Volts podcast: Abigail Hopper on the trade case that is crushing the US solar industry

In this episode, Abigail Hopper of the Solar Energy Industries
Association discusses the trade complaint that has cast a pall
over the US solar industry, why she believes it should be
dismissed, and the complexities of tariff policy.


(PDF
transcript)


(Active
transcript)


Text transcript:


David Roberts


Back in 2012, the Obama administration levied tariffs on solar
panels from China, to punish the country for unfairly subsidizing
its panels in an attempt to corner the market. In the ensuing
years, US imports from China fell off sharply and imports from
Cambodia, Malaysia, Thailand, and Vietnam rose just as quickly.


Early this year, a tiny California-based solar manufacturer,
Auxin, filed a trade complaint with the US Department of
Commerce, alleging that China is effectively laundering its solar
supply chain through third-party countries, thereby illegally
circumventing tariffs. It asked Commerce to apply commensurate
tariffs on imports from those countries. (Canary Media has
extremely thorough coverage of the case, if you want to catch
up.)


Commerce is investigating. Meanwhile, the industry has been
thrown for a loop — imports have fallen off, projects are being
cancelled, and projections of growth are being revised radically
downward. The tariffs could be anywhere from 30 to 250 percent,
which would radically change the economics of big solar projects,
and if applied, will be retrospective over the past two years,
which means even existing contracts are in jeopardy. The
uncertainty has cast a pall over the entire sector.


The Solar Energy Industries Association (SEIA) has been
advocating against tariffs from the beginning and is calling on
Commerce to dismiss the complaint. I contacted Abigail Hopper,
the head of SEIA, to talk about the merits of the case, whether
building a domestic solar supply chain is a good goal, whether
tariffs work, and what other policies might be preferable.


With no further ado, Abigail Hopper of SEIA. I'm not going to say
the whole thing. Welcome to Volts. Thanks for coming.


Abigail Hopper


Thanks for having me. I'm glad to be here.


David Roberts


So this is a knotty and complicated issue we're going to get in
here.


Abigail Hopper


Is that the K-N-O-T-T-Y naughty?


David Roberts


Yes, exactly.


Abigail Hopper


Okay, just checking.


David Roberts


Also, perhaps naughty, we'll see at the end. So I want to kind of
go through it piece by piece, before we get to the tariff
dispute, the tariff case that's at issue here, let's go back a
little bit and just talk about the tariffs. These date back to
Obama, the Obama era. So why don't maybe you just tell us sort of
what tariffs are in place, and what is the rationale for tariffs,
like when Obama put these in place in 2012? What is the sort of
stated rationale? What are they meant to accomplish?


Abigail Hopper


Sure. And you already have displayed more knowledge than the
average person around the multiple layers of tariffs that the
solar industry is dealing with. So, yes, these go back to 2012.
And at that time, there was an allegation and then a finding,
that China was dumping its product into United States. That meant
that the Chinese government was unfairly subsidizing production
of solar cells and solar modules and then selling them into the
United States below cost. So if it cost $10 to make it, they
would sell it in for $5, and the Chinese government would suck up
the other $5.


David Roberts


And presumably this is not just, like, unfair or unsporting. This
violates some law or treaty.


Abigail Hopper


Yes, it violates the trade laws, and therefore the tariffs were
put in place to address that unfair practice.


David Roberts


And then there were more under Trump. What did he add?


Abigail Hopper


So the ones we just talked about, people refer to usually as the
ADCBD, Anti-Dumping Countervailing Duties cases, and those are
from 2012, and those apply to products coming out of China. In
2017, a case was initiated, and then in 2018, President Trump
imposed tariffs. And those are the Section 201. That's the
section of the statute it applies to. And those were placed on
cells and modules coming from any country in the world. There
were a couple of specific exceptions, but generally, any country
in the world, these tariffs applied and they started at 30% and
stepped down.


There's a whole drama around the bifacial modules and that
exclusion, I'm happy to talk about. But those were additive to
whatever ADCBD tariffs that were already in place.


David Roberts


So specifically, then, imports from China would face both of
these tariffs added together.


Abigail Hopper


Correct.


David Roberts


I mean, the rationale for the first set makes sense. If China is
doing something illegal under trade law, that makes sense. But
what is the rationale for just slapping tariffs on all imports?
That can't be that all importers are breaking trade laws. What's
the rationale there?


Abigail Hopper


Yeah, it's a totally different theory of the case. It is not a
claim based on fault or anyone being nefarious or violating laws.
Rather, the finding is, the allegation and the finding is that
the US domestic market has been harmed by competition, and they
basically need a pause. They need a pause. They need a break.
"Give me a second. I got to get it together." And so the best way
that one of my trade lawyers explained it to me, as I was not
well versed in trade law when I started this gig.


David Roberts


Little did you know you were going to get a PhD.


Abigail Hopper


Little did I know, right. He explained it as basically putting an
umbrella over the United States.


David Roberts


Right.


Abigail Hopper


So there's this protection, right. And the goal of those Section
201 tariffs is to provide an opportunity for the US solar
domestic manufacturing base to recover and to build back.


David Roberts


Sure. But what I don't get is that seems like the mirror image of
Chinese subsidies. In other words, that seems like giving the US
domestic market an unfair advantage. It seems like that would
also be illegal under trade law for the same reasons.


Abigail Hopper


So it's not illegal under US trade laws, right. It's certainly, I
think a lot of people think smacks of protectionism of US
industry. There were complaints taken to the World Trade
Organization, right, to allege, that the imposition of the
Section 201 tariffs violates World Trade Organization rules, or I
don't know what they're called there, actually. Whatever, they're
not allowed.


David Roberts


It literally is just a subsidy to US manufacturers, just like
China is subsidizing its own manufacturers.


