Updated Jun 6, 2022 - Energy & Environment

Biden to invoke Defense Production Act for clean energy

Photo of solar panels in Pennsylvania
Solar panels at the site of a solar farm under construction in Portage, Pennsylvania, on April 25. Photo: Justin Merriman/Bloomberg via Getty Images

President Biden will shield solar project developers from the costs of potential trade penalties and offer new federal support for domestic panel manufacturing, the White House said Monday.

Driving the news: The Biden administration plans to provide a two-year reprieve from panel import tariffs that may stem from an ongoing Commerce Department probe of whether Chinese companies are dodging U.S. penalties.

  • Biden also plans to invoke the Defense Production Act (DPA) to boost the manufacturing of panels and other clean energy equipment in the U.S., senior administration officials told reporters Monday morning.
  • Reuters first reported the upcoming moves and, citing a source familiar with the matter, said the trade effort is designed to "allay companies' concerns about having to hold billions of dollars in reserves to pay potential tariffs."

Why it matters: The U.S. solar industry and analysts say the months-long Commerce investigation has slowed the pace of U.S. projects, calling it a hurdle that adds to supply chain woes and other headwinds.

  • A recent estimate from the consultancy Rystad Energy said 64% of 2022 U.S. solar additions are "in jeopardy," mostly because of the threat of new tariffs.
  • Commerce Department officials have called predictions of potential tariffs far over 200% overblown, with any levies more likely to be an order of magnitude lower.

What's next: A source familiar with the upcoming announcement said Biden would "take steps to provide U.S. solar deployers the short-term stability they need to build clean energy projects."

  • Biden will invoke the Defense Protection Act for solar panel parts, like photovoltaic modules and module components, heat pumps, electrolyzers, fuel cells and platinum group metals, as well as infrastructure for the power grid, such as transformers, a White House fact sheet states.
  • The Commerce probe will continue, according to a senior administration official.
  • Part of the administration's actions also includes ramping up federal procurement of clean energy, including solar.

The intrigue: The Commerce inquiry, initiated by the U.S. manufacturer Auxin Solar, has become a politically delicate problem for the Biden administration.

  • Officials are trying to accelerate renewable power deployment to meet the White House goal of 100% of U.S. electricity coming from zero-carbon sources by 2035.

What they're saying: "We applaud President Biden’s thoughtful approach to addressing the current crisis of the paralyzed solar supply chain," Abigail Ross Hopper, CEO of the Solar Energy Industries Association, said in a statement.

  • "During the two-year tariff suspension window, the U.S. solar industry can return to rapid deployment while the Defense Production Act helps grow American solar manufacturing," she said.
  • Auxin Solar denounced the administration's steps, saying: "President Biden is significantly interfering in Commerce’s quasi-judicial process. By taking this unprecedented – and potentially illegal – action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law," the company said in a statement.

Catch up fast: Commerce is investigating imports made via products assembled in Cambodia, Malaysia, Thailand and Vietnam.

  • The Biden administration has come under pressure from solar developers and many lawmakers to quickly end the probe and avoid major new penalties.
  • However, several Democrats recently pushed back, urging the White House not to "abandon" trade enforcement.

Alan Neuhauser contributed reporting.

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