President Joe Biden extended tariffs on imported solar panels in February 2022 in an effort to protect domestic manufacturing. These tariffs add a 14% to 15% tax on cheaper imports, increasing their cost in the United States. At the same time, the Biden administration is urging an expansion of renewable energy and energy security, two priorities for many countries.
Inasmuch as energy analyst focused on the production of renewable electricity, I follow the impact of solar policies. To understand why tariffs were extended, it helps to understand their historical impact.
The United States was once a solar leader
american engineers invented the solar cell, the part of the panel that generates electricity, in the 1950s at Bell Labs. The country was a world leader in manufacturing until about 20 years ago.
Several solar cells connected together constitute a typical photovoltaic solar module. Producing the most common type of PV module, a crystalline silicon module, is a multi-step process. As global demand for solar power grew, many of these steps started happening in China or involved Chinese companies in Southeast Asia.
Until 2011, the United States was a net exporter photovoltaic modules. As the prices of photovoltaic modules fell in 2010, many American and German companies could no longer compete and closed operations. US companies have claimed that China provides unfair subsidies and that its companies are throw away solar cells – by selling them at a price lower than the cost of manufacture – to drive out the competition.
Dennis Schroeder, NREL
How solar tariffs work
However, low cost modules and cells still come to the United States from outside China, especially as Chinese companies have added manufacturing in neighboring countries not subject to these duties. Most of the materials needed to manufacture the cells and modules still increasingly came from China.
In 2018, the US government implemented the Section 201 tariff, a four-year safeguard to give domestic PV manufacturers temporary relief of the “severe” injury imports were the cause.
Homework started at 30% on most imported modules, decreasing by 5% each year until 2022, when the rate fell to 15%. Photovoltaic cells were also subject to these duties, but the first 2.5 gigawatts of imported cells were exempt to allow companies that assemble modules some relief while encouraging the manufacture of photovoltaic cells in the United States.
Modules produced from cadmium telluride, rather than crystalline silicon, were also exempt and, in 2019, bifacial modules – which are designed with a transparent backing so that energy is produced when light strikes the front or the back of the panel – also became exempt. Both are mainly used for large solar farms.
The American module industry is accelerating
Fares are considered a major factor in the more than tripled of crystalline silicon module assembly capacity in the United States between 2018 and 2020, as well as in the recent scale-up of cadmium telluride module manufacturing by First Solar. This American company benefited from the increase in the market price of competing crystalline silicon photovoltaic modules.
In addition to tariffs, many module assembly manufacturers cited supply contracts with utility or roofing companies and the reduction of U.S. corporation taxes in 2018 as critical. Decisive factors for manufacturing ramp-up.
Companies assembling modules in the United States have benefited from the ability to import nearly all of their cells duty-free – the 2.5 gigawatt quota was not reached up to one month before the end of the initial four-year period – while competing with imported modules that were subject to the customs duty.
Yet even with the tariffs in place, about 80% of the solar modules installed in the United States during the initial four-year period were imported. According to trade data, just over half of the photovoltaic modules imported in 2020 were not subject to the tariffs of article 201.
In addition, modules produced in the United States are always heavily depend on China for parts, such as aluminum frame and glass. Shortly after the introduction of Section 201 tariffs, the U.S. government placed Section 301 Rates on these Chinese products, increasing the cost of assembling PV modules in the United States
How have tariffs affected the US solar industry?
The tariffs did not lead to an increase in the national production of photovoltaic cells.
Because Section 201 tariffs did not apply to the first 2.5 gigawatts of imported cells, a cap that was not reached in the first three years of implementation of the tariffvirtually all cells purchased in the United States have been free of the tariffs of article 201.
Therefore, the tariff offered no competitive advantage to domestically produced photovoltaic cells. At the end of 2021, there was no production of photovoltaic cells in the USA.
The impact of the tariff on the deployment of solar energy in the United States is less clear.
The tariffs were put in place during a period when global PV module prices were falling. So while there was a general price increase when the tariffs were first offered, US panel prices have since trended downward and are lower than they were before the tariffs were first proposed. entry into force of the tariffs, although they remain higher than the world average prices. In fact, more solar capacity has been installed in the United States during Section 201 tariffs than at any other time in history, largely because of low cost.
Yet the American solar trade group, the Solar Energy Industries Association, claims that the United States would have installed 11% more solar, employed 62,000 more people and had $19 billion more in investments without tariffs. Most solar jobs in the United States are associated with construction projects, not equipment manufacturing, and the devs said the higher prices forced them to delay or cancel solar projects. At the end of 2020, of 231,000 solar jobs in the United States, only 31,000, or 13%, were in manufacturing.
How will the next four years affect solar expansion?
The Biden administration has set a US goal in 2021 to achieve zero carbon emissions electricity sector by 2035 to end its role in climate change. This will require quadruple the 2020 record high annual solar deployment by the end of the decade.
Tariffs have the potential to slow deployment by making PV systems more expensive. However, this could be compensated by mandates and significant public and private investments in the solar sector.
The US goals are part of a larger global effort to both increase local energy security and reduce greenhouse gas emissions, which will likely require a significant expansion of solar manufacturing. The United States has the potential to be part of this larger global supply chain, but it must grow to be competitive.
This article is republished from The Conversation under a Creative Commons license. Read the original article here: https://theconversation.com/to-understand-why-biden-extended-tariffs-on-solar-panels-take-a-closer-look-at-their-historical-impact-177528.