Abigail Hopper


I think that's a very fair argument to make. I think what we saw,
which I think is important, is it didn't actually have the same
impact, though, right? Like, there were definitely a couple of
facilities that were built in the United States after the 201
tariffs were announced, but it certainly wasn't enough to supply
the US market, right. It did not create a robust domestic
manufacturing base. And so round two of the Section 201 tariffs
just took place in 2021. And in early 2022, President Biden
extended the Section 201 tariffs.


David Roberts


Yeah. And I don't think I'm alone here, don't get that. It seems
like I mean, you know, we can talk later about the question of a
domestic supply chain. I want to get into that. But it seems like
a crude and not particularly effective tool. And I had thought
that sort of the conventional wisdom was that this is a sort of
slightly crazy thing Trump did. So what on earth, what reason did
the Biden administration give for continuing these tariffs?


Abigail Hopper


So the Biden administration gave a couple of reasons. One was
that the US manufacturing industry had not recovered
sufficiently, and they said, partly, that was due to COVID,
right. That as the entire economy kind of was jolted for a year,
year and a half, that they too were. And so they sort of lost out
on this time of protection.


David Roberts


Right. So they need a break. They just need a little longer
break. They're not quite refreshed and ready yet.


Abigail Hopper


Exactly. I mean, I know that feeling.


David Roberts


Yes, I know. I'm very relatable.


Abigail Hopper


I just don't usually get government assistance with it. They did
do two important things, though, in the February 2022 decision.
One was to exclude from Section 201 bifacial modules that were
being imported. That was a significant development.


David Roberts


Tell us what bifacial panels are and why that's significant.


Abigail Hopper


So bifacial panels are solar panels used primarily, almost
exclusively, in the utility scale sector that have the ability to
reflect light and create energy from both sides of the panel. So
there's material on the back of the panel that allows it to
create more energy, and therefore be more efficient and produce
more electrons, obviously changing the economics of energy
production.


David Roberts


And that's the bulk. I mean, that's utility scale. So that's like
the bulk sort of by number, by weight, but that's the bulk of
imports. So then what's the rationale there for slapping a tariff
on everything except the main import? Like, I'm losing track of
what substantive goal is served here.


Abigail Hopper


Well, so the bifacial exclusion was originally requested shortly
after the imposition of the 2018 201 tariffs. And at that time,
bifacial modules did not represent a large portion of the US
market, the import markets. It really was a newer technology that
was more in the R&D phase. And so if you think about kind of
the theory of the case, the theory of the case is to allow the
domestic market the opportunity to really recover and continue to
develop. No one in the US was producing bifacial modules. And so
allowing bifacial exclusion made sense because it wasn't
competing with the US marketplace.


And that's still primarily the case. There really aren't
manufacturers of bifacial modules, certainly not at scale in the
United States.


David Roberts


So the original tariffs, the Obama tariffs, the rationale there
is that, "China is breaking trade laws." The rationale for
Trump's tariffs is, "we want to make room for the domestic
manufacturing, domestic solar manufacturing industry to grow a
little and get more robust." So before we get into the rest of
it, I guess the question here, I have sort of a twofold question.
One is, is it the case that once these tariffs were put in place,
domestic solar manufacturing grew and flourished as intended? The
larger question there is the reason, I think everybody at this
point sort of gets this, the reason there's a huge solar
manufacturing sector in China is not just because the government
subsidizes it, although it does, but it's got cheap materials,
and it's got cheap labor. It just has advantages, all the same
advantages that got manufacturing offshore in the first place. Is
a tariff, of the size being discussed here, enough to close that
gap between the sort of costs of manufacturing abroad and the
costs of manufacturing in the US?


Abigail Hopper


No.


David Roberts


It's not big enough to close the gap.


Abigail Hopper


No. The simple answer is that the tariffs alone did not incent
the kind of investment that the proponents of those tariffs
articulated it would, right. There were certainly a couple of
companies that made the decision to invest in the United States,
and that's great, but it did not bring the scale of investment
that would support our entire marketplace. And so I'm excited
about the conversation about what would it take to develop at
that scale. But tariffs, I agree with you wholeheartedly that
they are a crude and inefficient tool to create domestic
manufacturing in the United States.


David Roberts


Alright, well, we're going to return to that later, but sort of
sticking with the tariffs. So the Obama tariffs are in place. The
Trump tariffs are in place. Biden extends the Trump tariffs, and
then we get this case. This US solar manufacturer, Auxin, files a
complaint, basically saying, as I understand it, that China is
circumventing these tariffs. It's basically just exporting its
materials to nearby countries and then manufacturing the stuff
there. And we're importing from those countries. But in all but
name, we're still importing from China. Basically, China is using
Cambodia, Malaysia, Thailand, and Vietnam to launder its solar
cells and panels, and thereby dodging the tariffs.


This is the case Auxin is making. I think there's been a lot of
focus on Auxin. And this is, if people care, it's a pretty tiny
company, as these things go, does not appear to be particularly
robust or growing. There's been a lot of focus on Auxin. But I'd
rather just skip all that and talk about the case itself. So I
guess where I'd like to start is, just on the merits of the case,
is this true? Is China guilty of circumventing tariffs by
laundering its materials through these other countries?


Abigail Hopper


No, it's not, and I can tell you why. So there is a statute,
right? There's a statute on point that they have alleged that
China has violated. And I think the evidence will show that they
have not. And the key piece of that statute says that in order
for it to qualify the actions you're described, you described
well, to qualify a circumvention, the manufacturing or the
processing in the third party country, the third country. So the
Cambodia, Thailand, Malaysia, and Vietnam has to be minor and
insignificant. Like, those are terms that are in the statute.


