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Solar tariff fight raises the specter of U.S. ‘political risk,’ developer says

Investing in the U.S. market is no longer a safe bet for global solar developers due to the Auxin Solar tariff petition, according to the CEO of Lightsource bp Americas.
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In Episode 2 of the "Factor This!" podcast, which publishes on Monday, May 23, Lightsource bp Americas CEO Kevin Smith describes how one of the world's largest solar developers is approaching the Auxin Solar tariff petition and the threat of additional tariffs on imported modules. Also in this episode, American Clean Power Association CEO Heather Zichal, a former Obama administration climate and energy official, explains why she is taking the lead in a multi-million-dollar campaign to oppose the Biden Administration on tariffs. The episode is the second in a 4-part series on the Auxin Solar petition. Subscribe wherever you get your podcasts.

Amid the threat of additional tariffs on imported solar modules from Asia, Lighsource bp, one of the world's largest solar developers, is weighing the political risk of continuing to operate in the U.S. That risk is increasingly real as evidenced by a multi-million-dollar public relations campaign by clean energy advocates to oppose a Biden Administration investigation related to alleged solar module dumping by more than a dozen Chinese manufacturers.

Kevin Smith, Lightsource bp Americas CEO

Kevin Smith, Americas CEO for the business unit of the London-based oil major, met in April with senior leadership of the energy company to analyze the impact of the Auxin Solar tariff petition, which has upended utility-scale development in the U.S.

Smith was a guest on the Factor This! podcast for the second episode of a four-part series on the Auxin Solar tariff petition, airing on Monday, May 23. If you missed our exclusive interview with Auxin Solar CEO Mamun Rashid, listen here.

During his interview, Smith said that during the 1990s and early 2000s he was building power projects around the world, including southern Africa, Asia, and Latin America. When he came back home, colleagues would ask him about political risk in those markets. "And, you know," he said, "the areas where I've had the most political risk have actually been in the U.S."

With the recent tariff issues roiling domestic solar markets, "once again, the U.S. is delivering with political risk."

Smith said he joined Lightsource bp in part due to the financial backing of oil giant bp. He said the thought that with that kind of support, he could make the biggest impact in building renewable energy projects and addressing the threat of climate change.

Now, however, Lightsource bp -- the 50/50 venture between solar developer Lightsource and bp -- is reassessing "the best place to direct our investments," Smith said. "We'll end up investing less money in the U.S. in 2022. We'll see what happens in 2023."

Three-quarters of solar companies responding to a Solar Energy Industries Association (SEIA) survey reportedly said that panel deliveries have been canceled or delayed in the days since the U.S. Commerce Department agreed in late March to open a circumvention case against imported solar modules from Cambodia, Malaysia, Thailand, and Vietnam.

With the potential for retroactive duties imposed on solar modules imported after April 1, Lightsource bp was notified by suppliers in southeast Asia on April 2 that they wouldn't be shipping orders.

"Suppliers aren't going to take the risk of 50-250% tariffs, and owners/developers can't take that risk, either," Smith said. "You can't build a 100 MW, $100 million project with $50 million worth of panel supply, and then six months or a year later, they show up and say, oh, you owe us another $100 million for tariffs."

Amid the threat of additional tariffs on imported solar modules from Asia, Lighsource bp, one of the world's largest solar developers, is weighing the political risk of continuing to operate in the U.S. (Courtesy: Lightsource bp)

Lightsource bp may be better insulated than other developers from the trade squabble. That's because the company placed a 5.4 GW order with First Solar for solar modules at the end of 2021, the largest order ever for the U.S. solar module manufacturer.

Still, Lightsource bp said that the order won't be enough to meet all of its project development needs. The company's order with First Solar represents a chunk of the roughly 8 GW of manufacturing capacity currently available in the U.S. Smith estimated that solar development targets could drop by one-half if additional tariffs are implemented, and that ramping up domestic manufacturing to meet demand would take years.

Smith said Lightsource bp supports incentives for domestic manufacturing as opposed to import tariffs. Incentives for domestic manufacturing and the U.S. solar supply chain are the subjects of Episode 3 of the Factor This! podcast.

September 14, 2021 - Joe Biden, President of the United States, speaks during a visit the Flatirons Campus of the National Renewable Energy Laboratory in Arvada, Colorado. The President received insight into NREL’s long-term research mission, vision, and critical objectives which directly align with his decarbonization goals and national energy priorities.(Photo by Werner Slocum / NREL).

The solar tariff issue has political as well as business consequences and has put Heather Zichal in a tricky spot.

She's the CEO of the American Clean Power Association, a leading trade group for solar, wind, energy storage, and transmission companies. And she is fiercely fighting the Biden administration over the Commerce Department's investigation of the Auxin Solar petition.

And she's also a former Obama administration energy and climate official and knows President Joe Biden well. Maybe no one in clean energy is closer to the current occupants of the White House.

American Clean Power Association CEO Heather Zichal

"I've been working to deploy solar for two decades," Zichal told Renewable Energy World's John Engel. "And I never thought that I'd be having to raise money to run a campaign against the Biden administration."

Zichal is helping to lead a $5 million joint campaign on behalf of ACPA, the Solar Energy Industries Association, and other solar industry trade groups which aims to apply pressure on the Biden administration for allowing the investigation to proceed, although the step by Commerce is required by federal law.

She believes Commerce's action could lead to the delay or cancelation of 23 GW of solar projects over the next two years and thousands of lost jobs.

"This is an existential threat to the future of solar in the United States of America," Zichal said.

Auxin Solar and others that aim to take advantage of U.S. trade laws are "bad actors" in the eyes of Zichal. ACPA, while actively trying to convince Commerce to dismiss the Auxin case, is working behind the scenes to reform U.S. trade policies to prevent this situation from happening again.

On top of the impact on solar developers, EPC, and workers, Zichal said she has met with utility executives who are reconsidering their solar plans.

Zichal said these utilities have plans to retire coal-fired or natural gas power plants but say "because of this decision we're not in a position where we're able to do that."

While she adamantly opposes the Commerce Department's investigation of the AD/CVD case, Zichal and ACPA are supportive of incentives for domestic solar manufacturing. There isn't an "easy off-ramp" for this issue, though, and scaling domestic manufacturing will take time. She also acknowledges that the solar industry did not prioritize domestic manufacturing in the way that it is beginning to now.

The highest levels of the U.S. government are working on the Auxin Solar petition, and the impact on the solar industry, Zichal said. She remains confident that the Biden administration will "make the right decision" when they're confronted with unfinished projects and lost jobs.

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