U.S. Renewable Energy Marketplace Factors Driving the PPA Market U.S. Renewable Energy Marketplace Factors Driving the PPA Market

Solar module prices expected to rise, as manufacturers complicit in circumvention will face tariffs

The cost of solar panels is expected to rise, as the Department of Commerce (DOC) preliminarily determined there has been widespread circumvention of tariffs throughout the four Southeast Asian countries that have been under investigation since March 2022. The DOC will impose tariffs on violating suppliers starting in June 2024.

The DOC released a preliminary determination relating to the Auxin petition on December 2, finding that solar cell and module producers in Thailand, Malaysia, Vietnam, and Cambodia are circumventing tariffs. The decision went beyond cells and modules, instead ruling that wafers6 produced in China containing 3 or more of 6 specifically named components also sourced from China would be subject to tariffs: silver paste, aluminum frames, glass, backsheets, ethylene vinyl acetate sheets, and junction boxes.

Any module or cell produced in one of the four countries using Chinese wafers will be subject to tariffs unless it is proven they are below the "wafer +3" threshold. Four suppliers have proven their supply chain is below this threshold and will not be subject to tariffs: New East Solar, Hanwha Q Cells, Jinko Solar, and Boviet Solar. Suppliers who do not cooperate could be given the China-wide tariff rate of over 250% after the two-year tariff moratorium set by President Biden in an executive action ends in June 2024.

The solar industry is unlikely to have longer-term clarity on module availability and price expectations until the DOC releases tariff rates for this case and a final determination is issued in May 2023. Suppliers will find it challenging to source affordable, responsibly produced modules and prove that their supply chain successfully qualifies for the wafer +3 threshold.

A hopeful result of the DOC’s determination would be expansion of module manufacturing in the U.S. However, there is worry across the industry that President Biden’s two-year tariff moratorium provides too little time for domestic manufacturing to catch up and backfill the module supply, which formerly came from the four countries in the case. Democratic senators are calling for President Biden to extend the two-year tariff waiver. Solar PPA prices are expected to stay high as module manufacturers pay a premium for responsibly sourced input components, and developers remain hesitant to contract with violating module manufacturers.

Lack of clarity regarding forced labor prevention law implementation contributes to solar

The U.S. solar market continues to face equipment import hurdles and is experiencing project construction delays as Customs and Border Protection (CBP) grapples with enforcement of the Uyghur Forced Labor Prevention Act (UFLPA). This law, which has been in full effect since June 2022, assumes that all imports from the Xinjiang region of China are products of forced labor practices. Importers must present “clear and convincing evidence” in order to demonstrate their goods did not involve forced labor. Some manufacturers have struggled to present that high burden of proof, resulting in equipment being detained at the border.

As a result, buyers may experience some movement in project online dates and pricing as they partner with renewable energy developers on PPAs. Alternatives to imported modules are scarce, as domestic panels remain in high demand and low supply. First Solar, one of the few panel manufacturers headquartered in the U.S., has reported they are sold out for 2025 and are nearly sold out for 2026.

Though the UFLPA is a strong signal to the international trade community that the U.S. will dedicate resources to ban imports where forced labor practices are involved, the enforcement has been slow, opaque, and confusing for manufacturers and project developers alike. Oversight by Congressional committees has not yet been effective enough to bring transparency or further instruction to importers, compounded by a lack of coherence regarding CBP’s enforcement of the law. Among other goods essential to the clean energy industry, both polysilicon and critical minerals such as aluminum, cobalt, lithium, and zinc have been identified as high priority for enforcement, though it is unclear how these imports will be screened.

In the meantime, companies are contesting detentions altogether. Enforcement has been inconsistent, and perhaps in some cases, incorrect. As of early December, no review as described in the law has been conducted. Despite limited documentation, some importers are claiming their goods have no inputs from Xinjiang and argue that CBP is misidentifying products.

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