David Roberts


So, in other words, those countries would just be taking the
material and cranking it out and not really doing, not really
adding value?


Abigail Hopper


Right. Like, in my mind, it's sort of like it all gets there,
they slap a sticker on the back, and then it's like, boom, now
it's from Vietnam and not from China. But that's not what's
happening. I do not claim to be a supply chain expert, but I
certainly have a lot of them that are consulting for us, as you
could imagine. And certainly cell manufacturing, the
manufacturing of solar cells is far from minor and insignificant,
right. It is a very complex, very technologically advanced
process that adds a ton of value to the product. The United
States Department of Commerce has determined in four different
cases already that the country of origin is where the cell is
manufactured.


But as they have looked at other cases and considered other
claims, they have made that determination, because, "where do you
apply the tariff? Oh, you apply it where the cell is
manufactured, okay." So the cell is manufactured in these four
countries. And so, no, I do not think, and our council certainly
doesn't think, that the requirements needed to demonstrate
Circumvention have been met in this case.


David Roberts


But another way of looking at this, sort of intuitive way of
looking at this, is you got these Chinese companies that are
receiving all these subsidies from the Chinese government, which
is the whole sort of issue here. And then they open subsidiaries
in Cambodia, et cetera, and manufacture there. So in a sense,
they're not manufacturing in China, but in another sense, they
are still subsidized in the way that caused the original tariffs,
right? Do you see what I'm saying? Like, the sort of unfair
subsidies still seem to apply, even if a Chinese company opens a
satellite company in Cambodia, it's still getting the subsidies.


Do you know what I mean?


Abigail Hopper


I understand the point that you are making. I don't agree with it
wholeheartedly. I think two points. One is that some of the
companies that we're talking about that are impacted by this
Circumvention Petition are not Chinese-owned companies. They're
other companies, like from different countries. And so that's
sort of the reality. And then secondly, the petitioners chose to
use a specific statute, and they didn't meet the requirements of
the statute. If they want to go back and choose a different
statute, then we can have a different conversation about whether
there is sort of unfair dumping of some sort.


But that's not the issue before us today. Like, I get your sort
of theoretical point, but we're fighting a battle. And as we have
heard a quasijudicial proceeding, we've heard that term so often,
and so I'm going to stay focused on the proceeding in front of
me.


David Roberts


Right. The case itself.


Abigail Hopper


Yeah.


David Roberts


So if there are a bunch of companies involved in these countries
that are not Chinese subsidiaries, then the substance of the case
is just that they're sort of conduits for Chinese parts and
materials?


Abigail Hopper


Yeah. That some of the raw materials are coming from China, even
if the ultimate manufacturer of the seller of the module is not
Chinese-owned.


David Roberts


Right. So the substance of your side of the case is to say, "it's
not true that the manufacturing taking place in these countries
is small and trivial. They are adding value, and thus it's not
just laundered Chinese stuff." That's the substance here.


Abigail Hopper


Correct.


David Roberts


Given that Commerce, the Commerce Department, which is the one
doing these investigations, and I guess you'd call them the
quasi-judge and these quasijudicial proceedings, has found this
in previous cases, is it your sense that when they get around to
ruling on this, they're going to find that again and rule in your
favor? Obviously, you probably don't want to handicap this and
make guesses and everything, but are you confident enough in the
merits of your case that you think you have a pretty good chance
of getting a good ruling at the end of all this?


Abigail Hopper


I do. I think that the statute is clear about what the petitioner
has to show. The petitioner has actually testified in other
proceedings back to those Section 201 cases we talked about. The
petitioner has testified under oath that cell manufacturing is a
complex and technical and highly value producing process. And so
there's not really anyone that's disputing that. So I think we're
pretty confident on the merits. Obviously, one of the things
we've also been focused is on the timeliness of a decision.


David Roberts


Yeah, we're going to get into that. The situation is that there's
this case in front of now, Commerce Department. The schedule is
that Commerce is going to issue some sort of preliminary results,
or preliminary findings, in August, and then is supposed to issue
a decision in January of 2023. Although, as I understand it, they
can, if they want to apply for like a 65-day extension, which
could push it out into early to mid-2023. So this situation, if
they don't accelerate things, like you're asking them to, this
situation is going to linger for a while, potentially for a full
year.


So let's then talk about what are the effects of this case
lingering out there. Because one of the key pieces, and I don't
know if this is popularly understood, is that if Commerce finds
in Auxin's favor, it's not just that tariffs are going to get
slapped on imports from these four countries, but that tariffs
are going to be retroactively slapped on imports from those four
countries for the past two years. Which seems, honestly, to me,
crazy like that seems to violate some very core principles of ...


Abigail Hopper


Ex post facto?


David Roberts


Of actual judicial proceedings as opposed to the quasi kind. Like
in an actual court, you sort of legendarily cannot retroactively
punish someone for something that was not clearly illegal at the
time. So anyway, point being, it's not just that future imports
from these countries will be slapped with a tariff if this
succeeds, but that there's going to be a big retroactive penalty
on imports. So what effect is this having on the industry at the
moment? And it's just the uncertainty, right? I mean, it's just
the uncertainty that's screwing everything up.


Abigail Hopper


Yeah, there are so many layers of uncertainty.


David Roberts


Truer words.


Abigail Hopper


Well, let me clarify one thing. So that you are 1000% right about
the retroactivity of these tariffs. There were new regulations
that went into place November 1, I believe, November 1 of 2021.
And so that's sort of the outside date by which the retroactivity
could apply. My understanding is it could apply from the date of
initiation, April 1 of 2022. So you can just — that's one
uncertainty, right? We know they will be retroactive. How far
back the Department of Commerce chooses to go is one unknown.
Obviously, what the tariff will be, will be another unknown.


