How the U.S. is Accelerating Solar Adoption

The United States is one of the leading countries in solar energy and photovoltaic adoption. In 2021, the United States installed over 35 gigawatts of new capacity from renewable energy or battery technologies. In addition, photovoltaics represented over 44% of the new electric generation capacity in the United States. 

While the United States remains a leader, certain events and policies have slowed solar adoption over time. The current energy crisis caused the government to readdress many of these policies that created barriers to solar adoption. Though there is a short-term shift towards fossil fuels to lower energy costs, multiple policy changes reinforce the commitment and importance of accelerating renewable adoption in the United States. 

Barriers Slowing Solar Adoption 

All nascent, growing industries face barriers that slow adoption. As solar continues to gain adoption across the United States, it places significant strain on the global supply chain for modules, chips, and materials. In addition to the global supply chain, there are currently domestic policies that are disrupting the pace of solar adoption in the United States. 

Solar Tariffs 

The United States implemented solar tariffs on imported panels and cells from China in 2012. In 2018, the tariffs expanded to include cells and modules from a long list of countries, including many in Southeast Asia. These policies were implemented to make domestic solar manufacturing more competitive and reinvigorate the solar industry in the United States. 

Instead, the tariffs led the cost of installing solar to be among the highest in the world. A study by Solar Energy Industries Associations found that the tariffs are responsible for U.S. solar prices being 43 to 57 percent higher than the global average. While the tariffs raised the cost of solar panels, they also spurred the panel assembly industry in the United States. 

The high costs of solar panels in the United States hampered the overall adoption of renewable energy. With 43 to 57 percent higher costs than the global average, utilities lack the financial incentive to switch from fossil fuels such as coal and natural gas. In addition to higher costs, the slowed adoption due to tariffs provided a weak signal for many investors and companies to transition to renewable energy. 

Department of Commerce Solar Investigation 

Eighty percent of imported solar panels come from Cambodia, Malaysia, Vietnam, and Thailand. Auxin Solar, a small solar manufacturer in the United States, filed a complaint that Chinese solar companies were avoiding trade restrictions by manufacturing solar panels in these Southeast Asia countries. This complaint lead the Department of Commerce to announce an investigation into these claims in late March of 2022. 

This investigation led to the freezing of solar development as many companies want to wait for the initial ruling. If the complaint is true, these Southeast Asian companies would be subject to retroactive tariffs on all imported solar panels. This fear caused a major supply disruption for domestic projects and led many utilities to delay solar projects. 

Oslo-based energy research company Rystad estimated the U.S. to install around 27 gigawatts of solar capacity in 2022 but revised that estimate to be as low as 10 gigawatts given the Department of Commerce investigation. In the face of a global energy crisis, utilities are transitioning more toward fossil fuels like coal while the solar panel supply chain remains in flux. 

Supply Chain Disruptions 

The current global energy crisis is forcing many countries to increase their reliance on fossil fuels like coal due to price stability and a reliable supply chain. As natural gas and oil continue to experience supply shortages and elevated prices, countries are flocking to lower-cost alternatives to manage energy prices for consumers and businesses. While the energy crisis is a long-term catalyst for renewable energy, the short-term disruptions are slowing adoption. 

In addition to the solar supply chain disruptions caused by solar tariffs and the Department of Commerce investigation, a slowdown in utility-scale battery installations is affecting the adoption of renewable energy sources. Over a dozen storage projects have experienced delays due to labor and transportation bottlenecks, rising mineral prices, and competition from electric vehicles. Battery energy storage system installations have also slowed due to the uncertainty caused by solar tariffs and potential retroactive tariffs. 

Utility-scale battery installations go hand in hand with utility-scale solar farms. As solar panels become more efficient, utility-scale batteries are necessary to store the additional energy generated and discharge it during evenings and days without significant solar energy generation. These short-term disruptions place uncertainty around the solar industry and hamper adoption during a pivotal time. 

The United States Commitment to Solar 

The current energy crisis is catalyzing the United States to further its commitment to solar and implement policies to increase adoption. While coal and other fossil fuels remain a short-term solution, recent policy shifts emphasize the long-term commitment to renewable energy. 

