May 19, 2022
U.S. Agencies Take Steps Towards Renewable Integration Amid Solar Tariff Crisis
By Mackenzie Kuran, Associate Project Engineer, and Shannon Weigel, Head of Policy
Stay in the know with Edison Energy’s Pulse on Policy series, a biweekly publication covering the latest in global legislation and regulation that impact corporate procurement plans and sustainability goals.
The U.S. Department of Commerce (Commerce) is investigating solar panel manufacturers in Cambodia, Malaysia, Thailand, and Vietnam based on a petition from Auxin Solar. The investigation seeks to determine whether crystalline silicon photovoltaic cells (CSPVs) from these countries are circumventing antidumping provisions imposed on China and whether CSPVs from these countries are subject to the same tariffs as Chinese manufacturers. If Commerce issues an affirmative finding on August 29, 2022, tariffs as high as 250% will retroactively apply to imports as of April 1, 2022.
This is expected to have a significant impact on the U.S. solar industry, as panels shipped from these four countries make up 80% of all solar panels imported to the U.S.
A recent panel hosted by Edison Energy provided insight into the state of the U.S. solar market and addressed the potential impact of the Auxin petition on solar project development. During this discussion, Dan Rodriguez of National Grid Renewables stated that ongoing U.S. reliance on Southeast Asian-made panels may force developers to delay or cancel projects. This stems both from a concern surrounding an increase in the cost of panels, as well as potential impacts on the supply of panels to the U.S.
Due to the uncertainty surrounding costs of tariffs, manufacturers in these countries are pausing shipments to the U.S., further exacerbating supply chain constraints. While there are other manufacturers both globally and domestically, they do not have the capacity to support U.S. solar market demand. Prior to the Auxin petition, solar developers faced difficulty due to supply chain uncertainty associated with the pandemic.
On the panel was Edison Energy’s Mary Kate Francis, who discussed the surging prices of Power Purchase Agreements (PPAs), which total 24% over the past two years. The added uncertainty around panel pricing and the potential tariffs are likely to further increase the price of PPAs, in turn making it more difficult for developers to finance solar projects and for energy buyers to procure cost-competitive solar projects in the near term.
Despite the tariff uncertainty impacting the solar market, the Biden administration, federal agencies, and Congress are all working diligently to remove additional barriers to renewable development:
- On April 14, 2022, the White House Council on Environmental Quality (CEQ) proposed reforms to the National Environmental Policy Act (NEPA). The changes are an effort to restore NEPA following the cutbacks on environmental regulations made by the previous administration. One amendment requires agencies to consider the cumulative environmental impacts of multiple large infrastructure projects, rather than evaluating each project in isolation.
- Another notable change involves repealing the ceiling provision that established NEPA as the maximum regulatory review. NEPA will now be considered a “floor,” meaning that additional environmental reviews can be done by federal agencies. While NEPA’s regulatory review mainly pertains to projects that are executed by federal agencies, utilize federal funding, or are developed on federal land, it will still have a larger impact on renewable development in the U.S. as developers face increasing multi-year delays in environmental permitting. The CEQ is expected to soon make additional changes to NEPA that address environmental justice more directly.
- Efforts to reform NEPA further highlight the delicate balance the Biden administration must strive for – ensuring a robust permitting process to prevent further environmental harm to disadvantaged communities, while also increasing renewable development to meet the country’s aggressive clean energy goals.
- On April 21, 2022, the Federal Energy Regulatory Commission (FERC) issued a proposed rule on regional transmission planning and cost allocation that will facilitate interregional cooperation to better integrate renewables into the U.S. grid. The proposed rule was approved by a 4-1 vote, with Commissioner Danly as the dissenting voice.
- The proposal requires public utility transmission providers to take a long-term regional approach to transmission planning to help identify opportunities to “right-size” replacement transmission facilities. Interconnection reforms–a significant issue for renewable developers facing increasing project delays and interconnection costs–will be addressed in a subsequent proposed rule.
- According to a briefing from Lawrence Berkeley National Laboratory, interconnection wait times are increasing, with the typical duration from interconnection request to commercial operation exceeding 3 years. If approved, these rules would allow more renewable projects to connect to the transmission system, while also ensuring costs of transmission projects are reasonable for consumers. A final decision is anticipated at the end of 2022.
- Sen. Joe Manchin (D-WV), who serves as the Chair of the Senate Committee on Energy and Natural Resources, continues to meet with lawmakers to gauge interest for a bipartisan bill to address “our nation’s climate and energy security needs head on.”
- While Manchin does not support the stalled Build Back Better Act (BBB) due to the social spending provisions, he has indicated his support for the climate-related measures in the bill. While bipartisan legislation is likely to still include tax credits for clean energy, this bill is expected to contain more fossil fuel-friendly provisions. The legislation would need 60 votes to pass in the Senate and will therefore require Republican support. That said, Senate Majority Leader Chuck Schumer maintains that the only way to address inflation concerns is to move forward with reconciliation.
- Since the start of bipartisan discussions in late April, legislators such as Sen. Pat Toomey of Pennsylvania remain “deeply skeptical” that a bipartisan deal will be reached, especially in light of the upcoming midterm elections. While Manchin himself has not conceded that a bipartisan bill is improbable, he did acknowledge that it will be difficult to pass due to the reluctance of Senate Republicans to raise taxes. A possible silver lining for renewable energy buyers – renewable tax credit extensions have passed with bipartisan support in the past.