US solar manufacturers face challenging landscape of tariffs and supply gap

The large gap between US solar module manufacturing capacity and the availability of domestic cells, wafers, ingots and polysilicon is prompting concerns that preliminary US tariffs on imported solar cells could disrupt the emerging supply chains they are meant to protect.

Expected to be finalized in June, the new tariffs on solar imports from Cambodia, Malaysia, Thailand and Vietnam come as the US government again tries to spur a domestic supply chain for the growing industry. The US has already determined that some foreign governments are subsidizing their solar products.

More solar manufacturing facilities are coming online with the support of the Inflation Reduction Act, but so far most new facilities have been for modules because the IRA makes the downstream portion of solar manufacturing the most appealing. It is also easier to stand up production for solar modules than for components further down the supply chain.

The growing domestic module sector has led to a surge of US imports of photovoltaic cells not assembled into panels. Imports expanded to 4,230 MW in the third quarter of 2024, up from 903 MW a year before, with 71% coming from those four countries, according to the S&P Global Market Intelligence Global Trade Analytics Suite. Meanwhile, the US imported 15 GW of panels in the third quarter of 2024, with 80.7% coming from the countries in the trade case.

"Even though we are in a clean energy manufacturing renaissance ... we are still going to need to bring in from some foreign sources, at least cells," American Council on Renewable Energy Vice President of Government Affairs Jeremy Horan said in an interview. "We want to see more domestic production ... but we also have to look at where are we in the supply chain."

The importance of a domestic manufacturing industry and tariff support have split the industry between installers and manufacturers for years.

Invenergy LLC President and co-founder Jim Murphy is now in the position of being in both markets. Invenergy is a US-based independent power producer with a portfolio composed mostly of renewables but has partnered with Chinese solar manufacturer LONGi Green Energy Technology Co. Ltd. through a venture called Illuminate USA LLC to manufacture modules in the US at a facility in central Ohio. Murphy also serves as chairman of the board of directors of Illuminate USA.

He said the tariffs would add to the benefits incumbent providers are getting through the IRA by giving them a greater competitive advantage in comparison to upstarts.

"There can be a place for tariffs in trade policy. We get that," Murphy said in an interview. "We just feel like, in particular, this current [antidumping and countervailing duty] case, the motivation is misplaced. On the cell side, where there is no domestic manufacturing, tariffs seem very nonsensical to us."

Balancing prices, tariffs and domestic incentives

Antidumping and countervailing duty petitions filed with the US International Trade Commission and the US Commerce Department will impose new penalties on imports of crystalline silicon photovoltaic cells from the four countries, whether or not assembled into modules.

The Commerce Department on Oct. 1, 2024, set initial countervailing duties of 8.25% for Cambodia, 9.13% for Malaysia, 23.06% for Thailand and 2.85% for Vietnam on photovoltaic cell imports. On Nov. 29, 2024, Commerce set preliminary antidumping duties for crystalline silicon photovoltaic cells, with general rates at 125.37% for Cambodia, 21.31% for Malaysia, 77.85% for Thailand and 271.28% for Vietnam. Rates can vary by company.

Meanwhile, on Jan. 8, the Commerce Department found three new cross-border subsidies from China into Thailand for some Thai manufacturers on wafers, solar glass and silver paste, which raised the CVD rate on products from three companies, according to the American Alliance for Solar Manufacturing Trade Committee. Commerce is also investigating cross-border subsidies going into Malaysia, the committee said.

The committee — whose membership includes Convalt Energy LLC, First Solar Inc., Mission Solar Energy LLC, Hanwha Q Cells USA Corp., Meyer Burger Technology AG, REC Silicon ASA and Swift Solar Inc. — filed the petitions with the Commerce Department. If adopted, the tariffs could add 10-15 cents/W for modules, according to a Clean Energy Associates analysis from July 2024.

"Putting duties and tariffs on them are only increasing costs for consumers in the United States," ACORE President and CEO Ray Long said.

Tim Brightbill, a lawyer representing the manufacturing committee seeking the protections, said that with pricing from some imports "below cost," something needs to be done.

"The increased duty rates demonstrate that Thai solar producers are benefiting not only from Thai government subsidies, but also from discounted raw materials received from government-controlled entities in China," Brightbill said in a Jan. 9 statement following the finding of the cross-border subsidies.

"You have to have both investment in solar manufacturing, but you also have to have trade enforcement to back up that investment," Brightbill said in an interview. "What we want to see is that unfairly traded products are eliminated from the market, so we're not opposed to trade."

Solar Energy Manufacturers for America Coalition Executive Director Mike Carr said the IRA, domestic content bonuses and tariffs, and other trade actions, are "a three-legged stool," and "all of those things really have to work together."

"This case is important because American manufacturers need a level playing field against China's manufacturers who have gone abroad with subsidies to evade US trade measures," Carr said. "At the same time, the US must create a strong demand driver in the domestic content bonus tax credit for US-made solar components."

While it is cheaper to produce in China because of their subsidies, "there really isn't a fundamental advantage that they're operating on," Carr said.

This is not the first antidumping and countervailing duty petition lobbied against solar imports, but it is the first in the IRA policy environment, which was designed to bolster domestic clean energy manufacturing through incentives.

"The IRA is supposed to allow industry to reestablish itself in North America," Davor Sutija, CEO of Germany-headquartered solar wafer manufacturer NexWafe GmbH, said.

Invenergy's Murphy said imports are needed because of a lack of sufficient domestic supply for cells, though he would like to see more domestic supply to utilize the domestic content bonus in the IRA.

"We made the decision to get into manufacturing so that we could supplement what we're importing with what we can produce ourselves," Murphy said. "Longer term, we would like to go upstream and have more components of the supply chain coming from our own facilities. But for the near term, for the next several years, it will have to continue to be some mix of import and cell supply."

While domestic manufacturers are trying to get up and running and increase manufacturing capacity, there are concerns that tariffs could hinder this effort.

"It's not helping if it's putting a chill on things and scaring people to take the next step to go further upstream for a fear that actions similar to this one could affect profitability of that further upstream activity," Murphy said.

The new tariffs from this trade petition come on top of existing tariffs for the solar industry.

"While the [countervailing duty] tariffs came in lighter than expected, the reverse is true for the just-released [antidumping] tariffs," Guggenheim Partners analysts said in a Dec. 2, 2024, note after Commerce released the preliminary antidumping duties.

In a separate trade policy action, the Biden administration on Dec. 12, 2024, imposed higher tariffs on wafers and polysilicon from China and set new tariffs on certain tungsten products from China, potentially adding to US manufacturers' costs because such products are not readily available now in the US. The tariff changes took effect Jan. 1.

Commerce's final countervailing duty and antidumping rates are to be announced in April, and the International Trade Commission is expected to release its final determinations in early June. Final orders are also expected in June.