David Roberts


Oh, so that's not a fixed thing?


Abigail Hopper


No, that's not a fixed thing.


David Roberts


There's not some standard tariff here. It's a case-by-case thing.


Abigail Hopper


It is usually a company-by-company thing. And if a company does
not have a tariff rate, then there's a countrywide rate. And
that's why you've heard anything from 50% to 250%. That's why
when Secretary Raimondo, the Secretary of Commerce, last week
testified that if there were tariffs, there might be 10% to 12%.
That's why I, in particular, was very outspoken, that that was
just wrong. That's not factually accurate. If there are tariffs
and a company does not have a countrywide rate, then it will be
250%.


David Roberts


So we don't know how retroactive it will be, and the tariff will
be somewhere between 30% and 250%, which also seems extremely
large dollop of uncertainty there.


Abigail Hopper


Very large dollop, right. I think those are the two biggest
uncertainties, right. Then, once manufacturer — so your question
to me was, "How is this impacting the market?", right. And we are
in mad consensus that the uncertainty is really what is roiling
the market, and how that is playing out is that manufacturers are
just telling their customers here in the US, "You know what,
we're not going to sell you modules. There is way too much risk,
way too much uncertainty. We're going to go sell our modules to
Europe, or we're going to sell them to Brazil, or we're going to
sell them to another country where there's not this crazy policy
uncertainty."


David Roberts


So spell it out for me. What could happen? Like, if they sell to
someone in the US for X price, and then the tariff is imposed
retroactively, the customer then has to pay more?


Abigail Hopper


Yeah.


David Roberts


I literally don't understand how that works. If you complete a
transaction under the current circumstances, and then the tariff
is passed, and it's retroactive, do you then have to sort of
reopen all those transactions and redo them?


Abigail Hopper


So the way that it works is that the importer of record is liable
for the payment of the tariff. So Manufacturer A, they may sell
their product to a customer for whatever the cost is, but under
the terms of their importation agreements, like with the US
government, right, their right to import into the US, they're
obviously liable for additional duties. And if there were
additional tariffs imposed, then the manufacturer will be liable
for that additional money. They are going to contract that risk
with their customer, right. They're going to say, "Hey, there's a
risk here," right. "And so either you, customer, take the risk.
It could be 20%, it could be 200%, could be 250%. We're happily
bringing you some modules, if you want to take that risk."
Obviously, the customer is going to say, "No way, I'm not going
to take that risk."


David Roberts


How do you even price risk when it's, like, as we're saying, the
range of possible outcomes, the uncertainties are so broad, like
I wouldn't even know how to put a number on that risk.


Abigail Hopper


Well, I think that's what we're seeing, is that you are not alone
in being unable to price that risk. And so the alternative is
they're just not shipping here. Every conversation I have had
with a customer, a developer, a residential installer, a CNI
company, their number one challenge is they cannot get modules.
They cannot find modules. It's not a question of "the modules are
too expensive," right, because that at least you could make a
determination of whether the project can bear additional cost.


David Roberts


Right.


Abigail Hopper


It is literally like, "I can't find them."


David Roberts


Yes. Actual prices do help the operation of markets, I've found,
like, having a numerical price does ease market transactions.


Abigail Hopper


Right. Did you have to go to special school for that to figure
that one out?


David Roberts


So then imports have dried up? Projects aren't being built? We're
only sort of a few months into this. What's happened so far?


Abigail Hopper


Honestly, I think the entire solar market is a bit in shock at
how quickly this has happened, but yes, the answer is yes.
Modules are not being imported into the United States. So even if
you had a purchase order, it's not necessarily being honored.
Domestic module suppliers, obviously, everyone wants to buy from
them.


David Roberts


Right. They must be kind of enjoying this, right? I mean, they
must be maxed out.


Abigail Hopper


So I will tell you what I'm hearing, which is that they are
definitely maxed out and, perhaps, some are not honoring
contracts, are renegotiating contracts because demand has gone up
so much.


David Roberts


Yeah, I'm sure they can get a premium.


Abigail Hopper


And a higher price, right?


David Roberts


Actually, I want to take a little factoid timeout.


Abigail Hopper


Sure.


David Roberts


Let's get, just as a marker here, so listeners can get a sense —
how robust is the domestic US solar manufacturing industry? In
other words, what percentage of the demand for cells and panels
and modules in the US could be satisfied by the existing domestic
manufacturing sector?


Abigail Hopper


So it's currently about 25%. So if you think about last year,
2021, we had about seven and a half gigawatts of domestic
production in the United States. That includes all technologies.
So first, solar technology as well as PV technology that's
covered by these tariffs. We installed about 23, 24 gigawatts
last year, so roughly 25%. The majority of US production serves
the residential market, the distributed market, and so it is not
25% of the utility scale market and 25% of the resi market. I
don't actually know off the top of my head what percentage is by
market class, but it is a much lower percentage for the utility
scale because that's not what is here in the US.


David Roberts


Right. So if you're cutting off imports from these four countries
in question, you're, even best case scenario, if the US domestic
solar manufacturing industry is humming along at peak capacity,
you're whacking off 75% of your supply, which can only result, I
would imagine, in prices from domestic manufacturers going
through the roof. Like they could ask, if this keeps going on,
they could basically get whatever price they ask, couldn't they?


Abigail Hopper


I mean, they could until the market can't bear it anymore, right?
And then those projects won't get built either. I think at some
point there'll be a cap. But you are right, it distorts the laws
of supply and demand because it's just such extreme pressure on
demand. Obviously, there's lots of companies that are looking at
supplier module manufacturers outside of those four countries,
right, and trying to track back their supply chain.


