On the 4th February 2022, it was announced that Joe Biden, President of the United States, has renewed four years of tariffs on imported solar panels, which was previously implemented by the Trump administration.
The steps have come under both praise and criticism. Praise for the approach in the perspective of increasing a national effort of clean energy infrastructure, however also criticism for it supposedly being counter-intuitive to Biden’s prior plans of being carbon-free by 2035. Some initial frustration from utility and power producers has been quelled somewhat by the information that the panels common in large manufacturing products would be exempt from levies and that the number of solar cells that could be imported before tariffs applied would be doubled from 2.5 gigawatts to 5 gigawatts.
Backing for Biden’s goal of being carbon-free has continuously been met with the notion that imports from Asia specifically would need to be curbed if carbon-neutrality is to become a true prospect. Notably, 19.3 gigawatts of solar panels were imported by the US in 2020 – up from 15.3 in 2019 – with the top 4 exporters all being Asian countries. The tariffs, therefore, are seen as both necessary to cultivate a US-based manufacturing effort and to reduce the United States’ dependence on imports more generally as well.
Further criticism however has been levied at the exclusions to the tariff extension, with bifacial panels – which have solar cells on both sides – being noticeable exempt from the tariff and therefore there is an expectation that they will be a flood of cheaply manufactured bifacial solar panels into the US, irrespective of the intention to support US production.
Furthermore, Biden’s ‘Build Better Act’, also includes plans to issue tax credits that can cut the cost of installing rooftop solar panels by around 30% – up from the current 26% – and is a key aspect of projects that see solar capacity triple across the next five years in the US. The act also has clauses to ensure that the tax credit will last at least 10 years, majorly supporting American renewable energy installation.
Other climate-related tax credits have been included in the Build Better Act, noticeably one surrounding American buyers of new or used electric vehicles qualifying for a 7,500 tax credit USD. Furthermore, battery cells for said electric vehicles in the United States would be eligible for another 500 USD in tax credits and electric vehicles that are assembled at American factories would also qualify for a further 4,500 USD in tax credits. This huge push for American based manufacturing and purchasing has expectedly already damaged trade relations. Canada specifically has raised issues with the electric vehicle tax, noting there is a violation of both the WTO rules and the United States Mexico Canada Free Trade Agreement (USMCA) rules too.
The tax credits, of all forms in their proposed state, will likely work to damage the US manufacturing industries, rather than increase their competitiveness as is hoped for and touted by Biden about the scheme. Fossil fuel emissions will likely fall, however, as will dependence on imports, yet the in-build protectionism that is inherent with the scheme will likely limit its global scale effectiveness and resultantly its overall impact.
In September of 2021, the Biden administration also released a blueprint on how the nation could produce half of its electricity from solar energy by 2050. The target translates into solar energy doubling every year for the next four years and then doubling again by 2030. Such an ambitious target will require a huge investment in the electricity grid and solar energy more specifically, with the first steps towards this goal now materialising. This being said, the targets remain purely statement at present – with further targets of half of all new cars being electric by 2030 also following the previously mentioned target of carbon neutrality for the power sector by 2035.
While ambitious, however, there is some notable support to the targets that Biden has put forward, with the US Energy department noting that solar panels have fallen so much in cost in recent years that they’re set to produce 40 per cent of the country’s electricity by 2035, which would be enough to power all American homes.
Therefore, the stage is set for the United States to pave the way for solar energy installation. If this will truly translate into the ambitious targets set by the Biden administration, amid concerns regarding breaking WTO and USMCA rules specifically, remains to be seen, yet either way, solar energy has a renewed hope in its capabilities.
Analyst: Matthew Ball
Sector Head: Archit Lal