*US Solar Industry Faces Deadline as Tariff Holiday Ends*
The expiration of a two-year tariff holiday on solar panels from Southeast Asia has set the stage for a race against the clock for American project developers. The holiday, which lifted duties on solar panels from Malaysia, Thailand, Cambodia, and Vietnam, was put in place by President Joe Biden in 2022 to accelerate domestic projects aimed at combating climate change. As a result, U.S. solar developers stockpiled around 35 gigawatts (GW) of imported panels in warehouses across the country. However, with the tariffs set to snap back into place on June 6, developers now have just 180 days to utilize the Southeast Asian stock or face paying the tariffs.
The looming deadline could lead to a surge in U.S. solar installations, potentially resulting in a mini-boom for the already thriving industry. In fact, Wood Mackenzie, a research firm, predicts that the accumulated imported panels are nearly equivalent to the amount of solar capacity the U.S. is expected to install in all of 2024. The majority of the stockpiled inventory is believed to have come from the targeted Southeast Asian countries.
While this development may be a cause for celebration for solar installers and project developers, it has raised concerns within the nascent domestic manufacturing industry. The industry had hoped that developers would make the switch to American-made gear once the tariff holiday ended. However, with the surge in inventory and the limited timeframe to use it, it seems unlikely that all the stockpile will be depleted within the next six months.
Tim Brightbill, a trade attorney with Wiley Rein representing U.S. solar manufacturers seeking new tariffs on Southeast Asian imports, points out that the temporary tariff moratorium contributed to a surge in inventories and a subsequent 50% price collapse in the market, which has negatively impacted domestic manufacturers of panels. This turn of events marks a significant shift for the U.S. solar industry, which, until a year ago, faced tight supplies due to the pandemic and concerns surrounding solar equipment linked to forced labor.
Despite these challenges, the U.S. solar industry has seen record-breaking growth. In the first quarter of 2024, utility-scale installations soared 135% to 9.8 GW, according to Wood Mackenzie. Solar also accounted for a staggering 75% of electricity generation capacity added to the U.S. power grid during that period. The increased availability of panels, along with federal and state policies focused on clean energy, has fueled growth in the sector.
The report also highlights that the global solar supply chain has expanded, and module imports to the U.S. have risen significantly over the past year. Biden’s moratorium on imported panels potentially produced with forced labor in China played a significant role in easing supply chain bottlenecks and reducing the cost of solar panels. From June 2023 to March 2024, the U.S. imported 49 GW of solar modules. Moreover, domestic solar panel manufacturing capacity saw a substantial increase, rising to 26.6 gigawatts in the first quarter of 2024 from 15.6 gigawatts in the previous quarter.
Looking ahead, the future remains bright for the U.S. solar industry. The country is expected to install approximately the same amount of solar capacity this year as it did in 2023, which set a record of nearly 40 GW of additions. Florida, Texas, California, and Nevada lead the way as top states for solar installations, with utility-scale solar accounting for most of the additions. However, there has been a decline in home solar additions due to rising interest rates and a slowdown in California’s rooftop solar sector.
In conclusion, while the expiration of the tariff holiday poses challenges and potential risks for the U.S. solar industry, it also presents an opportunity for significant growth. Developers now face a race against time to utilize the stockpiled inventory, potentially leading to a surge in solar installations. Nevertheless, the industry’s continued expansion, along with favorable policies and an increased supply chain, bodes well for the future of solar energy in the United States.