David Roberts


How robust is that? How concentrated is manufacturing in those
four countries? Is there a robust manufacturing capacity outside
those four countries that are not subject to tariffs?


Abigail Hopper


So the majority of US imports come from those four countries.
There are other places that have manufacturing. Because the US
doesn't have kind of — they've not been the majority of our
imports. There's not the same kind of quality assurance or kind
of bankability or comfort level with performance. And so there's
a lot of that kind of work happening right now.


David Roberts


I bet they're scrambling too. Like solar manufacturers in
whatever other country must be excited about this. So projects
aren't being built, things are not being imported. Consequently,
US coal burning is on the rise for the first time in years. Super
exciting. There was an Indiana utility that announced that it's
going to keep its coal plants open several years longer than
planned because the possible spike in solar prices. It's going to
screw up a lot of utility plans, like a lot of utilities are
planning big shifts to solar, and this could potentially throw a
wrench in all those plans.


But let me ask this. The effects we're seeing now, as you're
saying, are largely a result of uncertainty, just because no one
knows how this is going to go, and there's such a wide array of
possible outcomes. So let me ask this. If the case doesn't go
your way, if Commerce finds in favor of Auxin, and these tariffs
are slapped on imports from these four countries, presumably that
would be damaging to the industry, but probably not as damaging
as this current fog of uncertainty. So in other words, I'm
asking, is the level of damage that's happening right now, that
will diminish somewhat just when there's some certainty, right?


Abigail Hopper


It obviously depends a little bit on what happens. And if
Commerce — a 10% tariff versus a 200% tariff, obviously, is a
very different outcome.


David Roberts


Right.


Abigail Hopper


The situation in Indiana, though, is really compelling for a
number of reasons. Because not only, obviously, is it troubling
that a carbon emitting facility is going to continue to emit
longer than was anticipated. But as you think about other
utilities that we're building, they put out IRPs, and they put
out a whole plan, and then they did RFPs to find lease cost
resources, and those were solar and storage usually combined. Now
we're impacting reliability, right? We're clearly talking about
carbon, which is critical, we're also talking about reliability,
and we're talking about rates to customers. And so the beauty of
the growth of solar is that we can impact the market.


And the challenging part is that we're going to impact the
market. If you take this fuel source out, or make it uneconomic,
it's going to have an impact on ratepayers and reliability. And
that thread, I think, is something that hasn't gotten quite as
much attention, right? People think, "Oh well, half-built solar
projects in the middle of the desert, well that's not ideal." No,
that's not ideal. But so is like new generation not showing up
when it's supposed to, right?


Think about what's happening in South Carolina. That nuke is not
showing up when it was supposed to. And that's impacting rates,
well, that's a whole different reason, and impacting supply. And
similarly, if you take solar and storage, if you either take. It
off or push it out two, three, four years, what are we going to
use? How are we going to keep the lights on? What's the plan? We
had the Senior Vice President of SPP at an event two weeks ago,
and he and I were having this conversation, right? As they look
at their resource planning from the RTO perspective, and they
think about their queue, and then they think, "well, 30%, 40%,
70% of what's in the queue might drop out," because it can't show
up, because it's not getting built. That's a problem.


David Roberts


Maybe 20% of it, maybe 80% to 90% of it.


Abigail Hopper


Right.


David Roberts


Again, this is not a small uncertainty band that we're dealing
with.


Abigail Hopper


It's not.


David Roberts


I think when normal people hear about this, there's a number — I
don't know if there are any normal people listening to my
podcast. I think when normal people hear about this, they're
baffled by a number of things, one of which is Biden's allegedly
got this whole of government push for clean energy. It's one of
his sort of signature things. There's all these things he's doing
to advance clean energy, and then there's this one thing that his
administration is doing which could sort of almost single
handedly just chop the knees out from under the clean energy
push.


And it just seems like that's bizarre. Why do that? But it's
worth noting here that there are legal like — well, let me ask
this, because I've been wondering about this — Once Auxin filed
the case, was Commerce sort of obliged to take it up, or did they
have discretion on that front?


Abigail Hopper


Obviously, they felt they didn't have discretion. They felt like
once the case was filed, they had to initiate. We have a very
different view of that, but it's water under the bridge at this
point. We are where we are.


David Roberts


Right, but you think they could have elected just to what, just
ignore it?


Abigail Hopper


Not ignore it, but just find that an investigation wasn't
necessary. The regs clearly indicate this, they also have the
authority and could have exercised it to initiate a case and then
issue a preliminary determination at the same time. They could
say, "You know what, we will investigate, and we're going to
issue a preliminary negative determination." Like, we don't
think, based on this petition, there's anything here. We'll
continue to take a look, right, through the rest of the
investigative process. But they obviously chose not to do that
either.


David Roberts


Yeah, they chose not to do that. And it's, like, the effects of
this, the effects of them taking it on and leaving this
uncertainty open are very predictable. So, again, I return to
being baffled. I guess, who has control over this? Could Biden do
anything? Is there anyone who can do anything other than the
people at the Commerce Department? And who are they, and what
would you like them to do?


Abigail Hopper


Yeah, well, first of all, I share the bafflement of the regular
people, or normal people, or whatever phrase you used. I don't
consider myself either regular or normal, but I certainly am very
baffled. In all seriousness, it is without a doubt the most
frustrating and maddening thing I've experienced in a long time
in my professional career, right. Just this juxtaposition of
rhetoric on the one hand and action on the other. And it is
enough to sort of put our hands up in agony, but yet we fight on
another day. But it is mind-numbing. I can tell you what
certainly should happen based on the statute.


