The White House said that it would be taking steps through the Defense Production Act to start ramping up domestic production of clean energy technologies such as solar panels and other components. In addition to directing the federal government with developing plans to buy solar products that are domestically produced. Lastly, the White House has put a two-year pause on any new tariffs on the solar industry.
Energy Secretary Jennifer Granholm had this to say:
For too long, the nation’s clean energy supply chain has been over-reliant on foreign sources and adversarial nations.
This pause has been considered to be a big win for the solar energy industry, specifically for domestic solar installers. These installers have outcried that the tariffs would slow down the Biden administration's goal of reducing carbon emissions by the end of this decade because it would reduce the flow of solar products into the U.S. The two-year pause delays the imposition of tariffs on solar panels from Cambodia, Malaysia, Thailand, and Vietnam, which are suppliers of the majority of photovoltaic cells to the U.S.
JPMorgan analyst Mark Strouse weighed in on the subject in a note to his clients, saying:
We believe the announcement will be a clear positive for our coverage, particularly within the utility-scale solar market, which has faced uncertainty since the U.S. Department of Commerce’s AD/CVD investigation was launched in late March.
But the ultimate goal is for the U.S. to ramp up its domestic production. Michael Stumo, CEO of Coalition for Prosperous America, a nonprofit group that promotes domestic manufacturing, said:
We’re getting dependent on hostile countries without sufficient domestic production to ensure against price hikes and supply shocks. Whether it’s medicine, or PPE, or solar panels, you’ve got to have domestic production.
Monday’s announcement from the Biden administration has had some critics, especially when it comes to Biden invoking the Defense Production Act. This act is a wartime authority that allows the president to direct industry to produce crucial equipment. Biden used it last month for the U.S. baby formula shortage. Some say that it isn’t quite the same when it comes to solar. However, the Biden administration is focused on clean energy and making sure the U.S. cuts the emissions it needs to by its deadline.
The U.S. has been lagging behind other countries committed to reducing carbon emissions. While it may not seem urgent to some people to implement actions to make clean energy alternatives a reality, if something doesn’t happen immediately, then it will be put off yet again. The Biden administration wants to increase domestic manufacturing of solar components and the industry, but until then, the administration would rather make sure that solar energy can become a reality. Solar energy companies will be able to start new solar projects and complete projects in the meantime while manufacturing gets built up in the U.S.
It will take some time for the U.S. solar manufacturing to be established, but once that does happen then reducing dependency on other countries will most likely become the next priority. On Biden’s announcement this week, solar energy stocks soared.
Sunrun (NASDAQ: RUN) rose 5.9%, Enphase Energy (NASDAQ: ENPH) surged 5.4%, SolarEdge Technologies (NASDAQ: SEDG), SunPower (NASDAQ: SPWR) gained close to 3%, and Array Technologies (NASDAQ: ARRY) experienced an increase of 18%. Other alternative energy stocks experienced strong gains on the announcements. We will most likely continue to see gains for solar stocks as the Biden administration continues to be focus on boosting U.S. solar production.
White House officials have said that the president’s actions are intended to increase domestic production of solar panel parts, building installation materials, high-efficiency heat pumps, and other components including cells used for clean-energy generated fuels. We could very well experience a resurgence of solar stocks as the government remains focuses on its clean energy goals and bringing manufacturing to the U.S.
Until next time,
Pro Trader Today