The Atlanta Journal-Constitution
Half-built solar project shows risks of tariff fight
Trade probe puts projects, Biden green agenda on hold.
On top of an old coal mine in western Pennsylvania, developers were preparing to install the first of 237,000 new solar panels — a living embodiment of the transition away from fossil fuels into clean energy. Just as the Maple Hill solar farm was getting underway, things came to an abrupt halt.
The $30 billion U.S. solar industry is being ensnared in a trade probe that’s leaving projects like Maple Hill in limbo and threatening to slow down — possibly even derail — the country’s shift to renewable power. The panels crucial to the solar farm in Portage, Pennsylvania, were being made in Thailand. But the threat of tariffs, equal to as much as 239% of the equipment’s value, forced the supplier to halt shipments.
“Solar projects across the country, including ours, just got stopped in their tracks,” said Tom Rumsey, senior vice president of Competitive Power Ventures, the developer behind Maple Hill.
The fallout is rippling through the industry. NextEra Energy Inc. is warning a huge number of its projects could be delayed, while SOLV Energy is shelving five planned installations and laying off 500 workers. The Public Service Company of New Mexico said planned renewable projects may cost more and won’t be operating until after next summer.
At least 65% of U.S. solar capacity set to come online in 2022 and 2023 is now at significant risk of cancellation or delay, according to an advocacy group fighting the trade probe.
And that’s just based on the announcement of the investigation, which could take a year to complete.
If the Commerce Department decides to expand tariffs, the consequences would be even more far-reaching. The duties would hit Malaysia, Thailand, Vietnam and Cambodia — countries that supply the U.S. with 80% of its imported modules. While it’s possible that other nations could help fill some of the supply gap and new domestic manufacturing may eventually spring up, the turbulence could take years to settle. The upheaval would likely jeopardize President Joe Biden’s green ambitions, including his goal to decarbonize the electricity sector by 2035.
The probe represents just the latest setback for the nation’s energy transition. The solar industry is already confronting Biden administration policies that hamper shipments of key equipment, and legislation to expand critical tax credits is stalled in Congress. Meanwhile, wind power is under threat as turbine makers struggle to translate soaring demand into profit, U.S. coal use is surging and Biden is imploring oil companies to produce more crude.
“I believe that the president, at his core, is a climate and justice champion,” said Suzanne Leta, head of policy and strategy at rooftop company SunPower Corp. “But we’re not quite seeing the urgency we need in order to meet that objective.”
Solar generation was earmarked to potentially provide 40% of the nation’s power under Biden’s climate plans. Now, 83% of companies surveyed by the Solar Energy Industries Association say deliveries of panels have been delayed or canceled because of the trade probe. The group estimates that 318 projects totaling 51 gigawatts of solar capacity are being impacted. That’s equivalent to the electricity generated by more than 51 nuclear reactors.
Many analysts say it’s too early to quantify what impact the possible duties would have on U.S. greenhouse gas emissions, though modeling provided by the solar association suggests an extra 364 million metric tons of carbon dioxide could be unleashed by 2035 — equivalent to the annual release from 97 coal plants.
“This is a lost opportunity,” said SOLV Chief Executive Officer George Hershman.
The solar industry “is well positioned to meet the demand,” he said. “We have an administration that all of us in the industry supported. We wanted this administration with this agenda. And to think that we’re two years in, and we’re talking about laying off solar workers. These are really self-inflicted wounds.”
In Pennsylvania, Maple Hill was originally planned as a 127-megawatt solar farm. The company now has just 20 megawatts of panels on hand and little chance of nabbing more quickly.
“We literally have a project with a quarter of the panels installed or in storage with the remaining panels in flux,” said Rumsey of Competitive Power Ventures. “It’s fully permitted. You’re paying for the land, your construction team is mobilized, you have your interconnect. All you’ve got to do is construct it.”
The Commerce Department is evaluating whether companies are unfairly skirting 10-year-old duties on Chinese solar cells and modules by assembling the gear in Malaysia, Vietnam, Thailand and Cambodia.
If the agency ultimately concludes tariffs are being circumvented, it could extend antidumping and countervailing duties — such as 49.79% levied against China’s JinkoSolar Co. and 40.27% for Longi Green Energy Technology Co. — to the companies’ operations in Southeast Asia. A broad country-wide rate — now set at 238.95% for China — could apply to a handful of manufacturers that haven’t petitioned the U.S. for lower, company-targeted tariffs. That would include Zhongli Talesun Technologies (Thailand) Co., the supplier for Competitive Power Ventures.
Talesun didn’t respond to an email seeking comment.
Duties could be imposed on products shipped to the U.S. since the probe started in late March. But in an unusual twist, tariffs could be retroactively applied, potentially to shipments dating as far back as November 2021.
That would further pressure an industry with notoriously slim margins — typically in the range of 5% to 8%, according to consultancy Wood Mackenzie.
Spending on panels generally represents about a third of the cost of a utility-scale solar project, and current supply disruptions translate to roughly $5.6 billion of capital expenditures in 2022, according to Pol Lezcano, a solar analyst BloombergNEF.
The U.S. added 17.8 gigawatts of utility-scale solar capacity in 2021, but BNEF projects deployment will fall to 16.8 gigawatts this year amid supply-chain snags and the trade probe.
“Developers and module makers are trying to work out who pays for the tariff, but without knowing how much they will have to pay, discussions cannot move forward,” said BNEF analyst Tara Narayanan.
To be sure, U.S. solar companies have a long history of issuing dire predictions about threats to the industry, only to beat the odds. Before former President Donald Trump slapped tariffs as high as 30% on panels and cells in 2018, solar companies howled about lost jobs and decimated projects, but utility-scale installers were able to blunt the pain by using two-sided models that dodged the duties.
This time, the threat is more serious, said Mike Kruger, president of the Colorado Solar and Storage Association.
“It’s been panic in a way that I haven’t seen before,” said Kruger, a veteran of the Commerce Department.
Supporters of U.S. solar manufacturing who back the trade investigation say the U.S. can’t afford to wait any longer to counter China’s solar manufacturing dominance.
At one point there were 75 major solar-parts factories in the U.S., a number that was expected to grow as the industry flourished. Instead, most plants have now been shuttered.
“For years, Chinese solar producers have refused to fairly price their products in the U.S. and have gone to significant lengths to continue undercutting American manufacturers and workers,” said Mamun Rashid, CEO of San Jose, California-based Auxin Solar, the American manufacturer that persuaded the Commerce Department to open the trade probe.
The U.S. must enforce its trade laws to rebuild the American solar supply chain and combat “pervasive backdoor dumping,” Rashid said.