If you can't tell, I'm a lawyer, so I'm super focused on sort of
what the statute allows. Obviously, this decision process is
bounded by statute and being governed by people who are very
attuned to what the statute allows and doesn't allow. And what
the statute provides is that the Secretary of Commerce, so to
answer your question, "Who's in charge," the Secretary of
Commerce will make a determination about whether this
Circumvention Petition is meritorious. And there's five things
for her to consider. I talked about one of them, which was
whether the processing was minor and insignificant. Even if you
were to determine, "Yes, all of these elements have been met and
there is circumvention," there's a fifth factor, which is, "Is
the imposition of tariffs appropriate?", right? And appropriate
is one of those words that lawyers love.


David Roberts


Yeah, exactly. You can sneak a lot through that door.


Abigail Hopper


Yeah. I think it's — like Congress wrote this statute, right. And
they know what the word appropriate means and sort of the
discretion it conveys and it gives the Secretary of Commerce. And
so I think, as the Secretary of Commerce is thinking about what
is appropriate, reflecting on what the President, as you said,
what the President's signature policy platforms are, how critical
addressing climate is to all of us as humans. Obviously, the
economic impact that this has, there's a number of things that we
think she should be considering as she determines the appropriate
remedy for any finding if she were to make one.


David Roberts


So in theory, she could look at this and say, "Yes, there's some
circumvention happening, but slapping a giant tariff on it would
screw up this administration's, one of this administration's
central goals, so we're just not gonna." She theoretically has
the discretion to say that.


Abigail Hopper


Yes, she does. The statute allows her to say that. We don't think
she'll get to that point because we don't think the first factors
are met, but even if she were to get to that point, she still has
the discretion to determine it's not appropriate. Your second
question about can Biden kind of, I don't know if you use the
word overrule, but ...


David Roberts


Well, can he do anything?


Abigail Hopper


Not really. I mean, I think the President kind of always has
ability to overrule his cabinet secretaries, but no one is
expecting that he would do that.


David Roberts


Like legally, he's supposed to allow Commerce to be independent
on this, right? I mean, that's the sort of idea.


Abigail Hopper


Yeah, that's the idea. That's the idea.


David Roberts


It's moments like this when I think back to the Trump
administration, and I think, "I wonder if Trump would be
restrained in interfering with such decisions by norms and
precedent." So what do — you have asked Commerce to basically
accelerate this process and basically issue an early decision
saying, "we're tossing this out." Commerce, as far as we can tell
thus far, is not taking you up on that. So at this point, are we
just sort of locked into a process where we get this preliminary
decision in August and then a final decision in January? Is that
schedule fixed at this point? Or do you think there is still any
open possibility that they might push it up or accelerate it?


Abigail Hopper


Yeah, so I don't characterize it personally as an early
determination, right. I think the statute allows them to take up
to 150 days.


David Roberts


Right.


Abigail Hopper


But there's nothing that says they can't act sooner. And in fact,
as I said, the regulations allow them to issue a preliminary
determination on day one. So all we're asking is that they look
at the precedent of their own department, right? They look at
what they have decided in prior cases and use that information in
a timely manner to get to a more rapid decision. So, so far, I'm
sure, you know, there's been an opportunity for people to comment
on the investigation, there's 30-day period, and now there's been
an opportunity for Auxin to respond and rebut those comments.


And we've actually asked the Department of Commerce to take those
60 days, 30 days, 15 days, and another two weeks to review
everything and act by the end of May. So what is it? It's May 19
today. I'm looking at my computer. So no, it's certainly not
fixed in stone. We do not think that we should all just resign
and wait until August. We're going to keep up the pressure
because as we talked about, it's having such a huge impact on the
market, that a decision earlier, rather than later, would be
extremely helpful.


David Roberts


Okay, so let's turn now to the sort of substantive question, or
kind of the philosophical question. Does SEIA agree with the
basic idea that it would be good for the US to have its own
freestanding, more or less, independent domestic supply chain for
solar technology?


Abigail Hopper


100%. Yes.


David Roberts


But, I shouldn't get diverted on this, but I wonder about that.
Everyone seems to agree on that. And I just wonder why though. I
mean, I understand that there's this larger issue of, like,
manufacturing got offshored from the US, and our manufacturing
sector is hollowed out, and we want to build it back up. But why
solar specifically? The world is full of products where the
supply chains are concentrated in particular countries, and we
just don't worry about it. It's just part of sort of like
specialization. It's part of the sort of advantage of capitalism
is specialization, and we get the cheaper products out of it.


And we don't worry that, when it comes to toasters or whatever,
that we're vulnerable because our supplier of toasters, because
toaster manufacturing is concentrated, might cut us off from
toasters. They could, but they probably won't because they depend
on our toaster money. That's what trade is. We're not vulnerable
to suppliers. Suppliers are also vulnerable to customers. It's a
two-way relationship. So I guess I just wonder, why do we need a
domestic solar manufacturing supply chain?


Abigail Hopper


Yeah, it's a totally fair question. I think I feel strongly that
we need a domestic manufacturing supply chain for the following
reasons, and I should not have said 100% quite so quickly. I
think you characterize it as — I don't think we need exclusively
100% domestic supply chain. I think we're always going to have a
global supply chain. But I do think it makes sense to bring back
more domestic manufacturing to the United States. And I think
that for a couple of reasons. I think one, certainly the last two
plus years, the challenges that COVID has brought with supply
chain, the increasing price of transportation, sort of the
vagrancies of workforce in other countries as things are
happening, we all saw, solar included, how depending on supply
from a particular part of the world or a particular country, it's
a risk.


It is a risk that perhaps we hadn't fully realized or fully
experienced before this.


David Roberts


And just tossing this in there too. There's the whole slave labor
question.


Abigail Hopper


Yeah, that was going to be number two.


