Wednesday, January 23, 2019

Tariff to Pinch US Solar Growth; Factory Surge Unlikely

By Jason Fordney and Rich Heidorn Jr.

President Trump’s decision to impose tariffs on imported solar cells and modules may not spur domestic manufacturing, but it will boost costs, slowing the fast-growing sector, analysts said last week.

The tariffs, based on recommendations from the International Trade Commission (ITC), start at 30% for the first year and drop by 5% each year over the following four years, with the first 2.5 GW of imported solar equipment exempt.

solar trump tariffs

| SEIA

Bloomberg New Energy Finance and ClearView Energy Partners separately predicted the decision will boost the cost of utility-scale solar by 10% and home rooftop units by 4%. ClearView, citing data from the National Renewable Energy Laboratory, also predicted a 6% increase in the cost of distributed commercial solar projects.

GTM Research estimated it may cut U.S. installations by 11% over the next five years.

Expansion Plans

U.S. Trade Representative Robert Lighthizer announced Trump’s decision to impose tariffs on imported solar cells and modules and washing machines on Monday. Trump said they will create jobs in the U.S. “Our [manufacturers] have been decimated, and those companies are going to be coming back strong,” he said in a televised signing ceremony Tuesday.

Greentech Media reported that several of the 14 crystalline-silicon cell and module manufacturers in the U.S. have announced expansion plans: Texas-based module manufacturer Mission Solar Energy, which had to lay off workers in early 2017, said last week it is hiring 50 new employees to increase production and move to a 24/7 schedule. Earlier this month, California-based Solaria announced it had raised $23 million in financing to expand its manufacturing capacity. Tesla said last week it is “committed to expanding its domestic manufacturing” at its Gigafactory 2 in Buffalo, N.Y. And SolarWorld Americas of Oregon, one of two petitioners in the ITC case, resumed manufacturing in September after the commission ruled in its favor. The company says it will add 200 workers by the end of the year. (See Trade Panel Rules PV Imports Hurting Domestic Manufacturers.)

Skepticism

But some analysts said Trump’s move — even if it survives a potential challenge before the World Trade Organization — is unlikely to seriously dent the dominance of Chinese manufacturers, whose share of global solar production grew from 7% in 2005 to 61% in 2012, according to U.S. government statistics.

“Anyone expecting a U.S. manufacturing renaissance as a result of these tariffs is set to be disappointed,” said Hugh Bromley, a solar analyst for Bloomberg New Energy Finance. “A tariff lasting only four years and ratcheting down quickly is unlikely to attract any manufacturing investment that was not going to occur anyway.”

The four-year limit “doesn’t give somebody much incentive to build a factory” in the U.S., agreed Varun Sivaram, fellow for science and technology at the Council on Foreign Relations. Sivaram, author of an upcoming book on solar power, said the U.S. and other nations should be leapfrogging China by investing in new solar technologies.

ClearView also was skeptical of a manufacturing boost, citing data from the Clean Energy Manufacturing Analysis Center, which found that the U.S. has capacity to manufacture about 2.8 GW of solar modules per year — less than one-fifth of the 14.7 GW of solar capacity brought online last year. “Absent nations that are exempt from today’s remedies, domestic manufacturers seem unlikely to increase capacity swiftly enough to meet future demand (or even last year’s actuals),” ClearView said.

Section 201 of the Trade Act of 1974 authorizes the president to create tariffs or take other actions in response to an ITC determination that increased imports are a substantial cause of serious injury to domestic producers. The tariff was the first action by Trump to make good on his campaign promises to revise trade rules to rebuild U.S. manufacturing.

Opening the Floodgates?

Trump’s decision drew fire from members of Congress in both parties and from conservative free-market groups, including the Heritage Foundation, the R Street Institute and the American Legislative Exchange Council. “There’s a real chance that this opens the floodgates” to other industries petitioning the ITC, Chad Bown, a trade expert at the Peterson Institute, told The Washington Post. Clark Packard, trade policy counsel at R Street, said he feared the increase in prices will lead to calls for more domestic subsidies for solar.

Others worried it could spur a trade war as the Chinese retaliate. ClearView noted that previous trade remedies imposed by the U.S. under Section 201 were successfully challenged before the WTO, most recently forcing President George W. Bush to reverse duties on imported steel in 2001. South Korea and China said last week they are considering filing complaints with the WTO.

