Production Act to help build more domestic manufacturing capacity for clean energy technologies, including photovoltaic modules and components for solar panels. And, under the executive order, federal agencies will significantly increase procurement of U.S.-made solar systems through use of “master supply agreements” and “super preferences” that apply domestic content standards for government purchases.
Those measures, combined with the 24-month suspension of new tariffs, aim to create a two-year “bridge” for U.S. manufacturing to scale up to reinforce the domestic supply chain and better compete with foreign imports, according to the White House fact sheet on the president’s order.
“The solar industry was booming before the Commerce Department initiated its investigation,” Wetstone said. “Hopefully, these measures will not only help it recover, but also accelerate the development of domestic manufacturing.”
The 24-month tariff reprieve, in particular, removes a cloud of uncertainty that impeded solar developers from pursuing utility-scale projects, said Affordable Solar CEO Ryan Centerwall.
“If new tariffs are imposed, this allows us time to price-in those new costs over two years,” Centerwall told the Journal. “This gives us the certainty we need to continue developing projects now, before new tariffs take effect, and to be prepared when and if that does happen.”
In fact, the previous uncertainty was far more paralyzing than the actual prospect of new tariffs, Centerwall added.
“I think solar demand is so strong today that new tariffs would not impact the industry’s long-term viability,” Centerwall said. “I think demand would remain just as strong as it’s been.”
Still, given the contract cancellations and postponements caused by the Commerce investigation, it will take time to renegotiate new projects and start rehiring laid off employees.
“Unfortunately, the tariff announcement itself in April delayed projects for at least a year or so,” Centerwall said. “We’ll begin rehiring for some key positions immediately, but significant rehiring won’t come until later this year, or early next year.”
The federal investigation generated industrywide pressure on the Biden administration to intervene, including bipartisan lobbying in the U.S. Congress against any new tariffs.
Sen. Martin Heinrich, D-NM, played a leading role in those congressional efforts. The White House action on Monday, however, drew significant praise.
“I applaud the president for giving a two-year reprieve from this solar tariff petition that was creating major uncertainty,” Heinrich said in a statement Monday afternoon. “Today’s actions will save thousands of American jobs, keep game-changing utility-scale solar projects on track for construction, and build a bridge for our domestic solar component manufacturers to scale up their operations and become more competitive on the global market.”