Suspending Solar Tariffs 

In early June, President Joe Biden declared a two-year pause on tariffs for solar imports in an effort to jumpstart solar installations. The Department of Commerce’s looming investigation and potential retroactive tariffs led many Southeast Asian solar panel manufacturing companies to suspend exports to the United States. This led many domestic projects to pause and cancel existing installation contraction. 

The pause on solar tariffs creates an incentive for many companies to not only resume current projects but potentially increase the deployment of solar projects. The two-year pause enables Southeast Asian solar panel manufacturers to freely export panels to the United States without fear of retroactive tariffs. In addition, the cost of solar panels is greatly reduced without tariffs creating a larger incentive for companies to rapidly develop solar projects. 

The increased reliance on fossil fuels, especially coal, during the current energy crisis generated questions about the feasibility of a renewable future. Pausing solar tariffs is a strong signal that the United States is leveraging this as an opportunity to increase, not reduce adoption of renewable energy. By lowering the cost of importing solar panels and delaying potential retroactive tariffs, companies are highly incentivized to switch to solar due to the lower costs compared to fossil fuels. 

Defense Production Act

The Defense Production Act allows the President to expedite and expand the supply of materials and services from the U.S. industrial base needed to promote the national defense. It covers activities such as emergency preparedness and the protection or restoration of critical infrastructures. Recently, this act was invoked to accelerate domestic production of clean energy technologies, including solar panel components. 

Through the Defense Production Act, the government placed emphasis on using domestic manufacturing of renewable technologies to create energy independence and lower energy costs. This allows the government to use the full power of federal procurement to expand domestic solar manufacturing capacity. It focuses on solar panels, building insulation, heat pumps, equipment for clean electricity-generated fuels, and critical power grid infrastructure. 

This is a strong signal by the federal government for domestic solar and renewable energy projects. In deploying the Defense Production Act, the government is supporting domestic companies and improving the confidence of investors and companies to invest in renewable technology. Not only does this spur domestic production, but it also allows the government to use its “super preference” status to purchase energy from these projects to help reduce energy costs for consumers. 

Reduce project costs on public land 

The Bureau of Land Management manages 245 million acres of public land with roughly 870,000 acres prioritized for solar energy development. This equates to more than 100 gigawatts of potential solar energy capacity which could power up to 29 million homes. In 2021, there were 2.89 gigawatts permitted on public lands, up 35% from 2020. 

The Biden administration announced fee reductions for building wind and solar on United States public land. The rate reduction policy cuts rents and fees by more than 50 percent. This policy coupled with increased royalty fees for oil and gas produced on public lands makes solar and wind projects highly attractive for developers. 

By reducing the cost of rent and royalties for renewable energy projects on public land, the government continues to signal its commitment to a renewable future. With over 870,000 acres available for development, there is a significant opportunity for the United States to transition to renewables in the future. This rate reduction provides more incentives for developers to build energy independence and contributed to future reductions in energy costs for consumers. 

Accelerating Solar Through Policy 

The energy crisis created an opportunity for the United States to reevaluate policies and implement new ones to accelerate the adoption of renewables. While fossil fuels are a stopgap measure to reduce energy costs, the government passed multiple policies to address barriers that slowed solar growth. By suspending solar tariffs, using the Defense Production Act, and reducing the costs of renewable project development on public lands, the government is developing the necessary foundation for a renewable energy future. 

These policies generate confidence for companies and investors to continue investing in renewable energy projects. As the price of solar continues to decline, these favorable policies generate additional incentives for utilities to transition to renewables while reducing the cost of energy for consumers. These policies also make solar more favorable for companies to adopt and invest in as they lower their energy bills and reduce the potential need to purchase carbon credits to offset emissions. 

Though the United States may rely on coal and other fossil fuels to reduce current energy prices, it is seizing the opportunity to pave a path for increased solar adoption. These policies highlight its commitment to attaining net-zero emissions and developing energy independence.

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