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President Joe Biden will pause solar tariffs and invoke Defense Production Act for clean energy

A federal investigation had darkened the forecast for solar energy in the US

U.S. Solar Industry Threatened By Southeast Asian Tariffs
Racking systems to hold solar panels at a solar farm in Portage, Pennsylvania, on Monday, April 25th, 2022. 
Image: Justin Merriman/Bloomberg via Getty Images

In an executive action on Monday, President Joe Biden announced a number of measures aimed at boosting solar energy in the US, including a two-year “bridge” meant to alleviate a squeeze on the flow of solar equipment imports from Cambodia, Malaysia, Thailand, and Vietnam.

The moves come after a federal investigation into whether solar manufacturers had been evading tariffs on goods from China by exporting them through other countries. The Department of Commerce says it will levy penalties on companies that it finds are evading taxes as part of its investigation, but only after the two-year reprieve from tariffs on imports from Southeast Asia ends.

Alongside the tariff holiday, the executive order includes two measures meant to boost domestic production of solar panels and other clean energy technology. Under the terms of the order, the White House will invoke the Defense Production Act to prioritize solar equipment, reportedly through a series of grants and loans. Biden established new measures to make it easier for federal agencies to procure items made in the US.

That’s supposed to prevent shortages of solar panels while the US works to ramp up domestic production. In 2020, only 3 percent of all the solar panels shipped around the world were made in the US. The majority of the world’s solar panels, and the materials used to make them, come from China.

While solar power is the focus, the impact of the order will extend far beyond just solar panels. Heat pumps and building insulation are included in the DPA action, as are transformers and other critical components needed to update the nation’s power grid. The list also includes electrolyzers and related materials used to make hydrogen fuel that the Biden administration hopes will help clean up heavy-duty trucks and steel manufacturing.

In March, the Department of Commerce launched an investigation into whether solar panel manufacturers have evaded tariffs by funneling Chinese goods through Southeast Asia. That investigation, which might have placed retroactive tariffs of up to 250 percent on the contested goods, threatened to cut solar installations in the US nearly in half through 2023, according to an April forecast by the Solar Energy Industries Association.

Now, it seems that retroactive tariffs are “off the table,” Reuters reports, based on information from sources close to the matter. But the investigation is still underway and could result in penalties after the two-year tariff break.

President Biden’s strategy to clean up US greenhouse gas emissions includes building up US supply chains for clean energy. In March, he invoked the Defense Production Act to speed up mining and the processing of key minerals used in batteries for renewable energy and electric vehicles. The Act gives the president the power to push companies to prioritize federal contracts for whatever goods or materials it deems necessary in a national emergency.

“As droughts cripple the West and Russia’s unwarranted invasion of Ukraine have placed increasing strains on America’s energy market, preventing disruptions to the electric power system, diversifying our energy sources and responding to the climate crisis have never been more urgent, and solar energy is an essential component of meeting those needs,” Secretary of Commerce Gina Raimondo said in a statement today.

The Biden administration says the US is now set to triple its solar manufacturing capacity by 2024. That’ll be crucial given how far behind the US is on meeting its climate goals. After he recommitted the US to the Paris Agreement, Biden pledged that the nation would slash its carbon dioxide emissions by at least half this decade compared to peak emissions in 2005.

But the US is only on track to reduce energy-related emissions by up to 28 percent by 2030, according to an analysis published last month in the journal Science. Solar and wind capacity in the US needs to grow at a rate two to seven times faster than they have over the past decade for the US to hit its emissions reduction target, according to the analysis.