David Roberts


Yeah. Sorry to cut you off, but I was like, "Oh, God, I don't
want to forget to, I don't want to forget to mention that." I'm
doing devil's advocate a little bit, but obviously this is a
counter consideration.


Abigail Hopper


But if you think about it, certainly, obviously slave labor and
forced labor has zero place in the solar supply chain. And I
think we've done a number of things which I'd be happy to talk
about. But if you think even a little bit more generally, the
integrity of the supply chain, the carbon intensity of a supply
chain, kind of all of these different attributes that customers
are caring about more deeply than perhaps they did five years ago
or ten years ago, I think that really lends itself to a more
transparent and onshored domestic supply chain. So I think
there's that.


And then I think third, it does go to customers, right? Customers
do want Us manufactured product, and if we can invest at scale,
like the at scale part is really important, I think we can
continue to get the price down, right, even for those customers.
Customers say they want US manufactured products until sometimes
they see the price, and then they think, "Oh, maybe I don't need
it." But scale, scale, scale, scale.


David Roberts


This gets to, like, I guess the broadest take on this issue,
which is just that it seems like there are two kind of
incommensurate impulses we have here. On the one hand, we don't
want slave labor. We don't want exploited labor. We don't want
people cheating in international trade. We want domestic jobs. We
want domestic supply chain and all this. But on the other hand,
it's just inarguably true that the US's progress, thus far, on
clean energy has depended on inexpensive solar from abroad, where
it's manufacture cheaper with cheaper labor. And of course,
that's great for solar installers in the solar industry and
everything, but it's also great for climate.


We want the transition to clean energy. So it just seems like
those two are in tension here. And I hear people arguing from
both sides, and either side seems to sort of find ways of
dismissing or talking around the other side. But it seems like
there's just no way around it. Like there's no way to solve that
equation. Like, you're either going to have a more robust
domestic manufacturing and more US made panels, that are more
expensive, or you're going to continue basically taking advantage
of cheap manufacturing, and cheap labor abroad, to more rapidly
install solar.


It just doesn't seem like there's a neat way of resolving that
basic tension. Am I wrong?


Abigail Hopper


I think you might be wrong.


David Roberts


I hope I'm wrong.


Abigail Hopper


I just don't think that, sort of past this prologue, is really
applicable here. If you think about how our industry is going, I
mean, I really believe it's going to grow exponentially over the
next decade and the next two decades. And so things that seemed
uneconomic and not scalable in 2015 are going to be very doable
in 2022 and 2025, right. So there's just this change in norms. I
think one of the things we've really been focused on is trying to
figure out what the US does really well in the manufacturing
space and harnessing our energy and our time and our resources on
those things.


And then there are things that other countries do really well. We
don't have to recreate every wheel here, but we should figure out
what's the most efficient.


David Roberts


Well, yeah, this is one of the things, even if it turns out US
manufacturers are really good at, say, manufacturing panels, the
raw materials are almost all coming from China, right? Like, the
rare minerals, all the early processing steps.


Abigail Hopper


Currently they are, but we have a lot of capacity to produce
polysilicon here in the United States.


David Roberts


But do we want to? Like, a lot of that sort of basic mineral
mining and processing business is really gross, and, like, China
is doing it for cheap. So even if we develop a robust panel
manufacturing industry, which would be great, we'd still, if you
choose to look at it this way, would be dependent on China for
the raw materials. Unless we also move that over here. But it's
just not clear that these sort of low rungs of the manufacturing
chain are some great prize. Do we want that in the US?


Abigail Hopper


Well, I think you have either intentionally or unintentionally
stumbled upon sort of the bigger question about the clean energy
transition, right. And like, yes, we all want solar panels and
wind turbines and batteries, but are we ready for the mining and
the manufacturing and all the other pieces that go along with it?
Same with EVs and all that stuff? I think there's a real question
about whether — I am on "camp yes," just for the record. Like,
yes, we do want that stuff, and we need to be cognizant of the
entire supply chain, but sort of embrace the fact that if we want
to have solar panels, we're going to have to use polysilicon, and
that means we're going to have to mine for metallurgical grade
silicon.


Right. Like, these things don't just happen by Fiat, they are
actually manufactured and mined.


David Roberts


Right. Somebody has to do them, and we want them done well, and
we want them done equitably, and we don't want them to be done in
a way that exploits workers. But it seems like one thing we could
do is, since we're a large market, we could just do things like
buying standards. Like we'll only buy raw materials from mines
and processors that can demonstrate that they pass some basic
standards, stuff like that.That would take care of the sort of
moral concern, and it still wouldn't require standing up a mining
and processing industry in the US.


Abigail Hopper


Right? Yes. We're actually working on a whole standard setting
certification at SEIA.


David Roberts


So say you do want to, as you do, and I think most people do want
to, enhance the US domestic solar manufacturing industry. Why are
tariffs — I mean, that's basically, despite what the sort of
technical justifications are generally, politically, that's the
motivation for tariffs, I think, the reason they get away with
them — why are tariffs the wrong tool to do that?


Abigail Hopper


We have a decade of experience to show that it just doesn't work,
right? Like, if it worked, that would be a different
conversation. But we have been tariffing product coming into the
United States, and it has not resulted in domestic manufacturing.
We have not talked, but we certainly could talk about the
domestic manufacturing incentives that are in the Reconciliation
Bill, right. The pieces that pass out of the House of
Representatives.


David Roberts


This is where I want to conclude the conversation, then. So if we
agree that we want domestic manufacturing, and tariffs don't
work, which I think is ... I had thought that was sort of
conventional wisdom, kind of common knowledge, but as I've been
reading about this, sort of like, I keep seeing tariff defenders
popping up out of the woodwork. But if we think tariffs are not
the right instrument to make that happen, what is the right
instrument? Because I just want to make a quick point here, which
is that when we talk about this, I feel like people are a little
glib about this, and I think people underestimate the distance
between where we are now and a robust domestic solar
manufacturing chain is not a small thing.


