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January 11, 2011

Pentagon Can Buy Foreign Solar Panels

The New York Times recently reported about an important step forward with the Pentagon's plan to buy solar panels:

The military authorization law signed by President Obama on Friday contains a little-noticed “Buy American” provision for the Defense Department purchases of solar panels — a provision that is likely to dismay Chinese officials as President Hu Jintao prepares to visit the United States next week...

The new Buy American provision, created mainly by House and Senate conferees during a flurry of activity at the end of the lame-duck session of Congress, prevents the Defense Department from buying Chinese-made solar panels.

The American military is a rapidly growing consumer of renewable energy products, because it is extremely expensive and frequently dangerous to ship large quantities of fuel into remote areas of Iraq and Afghanistan.

The bill is the Ike Skelton National Defense Authorization Act for Fiscal Year 2011. Here's the relevant provision:

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.

      (b) Contracts Described- The contracts described in this subsection include energy savings performance contracts, utility service contracts, land leases, and private housing contracts, to the extent that such contracts result in ownership of photovoltaic devices by the Department of Defense. For the purposes of this section, the Department of Defense is deemed to own a photovoltaic device if the device is--

            (1) installed on Department of Defense property or in a facility owned by the Department of Defense; and

            (2) reserved for the exclusive use of the Department of Defense for the full economic life of the device.

      (c) Definition of Photovoltaic Devices- In this section, the term `photovoltaic devices' means devices that convert light directly into electricity through a solid-state, semiconductor process.

But dig a bit deeper into the NYT story to understand what the phrase "subject to the exceptions..." means in plain English:

Two prominent trade lawyers said in e-mails over the weekend that the law’s language meant that in practice, the Defense Department must buy solar panels from any country that signs the W.T.O.’s side agreement on government procurement. Earlier American trade laws require compliance with that agreement.

Virtually all industrialized countries have signed the side agreement, which requires free trade in government purchases. China vowed to sign it as soon as possible when it joined the W.T.O. in November 2001, but still has not done so.

The two trade lawyers said that the United States was within its rights to discriminate against Chinese solar panels in military procurement.

It's true. We have to exempt the 39 members of the WTO's Government Procurement Agreement from Buy America rules, which includes Korea and other major competitors. These exemptions also apply to an additional 13 countries with whom the United States has so-called "free trade agreements." They would apply to Panama and Colombia if President Obama adopts those Bush-negotiated pacts as his own.

All that's keeping the U.S. Buy America program from giving advantages to Chinese solar panels is a piece of paper (signing the WTO's procurement agreement). China could sign that piece of paper tomorrow, and get those benefits.

Why did U.S. negotiators ever agree to give away the store like that? So much for our bright future of domestic solar panel production.

(Also, the NYT story misrepresents the Buy America legislation. It doesn't prohibit purchases of Chinese solar panels. It just gives a price preference to U.S.-made panels. If Chinese solar panels are as little as six percent less expensive, U.S. authorities can waive Buy American requirements. Note that the Department of Energy has used another exemption - the so-called public interest exemption - to buy foreign made solar cells.)

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Comments

Don Juan of Austria

Thanks for the great analysis. It is clear that our trade policy needs a ground up redo. It is ridiculous that we can't insist on ordering solar panels for our military only from U.S. firms.

What moron would have given this provision away to our trading "partners"? Does anyone honestly think that U.S. firms, using U.S. labor, sell very much to the Korean government or European governments? And if so, enough to compensate for the loss of exclusive rights to the U.S. government market?

solar phoenix

There are a lot of morons that would give the provision away. Have you met the government?

Aija Ryhänen

That was a good news,in Helsinki Finland most of the electricity are coming from solar panel and it is really a good thing if they will buy it,now a days solar panel helps a lot of electricity companies on proving clean energy specially those who are echo friendly.

shapna

Solar is the 100% free and renewable energy and reduces risks of Global warming, Smog and Acid rain. Today, most homes and business industries are using solar panel for generating electricity, depends on their needs.

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