An ongoing battle to support U.S. solar-equipment manufacturers against less expensive imports from China and Southeast Asia highlights the complexity of the international solar market and competing interests of domestic manufacturers on one side and developers and installers on the other. Two recent legislative moves illustrate the challenges of attempting to support both constituencies at the same time, while also ensuring overall growth in solar energy production. Achieving all three goals simply might not be possible.

In February, the Biden administration opted to continue Trump-era tariffs on Chinese products, but with some significant exceptions. The 14.75% tariffs that were set to expire will now be extended another four years. They are intended to address what some U.S. solar makers see as an unfair advantage arising from substantial Chinese state support of its manufacturers that U.S. producers say results in artificially low prices for Chinese products in the United States.

Manufacturers and the tariffs

Reaction from U.S. manufacturers was mixed. Though some supported the decision in general, they objected to the fine print. Original penalties applied to imported crystalline solar panels and any solar cells (the individual electricity-generating units that are combined to create a finished panel) over an allowed total of 2.5 gigawatts (GW). The revised guidelines allow up to 5 GW of solar cells. Also, bifacial panels—a type favored for utility-scale installations—remain exempt from duties, as they were under Trump rules.

Installers and developers advocate for eliminating the tariffs and argue U.S. manufacturers simply can’t meet today’s demand. They say this is driving up project prices, slowing the market and leading to job losses. Several new manufacturing plants have opened, and existing market leader First Solar has grown its operations. However, the added output hasn’t kept up with demand, which has surged while the tariffs have been in place.

According to energy analysts at Wood Mackenzie for the Solar Energy Industries Association (SEIA), the U.S. solar market grew to 20 GW from 11 GW between 2017 and 2021; so, while U.S. makers’ sales have increased, their market share has not.

Data on solar cell imports illustrate U.S. solar makers’ difficulties in scaling up output to meet demand. The United States has no domestic solar cell manufacturing capacity. All U.S. module and panel makers use imported cells, which is why the 2.5 GW exemption was first established.

However, figures from U.S. Customs and Border Protection, which administers the tariffs, show actual imports falling below that level, with 2.311 GW of cells imported in 2020 and just under 2.1 GW through November 2021.

In late March, about a month after the tariff extensions were announced, Biden’s team stated it was beginning an investigation to see whether Chinese solar companies were getting around the added duties by setting up new facilities in Southeast Asia. This move was prompted by a petition submitted to the U.S. Commerce Department by Auxin Solar, a California-based manufacturer, which cited the fact that almost 80% of crystalline solar panels were sourced from Cambodia, Malaysia, Thailand and Vietnam. Those countries buy their cells from Chinese suppliers. Auxin claims the Southeast Asian fabricators are, essentially, fronts for Chinese cell makers, which sets up the new operations to maintain low-cost manufacturing in what the company said was “textbook circumvention” of the U.S. penalties.

Groups advocating for solar development and installation companies immediately opposed the investigation, noting the impact sanctions could have on U.S. greenhouse gas reduction goals and the jobs needed to reach them. SEIA surveyed more than 700 members in the month following the investigation’s announcement and found 83% already had received notice that expected module supplies were canceled or delayed. In a companion Wood Mackenzie report, the organization estimated that proceeding with the Auxin petition would lead to 34 GW of lost deployment over the next four years.

Uncertain summer

The Commerce Department’s preliminary findings come out Aug. 30, 2022, with a final decision expected Jan. 26, 2023, though this could be extended to April 1, 2023. If the verdict comes down against the importers, penalties could be assessed retroactive to Nov. 4, 2021, to discourage buyers from stocking up before next April.

This August’s preliminary report could provide some indication on where Commerce authorities will land, according to SEIA lawyers who spoke at a webinar in early April. Julia Eppard, an attorney with Akin Gump Strauss Hauer & Feld LLP, noted that, “Commerce has changed its mind between a preliminary and a final decision in the past.”

However, Eppard added, there are no examples of investigators making a negative preliminary determination of wrongdoing and then changing that verdict to positive in their final opinion.