US renewables shares rose significantly after news the Biden administration would freeze new tariffs for solar imports from four Asian nations, providing a boost for renewable energy use in the US. Stocks were also supported by reports of progress on a US budget ‘reconciliation bill’ that could include USD 300 billion in climate and energy provisions, including tax credits.[1]
According to Bloomberg reports, President Joe Biden imposed a 24-month freeze on new tariffs for solar imports from Cambodia, Malaysia, Thailand and Vietnam – effectively removing a threat of retroactive tariffs that had cooled renewable project construction across the US.
At the same time, under the Defence Production Act, Biden is supporting US-made solar panels and other domestic clean-energy manufacturing.
Kick-start for solar projects
The action comes in response to a US Commerce Department investigation that has significantly cut solar panel shipments. The decision to waive new duties will do much to quash the tariff threat for now. The probe looked into whether Chinese companies were circumventing duties by assembling solar cells and modules in the four countries which constitute some 80% of annual panel imports.
Amid the threat of tariffs, manufacturers in the four nations had largely halted shipments to the US, stalling solar projects and prompting at least one utility to warn it would keep a coal plant operating longer than planned.
The Commerce Department is set to issue preliminary findings by late August.
Biden’s move provides a two-year bridge for US solar developers to obtain modules and cells duty-free from southeast Asia, even as the probe proceeds, the White House said.[2]
Boosting sustainable energy equipment
The Department of Energy has been told to work on rapidly expanding manufacturing of solar panel parts, building insulation and other gear. Power transformers and equipment for making and using fuels generated by electricity are also included. The Defence Production Act move should catalyse finance for clean energy manufacturing including loans and grants.
We believe the key beneficiaries are:
- Solar panel parts such as photovoltaic modules and module components
- Building insulation
- Heat pumps, which heat and cool buildings super-efficiently
- Equipment for making and using clean electricity-generated fuels, including electrolysers, fuel cells and related platinum group metals
- Critical power grid infrastructure such as transformers.
As an aside, we believe that if the Commerce Department does decide to scrap antidumping and countervailing duties for solar equipment in August, this could have ramifications for other industries that are protected today such as the US steel sector.
Also read: Environmental markets – Fundamentals will prevail
References
[1] See, for example, https://www.grantthornton.com/library/newsletters/tax/2022/hot-topics/jun-07/manchin-and-schumer-discuss-1-trillion-doller-in-tax-hikes.aspx
[2] See https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/06/fact-sheet-president-biden-takes-bold-executive-action-to-spur-domestic-clean-energy-manufacturing/
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