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16 December 2021

US sticks with sanctions, incentives, and tariffs for solar industry

The US Senate Finance Committee has released its draft version of the Build Back Better Act, which thanks to the efforts of the SEIA now includes incentives for manufacturing inverters and trackers, two lesser parts of the solar supply chain.

Support ranges from $0.025 to $0.11 per Watt according to the scale of the inverter, while tracker incentives are at $0.87 per kilogram for torque tubes, $0.87 per kilogram for longitudinal purlins, and $2.28 per kilogram for structural fasteners.

For comparison, the support levels proposed in Senator Ossof’s solar manufacturing bill in June are very high at $0.11 per Watt for integrated modules, $0.07 per Watt for non-integrated modules, $0.04 per Watt for cells, $12 per square meter for wafers, and $3 per kilogram for polysilicon. These incentives are also rolled into the current Build Back Better Act.

As for tariffs, the US International Trade Commission has issued its determination on the Section 201 tariffs on cells and modules, namely a 0.25% decline from current levels to occur each year, beginning in February, during a four-year extension. The same SEIA that praises incentives continues to pillory these tariffs as entirely useless for incentivizing US manufacturing – while manufacturers themselves favor them.

The SEIA blames these tariffs for costing the US 62,000 jobs, $19 billion in private investment, and 10 GW of solar since 2018. In April 2018, US solar imports fell to an annualized 3 GW with just 260 MW or so imported in that month, down to a quarter of the previous peak; but surged to new record in 2019 and 2020 amidst exemptions and tariffs reductions. In the first year of the Biden Administration imports are on track to reach 27.8 GW, according to Rystad’s research. China’s share of imports was dented by the tariffs, but almost all of the rest of the imports were from South-East Asian factories owned by Chinese companies and often using partial manufacturing in China itself, as alleged in the recent anti-SMACC petition.

Then there are sanctions. The sanctions on Xinjiang polysilicon caused some disruption but are not a dealbreaker in their current form given that Xinjiang is only a little over half of China’s output and less as new factories are built. Only direct products are banned and the US has not gone all the way in supply chain examinations – even the Chinese manufacturers themselves might find it a nuisance to trace which panel was made with which cells, from what wafer, from what location of polysilicon factory. China for its part reportedly has a law on the books banning its companies from co-operating with such supply chain examinations, given that they serve the purpose of sanctioning a Chinese territory.

But now a new bill has passed the House, with a similar bill pushed by Republicans in the Senate, which would ramp up the pressure. The bill demands that the Department of Homeland Security create a list of “entities that collaborate with the Chinese government in Xinjiang” and which would ban all Xinjiang products, with any exemption requiring positive proof that they were not produced using forced labor. It’s unclear how this affects the solar industry, since polysilicon was already banned. Most likely it will be at the discretion of the Administration to slacken or tighten detention of Chinese solar module imports, an activity which so far has occurred on only a minor scale.

So for now the Biden Administration is sticking with tariffs and sanctions – but the question with sanctions and tariffs is always how serious those are. Will tariffs become exclusionary when the Administration is pushing US demand sky-high with incentives such as the ITC, and needs all the solar panels it can get? Clearly not, and the sidestep of selling the Americans solar panels from the rest of China, or from Chinese-owned Malaysian and Vietnamese factories, while keeping Xinjiang stock for use elsewhere, will likely continue as well. For its part, the EU’s Xinjiang sanctions have been even more of a damp squib, with official and NGO rumblings earlier in the year coming to nothing.

Both sanctions and tariffs can be considered preparatory for more serious measures, either once America has more of its own manufacturing capacity, or if China-US relations go south. But for now they still seem unserious, especially with the Republican involvement in the new sanctions marking it as an attempt to embarrass Biden on the Uyghur issue or to stab at his solar agenda.

The past week has also seen Canadian Premium Sand open a factory for solar-grade glass in Manitoba, Canada, with the company observing that “All solar panels manufactured in North America using patterned solar glass are made with glass imported from China and other Asia Pacific countries. Locating a solar glass manufacturing facility in Selkirk will add significantly to the sustainability and supply chain security for CPS’s solar panel manufacturing clients.” The company also states that its discussions with domestic solar module manufacturers have “illustrated a need for a reliable local supply of solar glass to accommodate both current production and future growth plans”. So this is another move, however minor, for North America to procure its own solar panels.