The Department of Defense Authorization Act, 2011, was signed into law last week by President Obama. The full text of the law can be found here.
The act covers a broad range of Defense Department activities. And tucked into the act during the recent lame duck session of Congress is this little passage (italics mine):
SEC. 846. PROCUREMENT OF PHOTOVOLTAIC DEVICES.
(a) CONTRACT REQUIREMENT.—The Secretary of Defense shall ensure that each contract described in subsection (b) awarded by the Department of Defense includes a provision requiring the photovoltaic devices provided under the contract to comply with the Buy American Act (41 U.S.C. 10a et seq.), subject to the exceptions to that Act provided in the Trade Agreements Act of 1979 (19 U.S.C. 2501 et seq.) or otherwise provided by law.
That's right, it's the good old Buy American Act of 1933.
And amongst other things -- it means that the military can't use Chinese-made solar panels.
Uh-oh.
The Nellis Air Force base in Nevada has held the mantle as the largest solar installation in the U.S. for many years. Unfortunately, it's time to start dismantling that 14-megawatt trade problem since China's Suntech was the largest supplier of modules in that installation. Never mind that the photovoltaics provide a good portion of the base's electricity. [update and note: Nellis is not going to have to be dismantled, of course. I took some poetic license here and it's a PPA anyway, the AFB buys power, not product.]
We just published a piece on an innovative little startup building easily-transportable, on-site solar generation with huge potential to provide energy security to U.S. ground troops. But if those systems contain Chinese panels -- they are now a no-go.
Protectionism is tricky.
What if the solar panels are made in the Philippines by a U.S.-based firm like SunPower? What if the modules are made in Arizona by a China-based firm like Suntech? What about a German firm like SolarWorld building panels in the Pacific Northwest?
What if it turns out that the materials that go into those Chinese solar panels are American-made? The United States is actually a net exporter of solar energy products, with total net exports of $723 million in 2009, according to a just-published report from SEIA (prepared by GTM Research). The largest solar energy product export is polysilicon, the feedstock for crystalline silicon photovoltaics, of which the U.S. exported $1.1 billion in 2009.
So, by preventing the DOD from purchasing Chinese modules -- we potentially thwart the U.S. polysilicon industry.
SEIA's verdict on solar net-exporter status might come as a surprise to the "domestic-content" and protectionist jingoists in the U.S. Congress.
The U.S. is not the only government to play this game. Ontario, Canada has a generous feed-in tariff program but in order to qualify for the subsidy there is a 60 percent domestic-content provision. It's meant to foster domestic jobs and manufacturing, as are China's rules about manufacturing wind turbines with Chinese content in Chinese factories. The U.S. is fighting that losing battle in front of the World Trade Organization. Which is likely where China will take their grievance about the Buy American Act. Greentech Media Research Analyst M.J. Shiao has written about the solar trade balance and the WTO in this article.
China's President Hu Jintao is visiting the U.S. and meeting with President Obama this week and might make the green energy trade a discussion point during his stay.