Renewable Energy

To Survive on the Other Side of Biden's Two-Year Solar Bridge, We Need Further Steps to Build Up Our Domestic Supply Chain

Solar panels gleaming golden in the sunset
Credit: Milos Muller / Getty Images

The Biden-Harris administration is making a lot of promises to keep U.S. solar power growing, raising the question: Can they deliver? Yes, if they also take steps now to grow a fully-realized domestic supply chain, so that it will be there when the just-announced two-year pause in new solar import tariffs expires.

This bridge to the future, combined with the incentives that come with invoking the Defense Production Act (DPA), has been an immense relief for the solar industry and a step toward building out U.S. solar manufacturing.

The U.S. Department of Commerce has been probing whether existing tariffs have been circumvented when Chinese solar components are turned into modules and shipped to the U.S. from Cambodia, Malaysia, Thailand, and Vietnam. The administration has now directly acknowledged that this probe has hindered both near-term progress on Net-Zero goals, and also long-term plans to bolster the solar market here at home for both employers and employees.

The administration was stuck with a tough choice: Either continue to carry out a regulation that could hamstring the industry for the next five years; or do nothing about the unfair trade policies now cropping up all over Southeast Asia.

There’s no doubt that the White House has an important role to play as a value-added partner in developing U.S. solar self-sufficiency, while also negotiating a fairer trade landscape with the Chinese solar industry. If there was ever an opportune time to put together a structured trade framework that protects climate efforts and encourages a thriving global economy, it's right now.

“A challenge here will be to move substantially toward a domestic solar supply chain that is globally competitive,” says Andy Stone, producer and host of the Energy Policy Now podcast at the University of Pennsylvania’s Kleinman Center for Energy Policy. “That’s going to require additional industrial and trade policy support.”

The new problem is that the Defense Production Act and its sideline policies won’t do nearly enough to make the U.S. the globally competitive solar industry it could be. On the other side of Biden’s “bridge” needs to be a further set of policies that provide permanent solutions, and fulfill recent promises of a fully functioning domestic supply chain that can accelerate demand elsewhere in the world as well.

The U.S. has historically not offered cost-competitive solar panels. Panels manufactured here are significantly more expensive for good reasons, such as fair labor practices. While some U.S. companies have found a niche in which they can compete — such as First Solar, which manufactures Cadmium Telluride (CdTe) panels — they have not cracked the global cost competitiveness code with crystalline PV technology, which is more efficient and the preferred technology today.

While acknowledging there is some market for premium products manufactured in the U.S., without substantial long-term help from national policies the rest of the global market seems nearly unattainable. The cost difference versus cheaper imports is just too great.

Two immediate steps can help curb that cost curve, and better create a globally competitive U.S. solar market.

Step one: There has been a lot of talk in the past about marginal import tariffs that set the cost of imported goods to the cost of production in the United States. If we want a domestically competitive industry we will need marginal import tariffs. Otherwise, once the two-year period ends we will have built up an employment base, but our domestic supply still won’t have the backing to compete in the global market, and our manufacturing will tank.

Step two is more holistic: We need to identify which countries exporting to the U.S. continue to maintain “dumping programs” — the practice of exporting commodities at prices below the cost of production, supported by state subsidies, to undermine manufacturing capacity in import jurisdictions. If they won’t eliminate such subsidized dumping, we may need to match it, or tailor our own domestic industry subsidies to create a fair global playing field.

The steel industry serves as a warning for what could happen to our at-home solar industry if we carelessly continue dependence on Chinese and Southeast Asia imports. China’s domination of world steel manufacturing is a lesson on the power of domestic market subsidies, one we could apply here at home.

Exploring our own degrees of resource nationalism, along with carefully examining state-level subsidies and more effectively countering imports that benefit from dumping practices, can ultimately play a crucial role in regaining our global solar-market footprint.

To achieve energy transition targets, all the way from mine to installed solar panel, we will still need a close relationship with China. What’s called for is a balancing act between the U.S. interest in building out a domestic supply chain, and stated global international trade policies and laws meant to shut down any exaggerated action from other global players.

A certain amount of disruption comes with the territory, according to Christopher Ihler, CEO of EnergyLink, a design-build-finance engineering firm in the solar+storage business. “Our industry is regularly impacted by geopolitical issues — we anticipate and plan for such interruptions in production,” Ihler says. “But every interruption has its costs. Production and implementation losses systemically hinder growth and stall decarbonization efforts. Now more than ever, our industry requires a competitive and reliable domestic supply chain capable of supporting solar market growth and progress.”

Climate diplomacy can accelerate decarbonization for everyone. At the very least we need to continue progress on our own climate goals without some kind of embargo or bilateral trade spat that could delay them for years. With inflation picking up and weakness in global financial markets, to keep our Net-Zero targets on track, it’s crucial to work now on a policy package that offers the solar industry a landing pad at the end of President Biden’s two-year bridge.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Nicholaus Rohleder

Nicholaus Rohleder is a former roughneck in the Texas oilfield turned climate technology entrepreneur, Columbia University Adjunct Professor, and Forbes 30 Under 30 honoree for his work in climate technology and clean energy. He is the Co-Founder of Climate Commodities, a multi-strategy asset manager and financial technology firm focused on the climate supply chain and raw materials enabling the energy transition. He also serves as a member of the Energy Technology Leadership Council at Tulsa Innovation Labs, an economic development initiative funded by the George Kaiser Family Foundation; and on the editorial team for the Energy Policy Now podcast at the University of Pennsylvania’s Kleinman Center for Energy Policy. He received degrees in finance and engineering, respectively, from Columbia University and the University of Pennsylvania.

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