WASHINGTON (CN) — President Joe Biden invoked the Defense Production Act on Monday in a bid to ramp up domestic solar panel production. The move came in tandem with a two-year pause on taxing solar panels imported from four southeast Asian nations as the solar industry grapples with a stumbling supply chain.
Most solar panels in the U.S. are shipped from abroad, and the four countries — Cambodia, Malaysia, Thailand and Vietnam — targeted by the tariff freeze account for the majority of U.S. imports.
The Commerce Department kicked off an investigation of their solar panels in March over claims by Auxin Solar, a small California company, that these countries were using Chinese parts in their products, a cost-saving measure that would also violate U.S. laws and tariffs on Chinese goods.
But that federal probe had a ripple effect through the solar industry with U.S. companies fearing that it could lead to retroactive punitive tariffs on imported solar panels.
“What this investigation has done is to freeze a huge source of supply that developers were counting on to build solar projects and achieve climate goals," Christian Roselund, senior policy analyst with Clean Energy Associates, a company that inspects solar panel manufacturers on behalf of buyers, said in an interview.
When the investigation kicked off, solar companies across the country stopped importing solar panels and solar parts from the four countries out of fear of expensive retroactive tariffs on the products if the Commerce Department found illegal activity.
"We had no idea what everything was going to cost. We weren't getting new kit panels, projects were getting canceled, investments that we were expecting were not being made, companies were forced to lay people off. Just over this one case involving one small company, the entire $25 billion solar industry was brought to its knees," Dan Whitten, a spokesman for the Solar Energies Industry Association, said in an interview.
Roselund said the 24-month tariff freeze announced Monday could ease the pain any potential penalties would have on the global solar supply chain.
"This two-year exemption from duties gives the solar industry time to reroute supply chains so that they are less dependent upon these imports and that is what the industry needed most— time. So, this is like Christmas in June," Roselund said.
While the White House says the administration is supportive of the Commerce Department investigation, the Biden administration said Monday's executive actions are necessary to both bolster domestic manufacturing of solar panels and get more solar products from abroad onto the U.S. market.
"The United States has been unable to import solar modules in sufficient quantities to ensure solar capacity additions necessary to achieve our climate and clean energy goals, ensure electricity grid resource adequacy, and help combat rising energy prices," the president said in an official declaration Monday.
With the tariffs in force, according to the White House, approximately half of the domestic deployment of solar panels expected to hit the market over the next year is in limbo, triggering delays and cancellations for solar projects across the country due to short supply.
Earlier this year, 19 governors from both parties sent a letter to Biden raising concerns about the harm the investigation was doing to the solar industry.
While the Commerce Department said it stands behind its investigation, which the law says must proceed regardless of any impact on climate change or the global supply chain, Commerce Secretary Gina Reimondo applauded Biden's executive actions.
“As we invest in expanding domestic solar manufacturing and strengthening supply chains to protect our long-term energy security, imported solar panels remain an important component to addressing the immediate demands of bringing additional energy sources online and addressing the energy needs of the American people," Reimondo said in a statement . “I remain committed to upholding our trade laws and ensuring American workers have a chance to compete on a level playing field. The President's emergency declaration ensures America’s families have access to reliable and clean electricity while also ensuring we have the ability to hold our trading partners accountable to their commitments.”
Mamun Rashid, CEO of Auxin Solar, the company whose complaint kicked off the Commerce Department investigation, condemned the Biden administration's decision to freeze tariffs on the countries under investigation.
“President Biden is significantly interfering in Commerce’s quasi-judicial process. By taking this unprecedented — and potentially illegal — action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law," Rashid said in an email statement.
Eric Smith, associate director of the Tulane Energy Institute at Tulane University, said the tariff freeze on the very nations facing federal scrutiny undermines the Commerce Department's investigatory process.
"It's one voice of the government saying 'Look at all of the nice things we're doing to try and preserve some short-term jobs in the US,' and the other side of the government saying, 'Yeah, but they're doing this under unsafe, unfair trade practices and we're following an investigative procedure that Congress proscribed," Smith said.
Solar power is a key aspect of Biden's climate change agenda, which focuses heavily on expanding the use of clean energy and sets the goal of getting U.S. greenhouse gas emissions to half of 2005 levels by 2030.
And although the invocation of the Defense Production Act may make domestic solar production more competitive, Roselund said more policy incentives are needed to expand American solar production and invest in the country's long-term climate goals.
"It is a nontrivial challenge to return solar manufacturing to the United States and to rebuild the supply chains here. It's funny to even use the term rebuild because when we had solar supply chains here, the industry was so much smaller than it is today. So in many ways, we're building hem from scratch. That is going to take ongoing sustained policy support," Roselund said.
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