For Domestic Manufacturing of Advanced Energy Technologies, DPA was Just a Start

Posted by Harry Godfrey on Jul 5, 2022 2:30:00 PM

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On June 6, in response to skyrocketing oil and natural gas prices – an effect of Russia’s invasion of Ukraine – President Biden took a pair of bold steps to kickstart U.S. production of secure, clean, reliable, affordable energy. Now the Administration and Congress need to follow through, ensuring the government’s deeds live up to the President’s words, and the near-term boost leads to permanent production capacity and manufacturing jobs.

Invoking the Defense Production Act (DPA), President Biden empowered the Department of Energy (DOE) to bolster domestic manufacturing of solar, heat pumps, power grid infrastructure, building insulation, and equipment for making and using clean electricity-generated fuels. At the same time, the President also announced that he would create a 24-month trade “bridge,” suspending tariffs for certain solar imports, to ensure that the United States can continue installing low-cost solar generation. The latter came in response to the Auxin investigation launched by the Department of Commerce, which has halted most solar imports, along with many projects that planned on using them.

AEE applauded both steps. Advanced energy technologies must play a central role in bolstering real energy independence for America, making us less dependent on the whims of petro-dictators like Vladimir Putin. As such, utilization of the DPA here is just and reasonable, which is why we called upon the White House to utilize the DPA in just such a manner in April. At the same time, ramping up domestic manufacturing will take time. To address the pain U.S. consumers are facing now, and restart stalled solar projects, it is critical to address the import freeze prompted by the Auxin investigation.

So now what? Just like swinging a baseball bat, follow through is essential for success. That is why, on June 29, AEE sent a detailed letter to the Administration and Congress laying out a series of steps they should take to ensure the President’s announcement is effectively implemented, and the kick-start it provides won’t be lost over the long run.

Under Title III of the DPA, DOE has a variety of powers to bolster domestic production, ranging from subsidizing the procurement of additional production equipment to making purchase commitments. The dollars in the DPA Fund, which finances these actions, aren’t limitless, however. So AEE is urging DOE to use two key principles when deciding which actions to take: First, within the scope of the President’s announcement, invest in technologies that will provide consumers with the most immediate rate relief; second, invest in technologies that are available and scalable today. DOE has a number of programs to conduct basic R&D, nurture nascent technologies, and bring them to viability, and AEE supports them. But DOE’s DPA actions should focus on the need today and deliver tangible results in the near-term.

At the same time, AEE also called upon Congress to substantially increase the resources in the DPA fund. Currently, the fund has approximately $430 million for disbursement. Although that may sound like a significant sum, keep in mind those dollars must be spread across all priorities identified under DPA announcements, from clean energy to baby formula. Moreover, the cost to ramp up domestic production of just one technology identified in the President’s announcement could consume a substantial share of that. For instance, industry experts project it would cost $170M – almost 40% of what’s in the DPA fund today – to add approximately 1.4 GWs per year of additional domestic solar manufacturing. And that’s just one of the technologies the President identified in his announcement. AEE applauds the House for including $100 million for the DPA fund in the FY ’23 bill to fund energy programs, but what’s needed is double or triple that amount.

Nor should Congress stop there. The DPA is a short-term policy mechanism, intended to address an acute national security issue. It can help kick-start advanced energy manufacturing in America, and bolster our national security, but additional policy is essential for sustaining this growth over the medium- to long-term. That is why, in this letter and in earlier outreach, AEE urges Congress to pass a set of smart, forward-looking policies that sustain this development.

First and foremost? Budget reconciliation. Establishing a new manufacturing production tax credit, as has been discussed in a reconciliation package, is one of the best policies to spur a manufacturing renaissance in America. Pairing that with sustained, predictable clean energy tax credits – i.e. the existing PTC and an expanded ITC – ensures there will be demand for domestic supply as production grows.  

While the Administration and Congress work to bolster manufacturing over the short, medium, and long-term, it is also vital that the Department of Commerce address the chilling uncertainty created by the Auxin investigation. In the near term, that starts by ensuring that the 24-month trade bridge announced by the President is fully implemented. Clarity is essential here to reassure international suppliers, which is why AEE’s letter details a series of clarifying questions Commerce should move swiftly to address, including: what statutory authority the tariff suspension is grounded upon; when the suspension technically begins and concludes; and what the suspension fully entails. Is it a complete waiver of any potential new tariffs – as AEE would prefer – or merely a suspension of the due date of payment for potential new tariffs?

But Commerce also needs to resolve the underlying issue. While AEE respects that Commerce must adjudicate Auxin’s petition in a fair and impartial manner, we would argue – as we do in our letter – that the Department is well within its rights to provide a swift and negative preliminary determination in the investigation. Indeed, if the Department were to find otherwise, the resulting additional tariffs would be deeply antithetical to America’s present national security interests and even run contrary to the intent of federal trade law.

A positive determination would decimate the U.S. solar industry and could cost the U.S. tens of thousands of solar jobs (e.g., developers, installers, electricians, and sales staff) while only “saving” a fraction of that number in manufacturing jobs at Auxin and the small handful of domestic solar producers. This is hardly an outcome that current trade law could fairly contemplate as it is designed to protect American industry. Fundamentally, as recent history has shown, tariffs and countervailing duties raise prices while failing to bolster domestic manufacturing. In the current moment, that would be the worst possible result!

President Biden’s June 6 announcement has unlocked a set of invaluable tools to help address rising energy prices, build greater energy independence, and grow domestic manufacturing. It’s now on policymakers in the Administration and Congress to follow through, ensuring the promise of his announcement becomes reality, and spurring an advanced energy manufacturing renaissance for decades to come. AEE stands ready to support them in that effort.

Download DPA Follow-Through Letter

Topics: Federal Policy, Manufacturing and Infrastructure