Electrical Equipment / Components & Telecoms

The Biden administration will extend tariffs on solar imports for another four years, but significantly narrow the scope.

The decision is good news for solar installers, who have sought to remove or narrow the tariffs to help lower the price of solar compared to other energy sources. But it's a blow to U.S. solar manufacturers, who say the tariffs are necessary to level the playing field against rivals that dominate the solar industry's supply chain.

The above tariffs apply to all imported solar cells and modules, of which about two-thirds are made in China, about 15% are made in Southeast Asian countries, and about 2% are produced by U.S. producers.

These solar tariffs were first imposed by former US President Donald Trump in January 2018 and were due to expire on February 6, 2022.

The Biden administration has ignored advice from the U.S. International Trade Commission (ITC) in its move to continue extending solar tariffs. The U.S. International Trade Commission is the U.S. government agency that advises Congress and the White House on tariff policy.

In December, the U.S. International Trade Commission had recommended maintaining tariffs and the existing 2.5-gigawatt solar cell quota level. However, the Biden administration has doubled the quota level to 5 gigawatts, allowing a large number of imports to avoid taxation.

Currently, no US factory produces solar cells, and China holds 79% of the global solar cell market share. Biden administration officials say the U.S. will continue to allow bifacial solar panels into the U.S. without tariffs. U.S. domestic producers say excluding bifacial panels would weaken the tariffs.

The Biden administration is also trying to boost the U.S. solar industry through "Buy American" procurement rules to meet the government's energy needs. Biden's "Build Back Better" plan also includes tax credits for manufacturers across the solar supply chain.

Currently, no U.S. factory produces solar cells, a key input for most solar panels

U.S. lawmakers formed an unusual coalition to lobby for the Biden administration's decision, and the issue is also nonpartisan in the Senate.

Some lawmakers urged Biden to cut tariffs, arguing that "the price of solar panels in the United States is significantly higher than the global average, which has severely impacted U.S. clean energy jobs."

Other lawmakers urged Biden to keep tariffs in place across the board, arguing that "US solar manufacturing should be a key component of the clean energy economy."

The Biden administration faces tough choices on solar tariffs, balancing its goals to combat climate change and its ambitions to compete for the solar-manufacturing supply chain.

"The solar industry is actually trying to save the planet," the Solar Energy Industries Association recently told the Biden administration. "Tariffs are only going to be a roadblock, hindering solar deployment and undermining future growth," the association said. Efforts to replace fossil fuels with clean, renewable energy.” The association represents companies that install and use solar panels.

U.S. solar manufacturers welcome an extension of the tariffs for another four years. Without tariffs, the U.S. would effectively cede solar panel manufacturing to foreign companies, manufacturers say, while China already dominates a key part of the solar supply chain.

The dispute is the latest evidence of a strained relationship between the U.S. government's economic goals and the long-running task of tackling climate change, which President Joe Biden has called the world's greatest challenge.

The economic goal in the solar market is to build a resilient supply chain while supporting U.S. manufacturers in their efforts to win a larger share of the expanding market. The U.S. Department of Energy estimates that as soon as 2035, 40 percent of U.S. electricity could come from solar energy, and the industry could “employ up to 1.5 million people without raising electricity prices.”

Relying on duty-free goods from China may be the cheapest path to achieve this goal. But advocates of the tariffs say it could leave the U.S. solar supply chain unable to compete.

The U.S. International Trade Commission submitted a 586-page recommendation report to Biden in December last year (if you need the report, please leave a message to the company’s mailbox in the background), agreeing to continue to extend the solar tariff that will expire on February 6, 2022. The committee cited evidence that removing the tariffs could "severely undermine" efforts to revive U.S. solar manufacturing. The climate impact of such a move is not something to consider within the committee's remit.