American Solar Is in a Trade War With Itself

The American solar industry is in a tizzy over tariffs. On one side are the companies that develop, finance, and install solar systems. On the other, the American (or American-located) companies that manufacture them.

China’s solar panel industry has been a combination of boon and bugaboo for American renewable energy efforts for years. On the one hand, the solar development sector has benefitted from the cheap panels they have happily put up on roofs and in fields across the country, underpinning the massive growth of solar power in the past decade.

And then on the other there’s the still-nascent American solar manufacturing industry (and a South Korean company with a substantial facility in Georgia), which joined together to file petitions with the Department of Commerce and the U.S. International Trade Commission Wednesday, beseeching them to investigate what it argues are violations of trade laws by Chinese-owned solar panel manufacturers in Southeast Asia.

The group claims that China’s 80% market share in solar products is a “near monopoly” underpinned by “unfair trade practices,” including subsidies and selling at below-cost. About two-thirds of installed solar panels come from overseas, the group claims, “with the majority arriving without safeguard measures or tariffs from China via Malaysia, Vietnam, Cambodia, and Thailand.” The Southeast Asian imports the petition targets are worth some $12 billion annually.

“America’s solar manufacturing industry is on the cusp of tremendous growth that will create jobs and change the trajectory of our clean energy transition for decades to come,” Tim Brightbill, a lawyer representing the group, said in a release. “However, this manufacturing renaissance is being threatened by China’s industrial policy, which has led to massive subsidization in China and Southeast Asia.”

The solar manufacturers’ petition comes as a two-year moratorium on tariffs against Chinese solar panels is due to expire next month. Solar developers had been lobbying the White House to boost other kinds of support for American solar manufacturing, hoping to head off any push for new tariffs, Bloomberg reported. But according to Reuters, the administration is inclined to take the protectionist side.

“Reducing reliance on Chinese clean energy imports, such as solar panels, is among the most bipartisan issues within clean energy,” Morningstar analyst Brett Castelli wrote in a note. For Republicans, China‘s solar dominance represents yet another strategic asset controlled by an adversary state. For Democrats, they are choking off a burgeoning American manufacturing sector.

And yet the question is not as simple as support U.S. solar or don’t. The likely “tightening of solar panel imports into the U.S. would benefit First Solar,” an American solar manufacturer that’s part of the petitioning group, Castelli wrote, “while being a net negative for the rest of our solar sector coverage.”

The Biden administration has long put itself squarely behind American solar. The Inflation Reduction Act’s advanced manufacturing production credit subsidizes domestic renewable energy manufacturing in the United States, while Treasury Secretary Janet Yellen has criticized Chinese “overcapacity” in renewable energy technology. On the installer side, there are tax credits and subsidy programs to make solar more affordable to individuals.

While the solar manufacturers certainly are not unhappy with their tax credits, they see action on trade as an existential issue.

“Everyone knows these Chinese-headquartered companies in Southeast Asia are benefiting from subsidies and exporting below-cost solar into the U.S. market, harming American solar manufacturers and their workers,” Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition, said in a statement. “Conditions are untenable for American solar manufacturers.”

Other renewable energy trade groups — The American Council on Renewable Energy, the American Clean Power Association, and Advanced Energy United — call tariffs a threat to clean energy deployment. The manufacturers’ petition “creates market uncertainty in the U.S. solar industry and poses a potential threat to the build-out of a domestic solar supply chain,” the groups said in a statement, which also noting that they support a “strong domestic solar supply chain,” and specifically the tax credits that encourage onshore production of solar panels.

But while trade groups lament the stoking of trade war to anyone who will listen, companies — or at least one very big company — is telling its investors that things are going to be OK.

NextEra, one of the country’s largest renewable energy developers and operators, has been telling investors and analysts that the petitions and potential tariffs would not be a big deal.

“We expect that any trade actions that would occur this time around will be very manageable,” NextEra CEO John Ketchum said on the company’s quarterly earnings call Tuesday. The company didn’t expect any potential trade restriction “to result in delivery stoppages,” he added, and since NextEra orders panels well before actual construction on a project commences, that “gives us a lot of time and opportunity to be able to troubleshoot any issues should they arise,” Ketchum said.

Finally, even if there were new tariffs, the gap in cost between domestic and overseas panels – the exact thing that the solar manufacturers and the Biden administration lament — is so large that “there’s a lot of economic reasons for deliveries to continue to occur.” Even a 15% tariff on Chinese solar panels, Ketchum said, would be “quite manageable.”

While everyone says they want an American solar manufacturing industry to succeed, trade protection and tax credits can only go so far.