The idea that just like boosting the price of imports alone, it's
a little bit like the carbon tax discussion, right? Just making
fossil fuels a little more expensive on the margins is not going
to have the motive effect of building an industry, right? Like,
if you want to build an industry, you got to build an industry.
It's a very big thing to do and requires big policy to do it. And
people who say they want it, I'm not sure everybody's fully
reckoned with the size of the task.


Abigail Hopper


Right. Yeah. I agree with what you just said. I think that if we
really want to bring domestic manufacturing to the United States,
then we do need to embrace those big, bold ideas. And our
thinking, and obviously, having spoken to lots of manufacturers,
is that they need some certainty, right? It's not rocket science.
If you're going to invest hundreds of millions of dollars in a
manufacturing facility in the United States, you're going to want
some market certainty.


David Roberts


Yeah. That's not a small unit of investment.


Abigail Hopper


No. Sometimes I share your frustration. Most folks doing this
work are rational, economic actors, right? And they're making
kind of risk-reward calculations. Anyway, they need some
certainty. And there's nothing particular about solar that needs
certainty, right. If we were talking about pencil manufacturers,
right, they need certainty. But looking at what passed out of the
House of Representatives and what we worked on really closely
with them, it really is a long-term demand driver, right. So
long-term extensions of the investment tax credit, so you know
the customer base will be there. It is an investment tax credit
for the actual investment in the facility and then a production
tax credit.


And it's not just modules and cells, but also things like
trackers inverters, so covering more of the real high-value
pieces of the manufacturing base of production tax credit. It's
also woven into the ITC regime requirements for domestic
manufacturing to keep your refundability, your direct pay, as the
years go on, and then an adder for domestic content. And so that,
in my mind, is the whole of government, or at least the whole of
the tax code, perhaps, approach.


David Roberts


What's Ossoff's thing that deserves a mention in here? That's law
now, right? That passed? Or it's in the BBB?


Abigail Hopper


Yes, it is in the BBB. It is what I just described. The
investment tax credit for manufacturing investment and the
production tax credit for the production. That's Ossoff's bill.
So it's passed out of the House. It's sitting in front of the
Senate waiting a vote, as you know. That's not where you wanted
to land.


David Roberts


Well, avoid the Senate if at all possible, but apparently it's
not very possible.


Abigail Hopper


No, I don't think that's ...


David Roberts


Do you think, or does SEIA think, that what is in the House
version of the Build Back Better Act is to scale with the goal of
building a domestic manufacturing industry?


Abigail Hopper


I do. I think when you ... yes. And when you then add that to
some of the assets of the department of energy, things like the
loan guarantee program, things like the R&D spending at Cedo
and other offices, and the advanced manufacturing initiatives,
that — all of those tools that we have at our disposal, plus the
national labs, right, plus universities. As you said, this is an
ecosystem that we need to build. This is not just like, "Oh,
someone goes stick a factory and fill in the state." It is a
thoughtful and strategic ecosystem that needs to become
sustainable and self-reliant at some point.


And so, yeah, I think that what is contained in the House
provisions of Build Back Better, including Senator Ossoff's SEMA,
is going to be significant. We put out a press release a couple
of weeks ago about the manufacturers that have articulated ...
once that passes, they'll be making announcements and breaking
ground on manufacturing facilities. So it's not just kind of
theoretical. It's companies that have capital at the ready and
are looking to the US government to signal a long-term policy
certainty, so they can make those investments.


David Roberts


Do you have any I mean, getting into wild speculation here, but
if Commerce finds in Auxin's favor and slaps these tariffs on
these four countries, and we get something like the Build Back
Better Act, or something like, whatever we get, if those things
limp across the finish line, any idea how that would balance out?


Abigail Hopper


Again, it depends on the level of the tariffs, but I think it
would be sort of classic, like one step forward, one or two steps
backwards, right. It would be just an incredibly lost opportunity
if we were able to get provisions passed, and then handicap
ourselves with tariffs.


David Roberts


Right. So the most unanswerable question of all: what the hell is
going on in the Senate? And are you, I assume, SEIA is up there
lobbying or whatever. Do you have any insight into Senate
dysfunction that anyone else doesn't have? Do you have any
handicapping of the possibilities here? What the hell is going
on? No one knows what's going on. Do you know what's going on?


Abigail Hopper


I know that myself and my team are up on the Hill lobbying
literally every single day, and having conversations with all of
the names that you read in the newspaper on a daily basis around
what's happening. After that, I don't have a lot more insight
than we're all reading in the news clips. They're keeping this
pretty close. The people that are negotiating on what is going to
happen, either on the clean energy side, specifically, or
generally on a reconciliation package. I think they learned some
really painful lessons at the end of last year, that, perhaps,
negotiating through the press was not a particularly effective
mechanism.


And so things are close, and I choose to take that as a good
sign, right. If there's enough at stake that we're not going to
talk about it until there's something to announce, I'm going to
choose to view that hopefully.


David Roberts


So you're just reading the tea leaves. What color is the smoke
coming out of the window?


Abigail Hopper


Exactly.


David Roberts


Well, thank you so much for coming on. This is such ... in an era
of screwed up things happening, it's just like, "Do we need this
one more screwed up thing happening, really, on top of everything
else?" So thanks for coming on and untangling it a little bit for
us. And maybe once something happens, who knows what that might
be, we can have you on to talk about the aftereffects.


Abigail Hopper


I love that. Thank you for your time.


David Roberts


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