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Northern California solar industry cautious on letting in more Chinese panels under tariff pause

A move by President Biden to pause tariffs on imported Chinese-made solar panels for two years, even as the Commerce Department investigates the Asian powerhouse for possible trade agreement violations, isn’t sitting well with several solar company executives and the state of California.

They said removing protective tariffs now comes as U.S. solar companies struggle to find labor to install panels and face adverse changes in tax regulations.

Administration officials said allowing more Chinese-made solar components will help the domestic industry by increasing supplies of key parts needed for solar installations. The Commerce Department investigation, they added, is rooted in protecting the domestic industry.

But California Gov. Gavin Newsom recently sent a letter to Commerce Secretary Gina Raimondo, warning that the investigation is jeopardizing a state plan to quickly install new solar to power 2.5 million homes, the Washington Post reported.

S&P Global Market Intelligence said Congress is also considering tax credits for the domestic solar industry — because “today, the U.S. has no active ingot, wafer, or cell capacity and little panel assembly despite surging demand.”

In the Bay Area, Mamun Rashid, founder of Auxim Solar, a small solar-panel manufacturer in San Jose, petitioned Commerce to launch the investigation in a complaint filed earlier this year. Since then, he has become the target of negative reaction from green energy and environmental advocates. He said the outpouring of solar industry responses supports his case that Chinese products are being illegally dumped in the U.S. market.

“There’s absolutely no reason to stop product shipments, or to stop or delay projects, if there is no cheating going on. I did not expect to hear about projects being delayed, and I did not expect to see all this vitriol,” Rashid stated.

Rashid told the Business Standard, “President Biden is significantly interfering in Commerce’s quasi-judicial process… By taking this unprecedented and potentially illegal action (Biden) has opened the door wide for Chinese-funded special interests to defeat the fair application of US trade law.”

A majority of U.S. solar firms have cautioned that if the investigation turns up dumping by the Chinese, the U.S. could impose retroactive tariffs of up to 240%. Tariffs under consideration by Commerce could exceed 50% of the price of solar panels.

Such a dramatic leap in levies would drive up panel prices and imperil half of planned solar projects planned for completion in the U.S. this year, based on an industry survey, and could also result in thousands of layoffs, according to the Associated Press.

Part of reason for expanding the investigation to Southeast Asia is China has moved some solar manufacturing processes to Thailand, Vietnam, Malaysia and Cambodia, according to Timothy Brighton, an attorney for U.S. solar manufacturers. manufacturing. He claims that’s to skirt strict anti-dumping rules that limit imports from China.

Energy Secretary Jennifer Granholm testified that the time to take action is now.

“At stake is the complete smothering of investment in (domestic solar) jobs and the independence we would be seeking as a nation to get our fuel from our own generation sources,” Granholm said before the Senate Energy and Natural Resources Committee. “I am deeply concerned about being able to get to the goal of 100 percent clean electricity by 2035 if this is not resolved quickly.”

State and utility actions could bite more than tariffs

“One way to avoid Asian-related solar provisioning and supply issues is to buy American, source solar products from Canada -- or as we have done – obtain products from a Norwegian firm distributed through Singapore,” said Matt Smith, a consultant with Solar Works. The Sebastopol company serves Sonoma, Napa and northern Marin counties.

“We don’t use solar components and parts from China, and do not anticipate seeing significant price changes or an impact on current work in the short term,” Smith said. “But the future is impossible to predict.”

Smith said currently, no tariff-related fallout is foreseen affecting the company’s workflow, but there could be higher costs associated with the availability of solar parts down the road.

He said that a potential California Public Utility Commission tax and pending Pacific Gas & Electric rate hikes could have a greater effect on demand for photovoltaic (PV) systems.

The PUC’s proposal, which was last revised in May, is to tax solar users about $300 to $600 a year to contribute toward maintaining the electrical grid.

PG&E electricity rates have already been hiked twice in 2022, and other increases are expected for infrastructure investments, modernization, clean energy solutions and to bury 3,600 miles of power lines underground, among other improvements.

Smith said his firm has seen a 50% increase in solar installations after the wildfires. Today, this trend is growing as PG&E rates continue to climb along with skyrocketing gasoline and transportation costs associated with buying fuel for generators.

The price of solar panels dropped every year between 2013 and 2020, after which COVID-19-related supply chain disruption abruptly stopped this trend, according to a 2022 GlobalData report.

The total cost of rooftop solar for a typical residential home will increase modestly this year by about $1.60 per watt across the nation and by up to $3.50 a watt in California. This is due to a rise in raw materials prices and a sharp increase in PV system prices caused by a delay in shipments combined with a lack of workforce availability.

GlobalData predicted — before the Biden administration tariff suspension — that solar system costs would decline gradually between 2023 and 2030. That is expected to happen due to technological advances, reduction of component posts, increasing production scale and some countries’ offering temporary incentives and rebates.

‘Efforts to get panels from anywhere’

Tyson Berg of renewable energy distributor CED Greentech in Santa Rosa said the net to get solar system components has to be cast wider.

“Getting solar supplies from Southeast Asia has been getting very tight, and shipping costs have risen dramatically while demand has shut down or gone away,” Berg said. “We stepped up efforts to get panels from anywhere. Now we have an excellent inventory to satisfy today’s needs.”

The Solar Energy Industries Association reports that total PV system costs vary by capacity required, from $15,000 for 5-kilowatt output up to $31,000 for 10 kilowatts. That’s before a 26% federal investment tax credit — due to expire at the end of this year — and based on the average cost of solar power across three market segments (residential, commercial and utility scale), comparing wholesale prices for solar components.

A California Self Generation Incentive Program fund is still available to help pay for battery backup systems for solar.

Prices per panel have been high. But Berg believes they could start to decline over the next 90 to 120 days, as companies gear back up and obtain solar products from China due to a tariff suspension.

And his firm is among those planning to do just that. CED Greentech’s 25,000-square-foot Santa Rosa warehouse is among 81 U.S. locations.

“We’re now looking to expand to a new facility with from 50,000 to 60,000 square feet to take advantage of growth expected during the next two years, which is already being fueled by a three- to five-month order backlog,” Berg said.

The local operations serve the California North Coast, from the Golden Gate Bridge to Eureka, selling solar products to 150 installation contractors. Its business is 60% residential, 40% commercial, with increasing demand for battery backup storage.

“For us, the availability of labor is tight,” Berg said. “We need more installation partners.”

Demand has also focused on acquiring energy storage systems available from some 14 battery manufacturers to couple with solar products now being added by almost half of existing solar customers.

Another emerging industry trend are seven- to 10-year battery lease agreements, with a replacement policy built in.

“Leasing, rather than purchasing, is being seen by more customers as a path to becoming energy independent and how to virtually live off the grid,” Berg said.

‘Costs have been going down somewhat’

Whether or if prices soften due to Southeast Asia tariff changes remains to be seen, according to Joe Hadley, general manager with PurePower Solutions in Healdsburg.

“We tend to source the solar products we want from U.S. suppliers, such as one in Washington state,” Hadley said. “In addition, we receive continuous feedback from solar aggregators with variations in their pricing but have no major supply issues. Costs have been going down somewhat.”

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