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Federal pause on solar tariffs welcome news in the West

Federal pause on solar tariffs welcome news in the West

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The stars were aligning for a surge in solar energy development in Montana and the Pacific Northwest before supply chain disruptions cast a shadow over the industry.

Interest in residential rooftop solar was picking up as more people started working from home during the pandemic. Utilities in Washington and Oregon were soliciting bids for large-scale solar projects as state deadlines to decarbonize neared.

Problem was, solar panels and hardware needed to harness the sun’s energy were becoming harder to access due to supply chain disruptions and the possible expansion of tariffs on imported solar equipment.

“Panels in the last year have been hard to come by, but so have inverters. There’s all these supply chain issues,” said Andrew Valainis, Montana Renewable Energy Association executive director.

It can take months to get materials, he said. In cases where the wait extends into next year, the size of the tax incentive available to homeowners is affected. The current tax credit for solar is 26%, but drops to 22% 2022. Adding to the increased demand is an interest in avoiding the sharply increasing costs of gasoline for vehicles and natural gas for electricity generation and home heating.

It was welcome news for Montana solar installers earlier in the week when President Joe Biden announced the U.S. would stop expanding tariffs on solar imports, which meant more affordable, foreign produced materials would remain in play, as installers struggle to meet demand. The alternative was for the U.S. government to expand tariffs in an attempt to foster a domestic solar industry, which at this point produces a product that’s more expensive and less available.

The shortage in materials was also putting a pinch on developers of large-scale solar projects, who were positioned for growth in the Pacific Northwest when Oregon and Washington utilities put out bid requests for green energy projects. The lack of certainty that solar panels and other equipment would be available, discouraged developers from submitting bids.

“You’re seeing a lot of the larger utilities in Washington and Oregon, like PacifiCorp and PGE, Puget Sound Energy, they’re all putting out massive [requests for proposal] now to acquire renewable energy so they can meet the clean energy standards that are in Washington and Oregon,” said Robin Arnold of Renewable Northwest, an advocacy group working to accelerate the regional transition to clean energy.

Imported equipment has been important to the development of solar projects, but also a detriment to domestic production. China, for years, has flooded the market with solar panels and other equipment priced artificially low. The United States responded with tariffs against China that targeted U.S. import of finished solar products from China. China then imposed retaliatory tariffs on U.S. solar products, including solar-grade polysilicon.

The trade war whipsawed REC Silicon. One of Montana’s largest manufacturers, REC lost market share, which led to the closure of its plant in Moses Lake, Washington, a facility that once made solar panels and supplied polysilicon to manufacturers in China. The company's Butte facility, which is focused on electronics, continues to operate.

The tariff expansion, which Biden paused, was intended to target solar products from China that were allegedly being rerouted through other countries to get around U.S. tariffs. The U.S. Commerce Department has been investigating the movement of solar products from China to make sure U.S. tariffs weren’t being circumvented.

“That solar panel investigation has been a huge hit because about 80% of panels come through other countries that have kind of been put on hold while the investigation was going on,” Arnold said. “So, President Biden’s latest waiver for two years to allow panels to continue to be imported from those countries will be a huge benefit to the solar industry.”

The White House, on June 6, couched the pause on tariffs as “a 24-month bridge as domestic manufacturing rapidly scales up.” During the two-year period, Cambodia, Malaysia, Thailand, and Vietnam will be allowed to export solar products to the United States duty free.

It was welcome news for Montana solar installers earlier in the week when President Joe Biden announced the U.S. would stop expanding tariffs on solar imports, which meant more affordable, foreign produced materials would remain in play, as installers struggle to meet demand.

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