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 details
Photo by Dennis Schroeder / NREL
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.
U.S. manufacturers
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.
Texas-based Mission Solar Energy plans to hire back employees
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.
U.S. markets
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.
Photo by Dennis Schroeder / NREL
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.”
Future issues
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.
What bothers me more than tariffs, which conceivably could reduce the environmental impact of shipping the panels around the world, maybe allowing better labor and environmental practices, is intellectual property. Suppose a company wants to produce panels for profit and build some kind of empire style company with golden parachutes and stockholders, so it is illegal for the smaller guys with better hearts to use their manufacturing knowledge in a more ethical way. Cheaper, smaller, not shipping anywhere except in their own region. It is illegal for a competitor to create a more ethical company using the same technology, while progress globally is slowed down because the exchange of information is illegal. I think the fastest way to help the environment is to make all renewable energy manufacturing information public by law, not the status quo. If company A has super efficient cells, but mistreats workers, has a dirty energy supplier powering the manufacturing, and ships the panels by diesel across the planet, company B should be able to pirate their panel tech, but power the factory with a solar or wind farm, split the profit only among the workers, and supply only local projects. Usually taxpayers pay for part of the research through public universities anyway until it becomes privatized. Utilities like water, sewer, roads, electricity, maybe all of the research surrounding necessities like these should be open and public to create better business models. Isn’t patent law what is actually blocking US solar and wind manufacturing from flourishing? What do solar industry folks think about intellectual property? Is this not a little bit like hoarding a life saving medical formula? You want to stop climate change in 10 years or what? All of this scaling up, investing, legal wrangling, promoting, shipping, fancy contracts and leases…….lots of financialization going on. I feel that the industry is hiring financial people mostly and just subcontracting out installers but the technology itself is not widespread because somehow the attitude is too much about making money. for example, why can a university not produce and install it’s own panels? or a city? the city treats our waste water with public money that they use to build a treatment facility. Ok now I can dispose of my waste safely. Yet electricity is using the private market model and those Duke fracking fools are not giving us 1% solar. So imagine the city building a solar panel plant out in the country, just figure out how big of a solar farm it would take to power the manufacturing, then give them to all new buildings that the city permits or something. Public control of public information, publicly owned utilities, so I can cook dinner safely without contributing to climate disasters….I could care less about the profits of any one of the manufacturers I just want clean cheap RE fast and that means the financial people not squeezing profits out at every middle man. Every dollar given to shareholders is taken from consumers and workers. Pirate benefit corporations protected by law is what we need, or electricity through public institutions. The ridiculousness of putting tariffs on something that we shouldn’t need to trade for….import the pieces download the blueprints and cut out the banksters. Community colleges should be manufacturing panels to train electricians on how to install them in little low energy houses…..if its illegal to do this, we should break the law or change the law….if the lawmakers are taking dirty energy money…….what to do? I think we should maybe think about disobeying patent laws to get sued and try to convince the public the harms of IP……just musing…..any thoughts on this? It’s just so sick to think about how you really just need to melt some sand, slice it, and add some special techniques, very complicated, but private, secret, hoarded knowledge that keeps any normal person with less money completely cut out. Somebody just send all of the manufacturing techniques and plans from every company to Wikileaks for solar or something, it really annoys me that the tech is viable today but these corporations want to drag everything down into a financial nightmare of complicated rules that really should be broken for the benefit of the planet. oh its not a viable investment because you can’t make 5 or 10 % in absentee ownership for doing nothing physically useful in the production of the tech? give me the sand and the plans please we don’t really want to pay you for doing nothing every year until no one can afford it. Right? what is the material cost when you cut out the interest rates and pay cash for the materials to make just one panel a day, just enough for one building’s roof per day? how much in percentages of silicon, metals, etc, how many kw hours to produce that panel? give me some sunlight! like the actual manufacturing science, not this company investing this much for getting around this law, the public needs to know how to own this tech and bring it out into the open to scale down, not scale up. scaling up means I can’t make it in the abandoned shopping mall. appropriate tech like this could be smaller and more widely distributed in manufacturing. of course, we don’t want to start from scratch and just make some cheap low efficiency low quality youtube type of panels, we need professional engineers to give us all of their best research for free. this way there can be dozens of small high quality manufacturers locally along with the giant companies, we can see who does better. free the research and manufacturing techniques, take the ball away from these ball hogs and let the little players get a chance to play, secrecy is kind of suspect, sharing is caring, small is beautiful.
Let’s not over-react people. Don’t think people are going to stop buying solar just because of the tariffs. We’re signing a contract this week to get solar on our roof. The cost of clean is still cheaper than the costs we’re paying for traditional electricity.
TPP would have addressed this issue but with the backing of other pacific nations too
Welcome to the inverted logic of the GOP. Clean coal anyone?
Such a great article!!! I’m working in the solar industry for 4 years and I totally believe that we will make it…..some how the field is going to adjust to the new scenario.
Very informative analysis, indeed. With these tariffs it remains to be seen whether US will continue its position as second largest cumulative solar installed capacity country ( China clearly at the top spot). We are in total agreement with SEIA.
This will be a great lesson to learn for the Solar industry – although Solar Energy is rocking and marching ahead Globally. Pranav R Mehta
Chairman Elect, Global Solar Council (GSC) and Chairman, National Solar Energy Federation of India (NSEFI)
I think what’s been missing in this discussion is that the North American solar industry has benefited from cheap, imported PV modules largely because the Chinese solar manufacturing industry doesn’t have to play by the same rules as in North America. Chinese workers and the environment don’t get the same protections, electricity is still mostly from coal-fired plants, and the Chinese government gives manufacturers land to build on. It seems to me that we in the solar industry conveniently ignore the provenance of these cheap modules while waving our protective flag of environmental fundamentalism.
Don’t get me wrong, I am a solar supporter (I own a solar installation company) and know we need renewable energy ASAP to avoid a climate disaster. But, I got into this business to change the world, not make a more profit than I need to survive. And, that means looking at my effect on the ENTIRE world, not just the little corner I live in.
We will continue installing solar and making a difference, no matter what effect the tariffs have. Having been in the solar industry for nearly 20 years I’ve seen a lot worse. The indomitable spirit of the solar industry and necessity of what we have to do will carry us through.
Great Job Kelly – Thank you for the detailed update.
Looks like I picked the wrong time to pursue a career change to the solar industry.
Certain markets are still looking for just the right candidates. I believe in you, good luck!
This is the right time, Michael! Nothing like getting started in a challenging environment to become real experts and consultants. Move forward with it, Michael! We will prevail.
The tariff action out of this Administration is no surprise and its great political theater for the vast majority of people who believe this a real benefit to American workers. Its not. Tariffs are paid for by American workers/consumers.
Many factions in our society have been beating on the solar industry now for more than a decade. What it has done in the long term made our industry sharper, more competitive and more determined to move forward with solutions as the fossil fuel industry continues to struggle with declining production and/or increasing costs/debt loads. This will only continue going forward.
According to the GOP, there is always “Beautiful Clean Coal”… What a joke….
So, while some companies are rehiring a few hundred workers and maybe adding a few hundred more on the manufacturing side, there will be thousands of jobs lost ion the installation & maintenance side. Why can’t those numbers just be printed side by side and made more obvious. It’s not a trade off or “upgrade”, quite the opposite is true, gain 1,000 jobs in a factory and lose 20,000 field jobs. Seems that math is inverted the wrong way doesn’t it… such logic is beyond my ability to comprehend and I am sure I am not the only one. Am I missing something here ?