President Biden announced that solar parts from Cambodia, Thailand, Vietnam, and Malaysia can be imported duty-free for the next 24 months as part of an emergency push to ramp solar energy production. The move should bring down energy costs domestically and leave more room for oil and natural gas exports to countries under greater energy inflation than the United States.
The news is a boon for companies that are investing in solar energy projects, developers, utilities, operators, any company that produces solar inverters and power optimizers such as SolarEdge Technologies, mounted tracking devices, technology, and software, and just about any party that wants the industry to grow except for domestic solar panel manufacturers. Domestic solar panel manufacturers now must compete directly with the global market in an already difficult business climate.
The White House’s move should bring down investment costs and boost the return on invested capital for new projects. However, inflation, supply chain bottlenecks, higher labor costs, and higher costs of parts and components is straining the industry’s profitability even in the face of higher oil and gas prices.
NextEra Energy, which is the largest renewable energy operator in North America — and has the largest pipeline of development projects of any operator in North America — responded to the news. NextEra Energy, Inc. President and CEO and NextEra Energy Partners CEO John Ketchum issued the following statement regarding announcement on solar tariffs:
“The Biden administration’s announcement of a two-year pause on new solar tariffs is an important step to help the solar industry recover from the uncertainty of the last three months. I want to thank the administration for recognizing the challenges that trade uncertainty presents to our industry and the country and for taking this important action. NextEra Energy has and will continue to use our industry leadership to support more US solar manufacturing. We look forward to working with the administration on this effort and putting hard working Americans back to work in the solar industry.”
While manufacturing solar panels domestically should be a long-term goal that creates jobs and boosts the American economy, priority should be given to ramping solar energy production. Solar energy has been the fastest growing renewable energy source in recent years. But as of 2021, solar energy still made up just 2.8% of total US utility-scale electricity generation compared to 12% for wind energy.
However, the US Energy Information Administration (EIA) expects 46.1 GW of new utility-scale electric generating capacity to be added to the US power grid in 2022. Of that total, 21.5 GW, or 46%, is expected to come from solar energy.
Given the appetite to develop solar energy projects, it is reasonable that the Biden Administration would hurt the domestic panel industry for the greater good of the solar industry, the American economy, and to ease domestic dependence on oil and gas.