Now that the dust has settled from the expected (yet still disappointing) 30% solar cell and panel tariff announcement, where does the industry stand?
The tariffs are expected to take effect Feb. 7, 2018, and affect crystalline silicon cells, modules and AC/integrated modules. These products will be tariffed 30% during the first year of the four-year outline. The second year will see a 25% tariff, the third year will be 20% and the final year will have a 15% tariff. The first 2.5 GW of imported solar cells will be tariff-free each of the four years.
Working within World Trade Organization obligations, all Generalized System of Preferences (GSP) beneficiary countries that contribute less than 3% of total solar imports to the United States are excluded from the tariffs. Of notable exemption from the tariffs are Brazil, India, South Africa and Turkey (see a searchable list of where solar panels are manufactured here). Although the Philippines and Thailand are included on the list of GSP countries, they account for more than 3% of total imports and will thus still have tariffed cells and panels. As long as the collective share of GSP-manufactured imports does not exceed 9% of total imports, they will continue to be tariff-free.
The Office of the United States Trade Representative (USTR) should publish around Feb. 22 a set of procedures for requests for exclusion of certain products from the tariffs. It is assumed that producers of high efficiency modules (like SunPower) will request an exclusion, since they believe their modules do not compete with the cheaper modules typically imported.
Throughout this four-year plan, President Trump has the ability to make adjustments to the remedy. The tariffs are also subject to a midterm review, probably in February 2020.
All U.S. panel manufacturers will be affected, as solar cells imported for module assembly are tariffed. The first 2.5 GW of imported solar cells do come in tariff-free each of the four years and will help U.S. manufacturers boost production at a lower cost. There is no explanation of how those 2.5 GW will be allocated.
U.S. solar panels using U.S. cells would benefit the most. Tesla could be the biggest beneficiary (besides thin-film manufacturers), as its New York gigafactory also manufactures Panasonic solar cells. Tesla has a goal to achieve 2 GW of solar panel capacity per year, but the ramp-up has been slow.
Texas-based panel manufacturer Mission Solar Energy said it will be hiring additional employees to push its production lines to a 24/7 schedule. The company laid off close to 250 workers in 2016 and 2017, but this new announcement will enable Mission Solar Energy to “maximize its production output and operate at its full annual capacity” of 200 MW.
SolarWorld Americas (one of the original manufacturers requesting tariffs on imported products) started re-hiring 200 workers in September after some type of tariff seemed imminent. The company plans to have around 500 total American employees this year.
“We are still reviewing these remedies and are hopeful they will be enough to address the import surge and to rebuild solar manufacturing in the United States,” said Juergen Stein, CEO and president of SolarWorld Americas. “We will work with the U.S. government to implement these remedies, including future negotiations, in the strongest way possible to benefit solar manufacturing and its thousands of American workers to ensure that U.S. solar manufacturing is world-class competitive for the long term.”
Suniva, on the other hand, does not appear to be on the rebound, despite initiating the trade case. The company declared bankruptcy last year, and both LONGi and Canadian Solar have been in discussions about purchasing Suniva’s remaining assets.
China-based JinkoSolar recently confirmed reports that it is planning to set up a manufacturing plant in the United States. The plant is assumed to be part of a secretive project in Jacksonville, Florida, where an unnamed solar company has requested to lease 1.2 million sq. ft and hire as many as 800 people by 2019. The time to begin production and recover implementation costs puts significant earnings more than likely outside the four-year tariff roadmap.
SEIA has estimated that current U.S. panel manufacturers could only meet 20% of U.S. demand if all lines are operating at full capacity. So, each market is going to be buying imported modules. Panels are anticipated to see a 10-cent/watt increase in year one because of the tariffs.
While Bloomberg New Energy Finance analysts estimate total cost increases in utility-scale will be less than 10% and only 3% for residential systems, even slight increases can affect a project’s competitive advantage with other forms of electricity. GTM Research expects the U.S. solar industry to see an overall 11% reduction in installations as a result of the tariffs. It was originally projected that 68.9 GW of solar PV would be deployed over the next five years; with the tariffs, the new projection is down 7.6 GW to 61.3 GW through 2022.
Utility-scale solar will feel the largest effects as it is the largest installation market and the one most affected by module prices. GTM says 2019 will hurt more than 2018, since most 2018 projects had modules already warehoused. This year, utility-scale will see a decline of 525 MW while 2019 is expected to face a 1.6-GW decline.
GTM Research also predicts the residential market to decrease 9.9% (1.5 GW) and the non-residential (commercial) market to decline 10.7% (1.1 GW) through 2022.
Duke Energy spokesperson Randy Wheeless said the utility is looking into the new cost associated with going solar.
“We will continue to invest in this resource, but we are carefully evaluating the economics of each of our solar projects with a focus on minimizing adverse impacts on our investments and costs to customers while supporting the growth of renewable energy,” he said. “Duke Energy currently owns more than 800 MW of solar power capacity and plans to build and procure more than 3,000 MW over the next five years.”
As for job losses, it’s difficult to predict where those may be found, although one could look at regions with unsupportive solar policies. At the beginning of 2017, more than 260,000 people worked within the U.S. solar industry. SEIA is predicting a loss of 23,000 American jobs this year as a result of the tariffs.
“We need state governors, legislators and public utility commissions with huge solar workforces, from South Carolina to New York to California, to adopt policies and regulations to overcome the cost increases and job impacts from solar tariffs,” said Anne Hoskins, chief policy officer for Sunrun. “Now more than ever, states must step up so solar can continue to lead the transition to a more resilient and clean energy system.”
The next trade battles that could touch the solar industry would be felt by mounting and racking manufacturers. Both the steel and aluminum industries have launched Section 232 investigations into whether imported products are hurting the U.S. industry. The U.S. Commerce Department must prove that imports under Section 232 threaten U.S. national security (rather than cause serious injury to U.S. production, like with Section 201). Both decisions on any potential actions (including possible tariffs) should happen in April.