Sens. Martin Heinrich (D-N.M.) and Thom Tillis (R-N.C.), who joined with 14 Senate colleagues in a letter opposing tariffs, said last week they are considering legislative responses to Trump’s decision. “There’s no doubt that this is a significant speedbump for our solar industry,” Heinrich said in a statement.

Job Losses

The Solar Energy Industries Association (SEIA) predicted the tariff will slash domestic solar output by 6.7 GW by 2021 and eliminate 23,000 U.S. manufacturing jobs this year. The group said that out of 38,000 solar manufacturing jobs in the U.S., all but about 2,000 make something other than cells and panels, producing products such as “metal racking systems, high-tech inverters, [and] machines that [improve] solar panel output by tracking the sun and other electrical products.”

imported solar trump tariffs solar growth

Solar job growth since 2010 | SEIA, Solar Foundation

SEIA CEO Abigail Ross Hopper said during a media conference call Tuesday that while the group was unhappy with Trump’s decision, it was relieved he didn’t impose tougher sanctions requested by SolarWorld and fellow petitioner Suniva. The ITC had recommended import duties as high as 35%. (See Federal Trade Panel Recommends Solar PV Quotas.)

“I think this administration really grappled with understanding that solar is creating more jobs in this economy than many other industries and many other energy sources,” Hopper said.

imported solar trump tariffs solar growth

| SEIA

Since 2008, grid-connected solar power has increased more than 38-fold to 42.4 GW, according to the Department of Energy, with more than 260,000 people currently employed. Solar’s share of U.S. electrical generation has risen from 0.1% in 2010 to 1.4% today and is forecast to exceed 3% by 2020 and 5% by 2022, according to SEIA and the Solar Foundation.

The cost to install solar has dropped by more than 70% since 2010, the groups said. In 2016, solar was responsible for 39% of all new electric generating capacity, besting all other technologies for the first time.

“There’s no doubt this decision will hurt U.S. manufacturing, not help it,” Bill Vietas, president of RBI Solar in Cincinnati, Ohio, said during the SEIA press conference. “The U.S. solar manufacturing sector has been growing as our industry has surged over the past five years. Government tariffs will increase the cost of solar and depress demand, which will reduce the orders we’re getting and cost manufacturing workers their jobs.”

Jessica Collingsworth, lead Midwest energy analyst at the Union of Concerned Scientists, said the tariff will hamper solar’s growth in Illinois under the Future Energy Jobs Act. The tariff “threatens the development under Solar for All, which is a job training initiative and solar deployment program for low-income and economically disadvantaged communities throughout the state,” she said. “More expensive solar panels will decelerate new solar installation, delaying Illinois’s transition to a clean energy economy.”

ITC Findings

The Trump administration contends that China has used its own incentives and subsidies to flood the U.S. with underpriced solar cells and modules, hurting domestic manufacturers.

The U.S. imposed anti-dumping and other duties in 2012 and 2013, but Chinese producers evaded those tariffs by moving production to other countries.

ITC initiated the latest investigation in May 2017, after Georgia-based Suniva filed a complaint citing domestic solar industry job losses and wage declines. The company, majority-owned by privately held Chinese firm Shunfeng International Clean Energy, declared bankruptcy last April.

The commission found that “artificially low” priced solar cells and modules from China have spurred solar growth in the U.S. and that China has used incentives, subsidies and tariffs of its own to dominate the global solar equipment supply chain.

“The ITC determined that increased solar cell and module imports are a substantial cause of serious injury to the domestic industry,” the White House said. “Although the commissioners could not agree on a single remedy to recommend, most of them favored an increase in duties with a carve-out for a specified quantity of imported cells.”

imported solar trump tariffs solar growth

Falling prices since 2009 | SEIA, Solar Foundation

Prices for solar cells and modules fell by 60% between 2012 and 2016. “By 2017, the U.S. solar industry had almost disappeared, with 25 companies closing since 2012. Only two producers of both solar cells and modules, and eight firms that produced modules using imported cells, remained viable,” Lighthizer said.

Community Solar Growth to Continue

Trump’s “announcement does nothing to slow the momentum or dampen the excitement for community solar,” said Jeff Cramer, executive director of the Coalition for Community Solar Access. “More and more states are turning to community solar due to its proximity to customers, innovation in product designs and strong customer demand. We expect these advantages, combined with strong state-level support for projects, will result in community solar being able to weather these tariffs and remain a bright spot in the U.S. solar market.”

Top