US gives solar projects reprieve by suspending SE Asian import tariffs

US president Joe Biden will allow solar panel parts to be imported free of tariffs from four south-east Asian nations, offering a cost reprieve to US renewable energy project developers after months of uncertainty.

The move by the White House was part of a package of measures designed to boost a transition to clean energy, including triggering the Defense Production Act — a Korean war-era law — to spur the domestic production of solar panel components.

The temporary blocking of trade barriers for imported solar panel components from Cambodia, Malaysia, Thailand and Vietnam comes amid a heated debate within the US administration over whether to ease tariffs on billions of dollars of Chinese goods to fight inflation, unravelling levies imposed under former President Donald Trump.

Biden’s decision will “temporarily” allow US solar developers to source modules and cells from the four south-east Asian countries, “by providing that those components can be imported free of certain duties for 24 months”, the White House said.

The move effectively blunts the threat of a US commerce department investigation that might lead to much higher tariffs on some imported solar panel components. The probe was supported by some domestic solar photovoltaic equipment producers, but strongly opposed by clean-energy developers and other industry supporters who said it was having a “chilling” effect on the sector and could derail the Biden administration’s efforts to green the country’s electricity grid.

In May, energy consultancy Rystad Energy said up to 17.5 gigawatts of planned solar installations in 2022 — or almost two-thirds of the total — were in jeopardy because of the commerce department’s investigation.

Heather Zichal, head of the American Clean Power Association, said Biden’s announcement would “rejuvenate the US’s domestic solar industry, which Commerce’s flawed inquiry has disrupted”.

The commerce department launched the anti-dumping investigation in March after a complaint from Auxin Solar, a small, California-based solar panel manufacturer, which argued Chinese manufacturers were dodging tariffs on their exports to the US by completing the panels in south-east Asia.

Mamun Rashid, Auxin chief executive, said Biden’s move on Monday interfered with the commerce department’s quasi-judicial process.

“By taking this unprecedented — and potentially illegal — action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of US trade law,” Rashid added.

Panels from Cambodia, Malaysia, Thailand and Vietnam accounted for 85 per cent of all solar power capacity imported to the US last year, and 99 per cent in the first two months of 2022, according to Rystad Energy.

Analysts at ClearView Energy Partners, a Washington consultancy, said that they still thought the commerce department was “likely” to rule in favour of the complaint, and they “would not be surprised to see litigation directed against the waiver”.

Analysts have cautioned that reliance on imported solar panels, critical minerals, metals and parts for offshore wind turbines could leave the US exposed to political and supply chain risks in exporter countries, especially in China, where forced labour has been used to make renewable energy components in Xinjiang.

But other renewable developers have complained that the administration’s efforts to break that dependency by creating domestic supply chains threaten to slow clean energy deployment and compromise Washington’s target of fully decarbonising US electricity by 2035.

The White House sought to balance the easing of tariffs on imported solar panels with the use of the DPA to boost domestic manufacturing of components and shift supply chains in the sector back to the US. The invocation of the law — which Biden used recently to boost domestic supply of critical minerals — will also apply to building insulation, heat pumps, equipment for making clean-electricity fuels and transformers for the power grid, the White House said.