This opinion column was submitted by Howard Arey, owner of Texas installation firm Solar CenTex
It is time for industry leaders and advocates to think bigger about this Section 201 ruling. This means shaping the long-term path for our industry as an integral part of overall U.S. energy security picture rather than seeking the short-term status quo which seems to be all about guarding against a tariff and immediate job losses.
The 4-0 ITC decision is not the death knell for the U.S. solar industry, but it might be the start if we don’t look more strategically about our position in the energy sector. Undoubtedly, this vote has shaken up the successes of the last several years, but I’d offer this is necessary for the industry to move to an important new level to be part of any national dialogue regarding U.S. energy dominance. Solar must be part of this discussion, and if the best we have is, “We can’t lose installer jobs in 2018,” then we’re not thinking strategically enough.
Part of our struggle is that the industry is hyper-focused on this tariff case. Long-term, visionary pro-solar policy isn’t gained by “breaking the problem down” and attacking the issue. Instead, we must enlarge the problem set in front of us and see the challenge to our industry more systemically.
The 201 case is not isolated, but that is where our industry discussion centers. Parallel to the 201 case is comprehensive tax reform. We also have an opportunity since the Administration announced that energy security and dominance is one of its major “Make America Great Again” themes. We must position the full solar industry in the midst of this; a position within the nation’s critical energy infrastructure won’t be granted simply by saying jobs will be lost on the installation side.
Security means domestic capability and competitiveness for the full ecosystem of solar from R&D all the way to net-metering policy and technology. Right up front in this cycle is manufacturing. Of course there must be a robust, healthy domestic manufacturing capability if we want to be deemed a necessary component of U.S. energy security and dominance. It is hard to be energy dominant if we’re the global leaders in every aspect of solar… except this one little thing called “manufacturing.” There is a reason why our military has cultivated a national industrial base to build our ships, aircraft and tanks. We cannot be dependent on other nations to build and sell us items that are essential to our national security. If we want solar to be deemed essential, we must care about where the modules are manufactured.
Let’s look at this from an outside-the-industry view. A devil’s advocate position would question why we give tax credits (that directly reduce the tax revenue) that are supporting overseas module manufacturers that harm domestic manufacturers (and there is now a 4-0 vote saying they are being harmed!).
If I’m on a Congressional staff crafting tax reform legislation, why would I not use this 30% credit to lower corporate rates? If I’m advising the President, why would I not take a politically smart (and now defensible position–remember the 4-0 vote) and use reduced tax credits or tariff money to directly invest in natural gas pipeline infrastructure (“domestic energy!”) and move America’s plentiful natural gas around the nation and to export facilities?
Any analogy that solar modules are like other low-cost products we buy from China does not hold water if we look at this through the energy security lens. They’re not sneakers and flat-screen televisions; we must stop talking like solar is a consumer-good and instead refer, think and advocate for positions that bring us directly into the energy security discussion.
Objectively, the loss of the tax credit will be more of blow to the solar industry than any tariff on modules. This is a sure sign that this industry cannot stand on its own yet; we all remember the fight for the tax credit extension and how horrible we said it would be if not passed. To any outsider, today’s tax credit looks like a sweetheart deal for those who can afford solar. Despite studies that show how much the middle class gains with the tax credit, solar is still seen as something for the well-to-do. It definitely does not look like a credit essential to domestic manufacturing viability.
“Oh, but gas and oil get tax credits.” Yes, but they are masked upstream whereas this solar tax credit can look like a direct giveaway to the end user. Most importantly, the oil and gas industry–a national treasure that does not have a 4-0 vote against it during the ninth inning of comprehensive tax reform–has already positioned itself well with this Administration. Have no doubt, it is not going to throw solar a lifeline for the sake of energy diversity. We need to earn it.
Here is a smarter path forward for the long term:
First, we must acknowledge that a healthy and competitive domestic module manufacturing base is a critical component of the U.S. solar energy industry. That is how the dialogue opens, for only then can the Administration give an overt acknowledgement that solar and renewables are also essential to U.S. energy security. The recent Energy Department grid reliability study has already cracked the door open–let’s leverage this.
The solar industry should seek the Energy Department’s renewed U.S. investment in R&D toward the goal of making the tax credit unnecessary. Modules need to be twice as efficient as today’s models. I know there are so many other ways to get to solar cost structures that make a tax-credit unnecessary, but right now, it is all about solar modules (4-0!) and to the layman (or White House policy adviser), a 20-21% module efficiency level sounds pretty darned silly (“You’re only 21% efficient?”). The United States must design and domestically manufacture the world’s best solar modules.
As part of negotiations, our industry should seek tax credit “permanence and extension.” If solar manufacturing (modules, inverters and storage) is a critical national security industrial base of a critical energy security infrastructure, then seeking permanent relief is appropriate for we must protect it and ensure it is available to Americans no matter what. It is not too unimaginable to see a major war in Asia and the module price increases will be worse than any tariff. We must start producing domestically, and that should mean tax credit permanence in its current or manufacturing-focused form.
At the least, the industry associations should seek extension of the current tax credit to ensure the survival of the industry as minimum import prices and tariffs are put in place. January 2018 will be a much sadder time if full tariffs are put in place at the same time that the tax credits are eliminated across the board.
Finally, the industry must seek a delayed, incremental implementation of tariffs. Just because a tariff may be implemented does not mean it must happen immediately. With the acknowledgement from SEIA and others that advanced domestic solar module manufacturing is important, our industry can negotiate for deferred action since we just can’t turn on the manufacturing spigot. It will take time. The President has already demonstrated an example of deferred action on his cancellation of the DACA “Dreamers” executive action; we should take from this non-related action that he is pragmatic enough to delay specific threats he sees as necessary to bring about the important underlying action he really wants. In the DACA example, he wants the Congress to act. On this module tariff, he will want the industry to embrace domestic manufacturing.
This is not an about-face for the association leaders. But it can be the refined position they should adopt to ensure the long-term vibrancy of this overall industry.
The solar industry, and the nation, will be better for it.
Howard “Scot” Arey is the founder and owner of Solar CenTex, a Solar Power World Top 500 contractor in Texas. Prior to starting Solar CenTex, he was the chief of staff of Nexolon America, now Mission Solar. His interest in energy security comes after retiring from the U.S. Army after 25-years of national security.