Cloud Cover – Solar Tariff
On January 22 a deep cloud descended over the solar industry in the United States, and the forecast isn’t good. The Trump administration will impose duties of as much as 30 percent on solar panels and modules made abroad, following a ruling based on a recommendation by the US International Trade Commission. Because only about 20 percent of solar panels are manufactured in the United States, the move is seen as a major blow to the $28 billion solar industry and could result in a serious slowdown in the quickly expanding renewable sector.
The move was pushed by two American solar manufacturers, Suniva, based in Georgia and currently in bankruptcy but owned by Chinese cell maker Shunfeng, and Oregon-based Solar World Americas, a struggling subsidiary of the bankrupt German firm, SolarWorld AG. Virtually all other companies in the solar industry, including installers and companies involved in related technology, are opposed to the tariffs. The new tariff will fall to 25 percent in a year, 20 percent in two years and 15 percent in three years, after which it will phase out entirely. The first 2.5 gigawatts of imports each year are exempt.
What will the effect of these tariffs be? At one extreme, people are forecasting disaster for the renewable sector and, as a consequence, for a large part of the economy and for the world environment. On the other hand, some observers, while acknowledging a short-term decline, don’t think the tariffs will be of serious consequence going forward. As for claims by some domestic manufacturers that the tariffs will add 100,000 jobs, few analysts other than those hired by domestic manufacturers believe the tariff will revive the panel industry in America. Optimists for job creation seem to have overlooked the fact that the tariff is temporary, hardly an inducement to investors thinking of investing in panel manufacturing, if there are any such investors left. Few analysts believe the manufacture of conventional solar panels will revive in this country, but manufacturers of thin-film solar, a second generation solar technology could actually benefit from the tariff. Thin film has been cheaper but less efficient than traditional crystalline silicon solar cells, but efficiency has significantly improved in recent years, and while it has accounted for a very small percent of market share, that could increase as the technology improves.
Abigail Ross Hopper, president of the Solar Energy Industries Association (SEIA), said the tariffs could decrease the 11 gigawatts of solar forecasted to be installed in the United States this year by 2 gigawatts and result in 6.7 gigawatts less solar over the next four years. She was also quoted by Reuters as saying “it means billions of dollars of lost investment, [and] 1.2 million homes that won’t be powered by solar.”
SEIA estimates the loss of 23,000 jobs in a sector that currently employs at least 260,000 people (some analysts put the number as high as 374,000); by way of comparison, coal mining employs 54,000. There were 38,000 jobs in solar manufacturing in the United States at the end of 2016, but all but about 2,000 of those made something other than cells and panels. The rest, or 36,000 jobs, were involved in the manufacture of metal racking systems, high-tech inverters, machines that improved solar panel output by tracking the sun and other electronic products. But insofar as the tariff will increase the cost of solar and depress demand, it will cost some workers their jobs with almost no chance those jobs will be replaced by an increase in the domestic manufacture of panels.
While there’s no doubt the tariff will hurt the solar industry, the results may be less devastating than the press suggests. Panels don’t represent a very significant part of the total expense for solar installations, something between 10 percent for large solar farms to about 3 percent for residential systems. And Trump has been threatening this tariff for some time, so solar companies have been stockpiling panels for some months. As a result, there’s already been an up tick in the price of panels, but the full effect of the tariff will be obvious only after supplies begin to thin.There’s no doubt the tariff will have a negative effect on the solar industry, which has been one of the biggest success stories for the U.S. economy over the past few years. On the bright side, renewables are now cost competitive with conventional energy sources, and public demand for them is exploding.