US solar installations tumbled 24% in the first quarter versus a year ago partly driven by supply chain challenges that President Joe Biden sought to ease on Monday when he announced a 24-month tariff exemption on cheap solar panels from four Southeast Asia nations, according to a new report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie.
In 2020, the last year for which federal government data is available, 89% of the solar modules employed in the US were imported with Cambodia, Malaysia, Thailand, and Vietnam supplying about four-fifths of those deliveries.
The 3.9GW of new capacity installed on a direct-current basis this year through March was the slowest quarter for the industry since 2020, although solar accounted for 50% of all new electricity-generating capacity added to the US grid.
Utility-scale solar, the main industry driver, had its weakest performance since third quarter 2019 with 2.2GW, a 41% decrease year-on-year.
The latest US Solar Market Insight, compiled by analysts from both organisations, highlighted supply chain constraints and shipment delays they said were exacerbated by the Biden administration’s trade policies that have negatively affected availability of solar components and panels.
The report also underscored the “havoc” wreaked on the industry here by the Department of Commerce (DoC) inquiry into whether some Chinese-branded solar panels and cells entering the US from those nations are using cheap components made in China to cut costs and circumvent existing US duties in place since 2012 on panels imported directly from the Asian superpower.
Fearing the administration could impose retroactive tariffs ranging from 50% to 250% if it found that the plants in southeast Asia were set up to dodge US levies, domestic installers halted imports, causing an acute supply shortfall for projects in construction and under development.
In early May, SEIA CEO Abigail Ross Hopper said the tariff case would result in a decline of 24GW of planned US solar capacity in 2022-23, which would be more than the record 23.6GW installed last year.
Under Biden’s order, any new retroactive tariffs resulting from the DoC investigation could not be imposed for two years.
The decision does not affect tariffs on solar cells and modules imported from China and Taiwan imposed under former President Donald Trump and extended in February by Biden for four years.
Biden in controversial move
Biden’s decision to invoke Section 318a of the 1930 Tariff Act, which allows the president to waive import duties to address a national emergency, was controversial. So was his use of presidential authority in the Defence Production Act of 1950 to accelerate investment of federal money appropriated by Congress to support development of a “secure, stable, diversified, and competitive” domestic solar module supply chain, which he said was essential to US national security.
Biden said unavailability of cells and modules jeopardises solar capacity and batteries that were expected to account for over half of new electric sector additions through 2023.
That situation, in turn, “threatens the availability of sufficient electricity generation capacity to serve expected customer demand,” he said, adding solar power is “critical” to reducing US dependence on burning fossil fuels, which drives climate change.
“The department of Defence has recognized climate change as a threat to our national security,” he said, while noting more solar energy will benefit the country amid disruption to energy markets caused by Russia’s invasion of Ukraine.
Clean energy lobby groups and solar developers and installers - who comprise a large percentage of their members – praised the actions by Biden, contending that the present supply chain shortfall, if it were to continue, would further place his 2030 climate goals at risk.
Those include a 50-52% reduction in US greenhouse gas emissions from 2005 levels and up to an 80% carbon-free electric grid. The $1.8bn Build Back Better bill, which stalled in Congress last December but could be revived as a smaller package, was designed to support those targets.
“The president is providing improved business certainty today while harnessing the power of the Defence Production Act for tomorrow,” said Ross Hopper of SEIA, calling Biden’s approach “thoughtful” to address “the current crisis of the paralysed solar supply chain.”
American Clean Power Association CEO Heather Zichal said Biden's use of the “full power of executive authority to jumpstart the domestic solar industry is a bold act of leadership”.
Now that the solar industry has a “reprieve from the destructive impacts of the Commerce inquiry”, it can work with the administration and allies in Congress to secure enactment of policies that strengthen the domestic supply chain such as creation and extension of clean energy tax credits, said Greg Wetstone, CEO of the American Council on Renewable Energy.
Biden’s moves, however, drew criticism from certain US solar manufacturers and their allies, who lobbied hard for the administration to allow the DoC investigation to run its course before providing the industry with relief.
Mamun Rashid, CEO of Auxin Solar, a small panel maker in California which brought the petition to DoC in February, said Biden is “significantly interfering” with the inquiry.
“By taking this unprecedented - and potentially illegal – action, he had opened the door wide for Chinese-funded special interests to defeat the fair application of US trade law,” he said.
Nick Iacovella, a spokesman for the non-profit Coalition for a Prosperous America, an advocacy group for domestic manufacturing, told the conservative The Daily Caller News Foundation: “It shows that the Biden administration policy, in this space, in particular, is Build Back Beijing.”
“All this boils back down to – if you allow the Chinese to dump subsidised product in our market, it doesn’t matter,” he added. “For our manufacturers, they’re not going to compete with subsidised product.”
First Solar, the leading US panel maker whose thin-film cadmium telluride technology differs from most manufacturers that use multi-crystalline silicon technology, which predominates in China and Southeast Asia, said it is “deeply disappointed” in Biden’s emergency order.
“Today’s proclamation directly undermines American solar manufacturing by giving unfettered access to China’s state-subsidized solar companies for the next two years,” said Samantha Sloan, vice president of policy.
“This sends the message that companies can circumvent American laws and that the US government will let them get away with it as long as they’re backed by deep-pocketed political pressure campaigns,” she added. “Furthermore, the use of the Defense Production Act to boost solar manufacturing is an ineffective use of taxpayer dollars and falls well short of a durable solar industrial policy.”