The Commerce Department is back to investigating U.S. solar imports from southeast Asia, most of them from Chinese multinationals, after abandoning a similar investigation late last year. Solar stocks are taking it on the chin.
Over the last five days alone, NextEra (NEE) – a Florida-based solar importer and power producer — lost $10 a share. First Solar
About a month ago, California based solar manufacturer Auxin Solar asked Commerce to re-open its investigation into southeast Asian manufacturers of solar cells and solar modules.
Auxin says that Chinese multinationals are circumventing existing tariffs and anti-dumping duties imposed on them by setting up shop in Vietnam, Cambodia, Malaysia and Thailand. All of those countries accounted for over 80% of solar panel imports into the U.S. last year. None of these countries had major solar factories until tariffs were imposed on China in an effort to build up the U.S. solar industry.
The petition to add anti-dumping and countervailing duties to southeast Asian suppliers, which would likely impact non-Chinese companies there as well, includes five complaints Commerce will investigate in the weeks ahead. A preliminary decision is not expected until August.
During an earnings call on Thursday, NextEra’s chief financial officer Kirk Crews said that companies in southeast Asia were withholding shipments of solar cells and modules.
“A number of suppliers are not expected to ship panels to the U.S. until the Commerce Department makes a preliminary determination,” Crews said on the call. “We expect some of our solar projects will be impacted by this delay. Based on what we know today, we believe that approximately 2.1 to 2.8 gigawatts of our 2022 expected solar and storage build may shift to 2023,” he said.
The shipment delays seem as though companies in the region are holding U.S. solar hostage in hopes to get importers to pressure Washington away from tariffs.
Commerce has rejected anti-dumping and countervailing tariffs on southeast Asian suppliers four times already, and the industry – ripe with doom and gloom commentary from the Solar Energy Industries Association (SEIA) in Washington this month – suspects Commerce will keep the status quo.
NextEra declined to comment on which companies they partner with in southeast Asia.
They purchased from Chinese solar giant JinkoSolar in the past. JinkoSolar manufacturers solar panels in Jacksonville, Florida, but imports solar cells from its factories and partners in southeast Asia. Jinko is a member of SEIA’s board as of 2019.
Importers are now busy trying to make the case that high natural gas and oil prices are making solar more attractive, but if tariffs are added to the price, it will hurt demand for clean energy. “Solar is deflationary,” Crews said.
Crews said that NextEra will likely shift to wind power projects if solar from southeast Asia loses its fight in Commerce.
Moreover, importers are also trying to argue that if southeast Asia is punished with anti-dumping and countervailing duties, they will just buy from China. China solar is already tariffed, so importers would not be making a strong case for lower prices.
Crews told analysts on Thursday that domestic solar panel manufacturers in the U.S. were “sold out of solar panels until 2024” and even at full capacity were “only capable of serving 10 to 20 percent of U.S. solar panel demand in the first place.”
One reason for the solar safeguard tariffs put in place in the Trump years and renewed, in part, by President Biden in February, though at a weaker level, was to increase solar manufacturing here. If the U.S. is to move towards a solar electric future, dependence on Asia for all of the technology to build it would be an energy security risk. The U.S. is already energy secure thanks to its fossil fuel resources.
The domestic solar sector was unable to gain the traction it hoped for. One reason: the pandemic in 2020 slowed demand and shut factories in Asia.
The other reason: lawsuits brought on by SEIA put utility-grade solar tariffs on hold, one of the most promising markets as this is what the power producers like NextEra need for their electricity generation plants.
Crews went on to tell analysts that most panel makers in the U.S. were wholly dependent on solar cells imported from Asia, including China, in order to make their solar panels. The U.S. solar cell industry collapsed years ago due to China dumping, hence the tariffs.
One analyst asked NextEra CEO John Ketchum what happen if tariffs were imposed.
“It would have an impact. We would see it in our own portfolio with potentially 2.8 GW being moved into 2023,” Ketchum reiterated.
Everyone on the call asked about the Commerce investigation. It was top of mind for solar investors.
“Right now the Commerce Department has provided questionnaires to different groups and those questionnaires are being completed,” Ketchum said. “Once they have all that information then the groups that have standing are allowed to weigh in on the matter. We have standing so we will be weighing in.”
Anti-dumping tariffs coupled with the Section 201 solar safeguard tariffs increased U.S. domestic solar supply, which had single digit market share by 2018.
To companies like Auxin, their argument is that an ideal solar world would be one in which the local manufacturer is responsible for nearly half of demand, rather than current levels that NextEra estimates to be no more than 20 percent.
Still, a tariff on southeast Asia would need to be quite high to compensate for the currencies there that trade at pennies on the dollar.
On circumvention alone, it will be difficult for Commerce to know what China is circumventing to factories in Vietnam, for example, because many of those companies are told not to comply with U.S. questions about supply chains.
On the inflation side, the price of solar panels has fallen over the years thanks in part to technological improvements and because China drives down the price through overcapacity. This also forces the competition to compete against China’s artificially low price points.
Current supply chain woes – caused by a mix of Covid lockdown policies and some commerce gamesmanship – should make China less attractive. But China has played this well before. It has turned southeast Asia into its offshore manufacturing hub for solar, among other things.
Since the early 2000s, Beijing has taken its cue from both Brussels and Washington on clean energy’s future prospects.
Talk about climate change and a post-fossil fuel economy sparked China’s interest in controlling these new-economy supply chains.
They have succeeded in solar, knocking the Europeans out of the solar business, and putting the U.S. solar industry, an industry first invested in Silicon Valley, on life support.
China is currently busy building up its wind industry, and is set to become a world leader in this space in the years ahead.
Software Can Determine Which Care Your Medicare Advantage Plan Covers
Will Protests In Paris Change Macron’s Mind?
It’s Time For Some Serious Railroad Regulation