A federal probe into whether China is dodging tariffs on solar panels has prompted Colorado’s expanding solar power industry to warn of layoffs, soaring prices and new projects.
In January, industry officials and the US Energy Information Administration forecast that 2022 would be a busy year for new solar generation. Now the Commerce Department is looking into claims that China is funneling its panels through other countries to evade US tariffs, which if confirmed could result in huge tariffs that could apply retroactively to November 2021.
Four Southeast Asian countries studied account for more than 80% of US solar panel imports, and tariffs on the products could eventually increase by 50% to 250%. The situation threatens the U.S. solar industry and Colorado and national efforts to reduce greenhouse gas emissions and promote renewable energy use, said Mike Kruger, president and CEO of the trade group Colorado Solar and Storage Association.
“We’re likely to see job losses throughout the summer, although that shouldn’t be the case as customer demand continues to soar,” Kruger said.
At least 70% of Colorado solar companies have said they may face layoffs or furloughs, Kruger added.
The solar association has filed a notice with the Colorado Public Utilities Commission saying the investigation is causing “serious uncertainty” for the industry, which may have to delay and cancel projects or renegotiate deals.
“We pulled everything from our pipeline that we wanted to build for this year except for one project,” said David Amster-Olszewski, founder and CEO of SunShare, a leading community solar company based in Colorado.
About 70% of respondents to a Solar Energy Industries Association survey said at least half of their workforce and $52 billion in investments in major projects in 39 states are at risk. In Colorado, 75% of companies reported delays in sourcing supplies or cancellations of orders and threats against $870 million projects.
The Commerce Department on April 1 opened an investigation into claims by Auxin Solar, a California solar panel maker, that China is evading tariffs by shipping its products through Cambodia, Malaysia, Thailand and Vietnam. The tariffs imposed during the Obama administration are intended to prevent Chinese-made, government-subsidized solar panels from unfairly competing with US-made panels.
One problem, Kruger said, is that U.S. solar panel production is small and “not producing nearly enough to meet demand.”
“Even domestically conducted (production) uses Asian inputs, whether cells or modules,” Kruger said.
And the possibility of large tariff hikes going back to November, when an initial complaint was filed, has frozen the flow of most parts coming into the US, Kruger said.
A preliminary decision is expected in August.
Colorado Senators Mike Bennet and John Hickenlooper joined a bipartisan group of their peers to ask President Joe Biden to expedite the investigation and remove the possibility of retroactive indictments. Her May 1 letter to Biden said higher tariffs would hurt the country’s solar industry and increase customers’ electricity rates.
Gov. Jared Polis sent a letter Tuesday urging Commerce Secretary Gina Raimondo to quickly close the investigation and not impose tariffs.
“The trade should encourage, not discourage, the growth of America’s solar industry,” Polis said. “The Colorado solar and storage industry employs over 9,400 hard-working people statewide and has been one of the fastest growing industries to recover and grow from the pandemic.”
There are around 350 solar companies in Colorado.
The investigation will not help spur the U.S. solar industry, but will hurt Colorado’s goals to reduce greenhouse gas emissions and address climate change, Polis said.
Mamun Rashid, CEO of Auxin Solar, which filed the petition with the Department of Commerce, said in an email that the investigation will strengthen the US solar industry and reduce dependency on other countries. The trade secretary has explained that the law requires fact-finding and reasoned decision-making, he said.
“Until the investigation is complete, all predictions are pure speculation,” Rashid said.
The Trump administration imposed tariffs on solar panels and cells from other countries. Tariffs fell from 30% to 15% over four years. The Biden administration has kept the 15% tariff but excluded some devices and increased the amount of solar cells that can be imported duty-free.
Boulder-based Namaste Solar has pushed back project schedules because imports of most solar cells and modules used by US companies have suddenly stopped. Depending on what happens with the investigation, the company may have to cancel projects and could face significant price hikes, said Eliot Abel, co-owner and director of commercial project development.
“All of this comes on top of the fact that we still haven’t recovered from the pandemic,” Abel said.
Like many companies, Namaste and other solar companies are grappling with supply chain disruptions that have erupted during the coronavirus pandemic. Inflation and labor shortages are other challenges.
Abel said the investigation and uncertainty over tariffs have stalled business at a time when demand is rising and solar companies are trying to take advantage of federal tax credits.
The 26% credit on commercial solar is set to drop to 22% next year. Biden’s Build Back Better, held in Congress, proposes increasing credit and extending it by 10 years.
Abel said he understands the push for more US solar panel manufacturing.
“We are on site. We are employee owned. We’re as local as it gets. We would also like to see more domestic production,” said Abel. “We want a political environment that encourages private investment in domestic manufacturing. Retroactive tariffs are not the way to go.”