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The Great Solar Panel Tariff Debate Heats Up

The Commerce Department has ruled that four Chinese solar panel makers have violated its trade rules and will pay higher tariffs.

The Biden administration wants America to get 100% of its electricity from renewable sources — primarily wind and solar — by 2035. As the song goes, “We’ve got a long way to go and a short time to bet there.” The Biden administration is also putting $37 billion into incentives that will encourage US companies to manufacture the products needed to fulfill that renewable energy goal in the US using American workers and materials sourced from within the US or one of its favored trading partners.

The problem is, the United States currently does not have enough raw materials or solar panel factories to meet the need. At the present time, domestic solar panel manufacturing produces about 7.5 gigawatts (GW) of solar panels a year. The Biden incentive program will increase that to around 20 GW in a few years, but the solar industry expects to install 40 GW of solar in 2023, and that needs to double if the goal of 100% renewable energy has any chance of being achieved by 2035.

To meet the goal, the US is going to need a lot of solar panels from foreign manufacturers while it waits for domestic production to ramp up. But it doesn’t want them to come from China, which happens to have the largest solar panel manufacturing capacity of any nation in the world. There are two reasons for that.

First, there are concerns that much of the polysilicon needed for Chinese solar panel factories comes from forced labor camps. Second, thanks to the decade-long head start China has had thanks to Republican-led opposition to clean energy technology, Chinese companies now enjoy economies of scale that make if extremely difficult for American manufacturers to compete.

That’s the claim of tiny Auxin Solar, which filed a trade case with the Commerce Department in 2021 in which it claimed Chinese manufacturers had an unfair advantage over it and other domestic manufacturers. The US has imposed tariffs on Chinese-made solar panels since 2012 on the basis that Chinese manufacturers were selling their panels in the US at prices that were lower than it cost to manufacture them.

That is known as “dumping” in international trade circles. Decades ago, Japanese automakers were accused of dumping cars in the American market. While it may seem to the ordinary citizen that you can’t sell stuff for less than it costs to make it, you can get away with it if in fact the national government is absorbing any losses in order to boost domestic manufacturing. People used to refer to the Japanese manufacturing sector as Japan Inc, because the government was deeply involved in promoting its industrial policy.

That led to a lot of tariffs against Japanese cars, some of which continue to this day. Those tariffs were a driving force in convincing Japanese automakers to start building their cars in the US. But that avenue is not currently available to Chinese solar panel manufacturers because the US government is hostile to Chinese investments. It sees all Chinese companies as being agents for the CCP, and that concern is not without merit.

The Commerce Department Rules On Solar Panels

The complaint by Auxin Solar claimed Chinese companies were setting up manufacturing operations in other Southeast Asian countries specifically to evade US tariffs. It claimed those factories were not doing much actual manufacturing but were just making minor changes to panels made in China and then sending them off to America.

Last week, the US Commerce Department issued a preliminary ruling that found four Chinese solar panel manufacturers — Canadian Solar and Trina Solar in Thailand as well as BYD Cambodia and Vina Solar Vietnam — were doing just that. On the other hand, it ruled New East Solar Cambodia, Hanwha Q CELLS Malaysia, Jinko Solar Malaysia, and the Vietnam operations of Boviet Solar were not violating U.S. trade rules. The Commerce Department will make a final determination next May.

That is not the end of the story, of course. The Biden administration has imposed a two-year moratorium on tariffs for Chinese-made solar panels that will expire in 2024. That means any action the Commerce Department takes will be deferred. At the same time, the Energy Department, which is primarily responsible for meeting the 100% renewable by 2035 goal, is opposing any new tariff action by the Commerce Department. The difference in how Commerce and Energy view this issue illustrates how deeply divided the government is on this issue.

The long and short of it is that tariffs on Chinese solar panels may make it impossible for the United States to meet its energy goals. That has significant implications for America and the world as the seas continue to rise, droughts get more severe, forest fires become more common, and hurricanes grow more powerful.

On the other hand, cheap panels from China could keep the nascent US solar panel manufacturing sector from growing to the point where America produces the renewable energy resources it needs domestically. The two policies are in total conflict with each other, which presents the Biden administration with a dilemma. There is simply no way to reconcile the two positions.

The Reaction

Reaction to the Commerce Department decision has been split. The New York Times reports Mamun Rashid, CEO of Auxin Solar, said in a statement that the findings “largely validated and confirmed Auxin’s allegations of Chinese cheating. We will continue to press forward in these cases as they continue to make sure all trade cheats are playing by the rules.” There are those who accuse Auxin, which has only minuscule manufacturing capacity, of simply gaming the system in order to stick its oar into the trough of federal money on offer.

Abigail Ross Hopper, CEO of the Solar Energy Industries Association, said her group was “obviously disappointed that Commerce elected to exceed its legal authority” by ruling against the imports from Southeast Asia. “This decision will strand billions of dollars’ worth of American clean energy investments and result in the significant loss of good-paying, American, clean energy jobs. This is a mistake we will have to deal with for the next several years.”

Major solar importers have complained for months of difficulties obtaining enough solar panels to meet growing demand for clean energy solutions. George Hershman, the chief executive of SOLV Energy, which has provided engineering, construction, and maintenance services for projects across 26 states, said the decision will likely disrupt an industry that has already been reeling from supply chain constraints in recent years.

“The upside is that Commerce took a nuanced approach to exempt a number of manufacturers rather than issuing a blanket ban of all products from the targeted countries,” he said. “While it’s positive that companies will be able to access some of the crucial materials we need to deploy clean energy, it’s still true that this ruling will further constrict a challenged supply chain.”

No Way Out

Climate change has put the whole world in a box, and unless we reduce carbon emissions by at least 90% over the next 8 years, there is no way out of the predicament we are in. Ultimately, it will come down to priorities. Is addressing an overheating planet more important than protecting domestic manufacturing? China could certainly help defuse this situation by backing away from its “We will bury you” brand of “manufacturing as a tool of global domination” policies, although that might be like asking a leopard to change its spots.

Republican Senator Marco Rubio made his stance plain when he said the Commerce Department’s new tariffs should take effect immediately. “President Biden should be focused on revitalizing American industry, not continuing our dependence on slave-made goods in the name of arbitrary climate goals.”

The sense around the CleanTechnica lunchroom is that saving the Earth as a place where humans can thrive has to be the highest priority, but there are divergent views and debates here as well. One can only wonder what Little Marco will have to say about domestic manufacturing when Florida sinks beneath the waves.

To address global heating effectively will take a concerted and cooperative effort among all nations and all people. If the current flap over solar panel tariffs is any indication, human civilization is in deep trouble.

 
 
 
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Written By

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. 3000 years ago, Socrates said, "The secret to change is to focus all of your energy not on fighting the old but on building the new." Perhaps it's time we listened?

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