The United States had a very busy week of policy changes, involving changes to 301 tariffs, domestic content, bifacial panel exemptions, and AD/CVD.
The federal government of the United States recently updated incentives for clean energy projects and made a swift series of changes to its foreign trade policy. These changes are outlined below, along with some analysis of their potential effects on the market.
AD/CVD initiated
On May 15, the Department of Commerce opened an investigation into alleged antidumping and countervailing duty (AD/CVD) violations in Vietnam, Malaysia, Thailand, and Cambodia. Historically, tariffs have ranged from 50% to 250% of the cost of shipped goods.
By June 10, 2024, the International Trade Commission (ITC) must now make a preliminary determination regarding the investigation. If the import of goods that have been dumped hurts the domestic industry, the ITC will decide.
According to Clean Energy Associates (CEA), the decision has “no direct market impact” on the solar supply chain. However, the threat of AD/CVD is causing price increases, contract re-negotiations, and delays in procurement decisions, according to CEA. It stated that project timelines are being pushed back.particularly for projects planned for construction in 2025.
Domestic content bonus guidance
The U.S. Treasury revised its guidelines on May 16 regarding how to use the domestic content bonus under the Inflation Reduction Act’s Section 48/48E Investment Tax Credit and Section 45/45Y Production Tax Credit. Besides the base 30% tax credit for clean energy projects, there is a bonus of 10%.
For solar projects, the IRS mandates that steel and rebar foundation posts. among other structural construction materials, be made entirely in the United States. The remaining materials, referred to as “manufactured products,” are required to have 40% domestic content initially, rising to 55% over time.
To determine the manufactured product portion, developers are required to obtain three “direct costs” from equipment providers. Payroll taxes on wages, wages paid to factory workers, and the amount paid to component suppliers for parts that are delivered straight to the factory are all considered direct costs.
Developers of clean energy now have the choice to depend on data on default cost percentages from the Department of Energy for a comprehensive list of manufactured goods and their parts. Instead of asking suppliers for their direct costs, you can use this safe harbor data. It is anticipated that the updates will facilitate project developers’ access to the bonus.
The CEA stated, “Yet most projects will still need a domestic cell or a First Solar module to qualify, and these are in limited supply. Even for those solar projects utilizing trackers with a high portion of domestic content.” Thus, even though CEA anticipates more.
projects will still be few in order for them to now be eligible for the Domestic Content Bonus (especially in 2026 and later).
Bifacial exemption removed
Biden Administration tariffs on bifacial solar modules—which produce electricity on both sides of the panel—were re-instituted on May 16. Tariffs on biaxial solar modules were previously waived; the elimination of this exemption results in the application of a 15% tariff once again.
Cost increases of 1% to 2% are anticipated for utility-scale, commercial, and industrial solar projects upon the reinstatement of this tariff.
The price of imported bifacial solar panels, which normally cost between $0.10 and $0.25 per watt, will rise by $0.015 to $0.0375 per watt if this exemption is removed. These increases will translate into system price increases of roughly 1% to 2% for commercial projects where installation costs are between $1.50 and $2.75 per watt. Currently, 98% of all imported solar panels are bifacial these sectors
A tariff-rate quota, or the amount of solar cells that can be imported without having to pay the 201 tariff, was also preserved by the administration. This will be set at 5 GW, but Biden stated he has the authority to increase the tariff-exempt cells by 7.5 GW to a total of 12.5 GW if the annual volume of cell imports hits 5 GW.
According to CEA, suppliers are anticipated to bear about half of the tariff cost, so the elimination of the bifacial exemption is anticipated to have a minimal effect on module prices. However, according to CEA, 201 tariffs could “significantly disadvantage products from Southeast Asia in the U.S. market” when paired with AD/CVD duties.
Section 301 tariffs raised
Modifications to Section 301 tariffs on imports of solar energy, electric vehicles, battery energy storage, and related components were announced by the Biden Administration on May 14.
The 25% to 50% tariff on solar modules and cells imported from China was increased. Equipment used in the production of solar cells and modules was given several exemptions; it had previously been subject to 25% tariffs.
Since the United States imports less than 1% of its solar cells and modules directly from China, Clean Energy Associates stated that the tariffs on Chinese solar cells and modules “are largely performative”.
“Capital expenditure costs for U.S. factories producing cells and modules will decrease with the removal of tariffs on solar manufacturing equipment, making it easier to set up these factories and making U.S. cell and module production marginally less expensive and more competitive with imports,” the CEA stated.
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