By Scott Cramer, president of Go Solar Group
As the CEO of a small solar company relying on foreign imports, what I know to be true of our country and the solar industry casts a shadow on any frustration I’m supposed to have over the 201 trade case decision.
The solar industry is like America itself: Full of good intentions, strong, enduring, resilient and willing to fight to improve not just the human condition, but also the most sacred place in our nation’s psyche – the sole item preceding the white picket fence in the last and greatest components of the American Dream—our homes—which are now powered by solar in larger numbers than ever.
That trend will still continue year over year. I’m unfazed by the new tariff, and I feel many American solar companies relying on foreign imports have reason to feel the same.
It’s why logic tells me to ignore the cloudy, alarmist and overwhelmingly negative reactions to the ruling of the tariff. Because no matter what solar legislation is written into law, it can’t achieve its destructive intentions if they differ from the will of the overwhelming majority, who will find a way to prevail despite the International Trade Commission’s intervention.
Initiated by three entities that have all filed for bankruptcy at some point (President Trump, Suniva and SolarWorld), the tariff cannot harm the long-term future of 275,000 people employed in the thriving American solar industry because the overwhelming majority will find creative workarounds that spawn the innovation and resourcefulness our industry needs to secure its foothold in the future of renewable energy.
In hopes of helping other solar executives understand the opportunity to grow and prosper in spite of the tariff, I’ve outlined the below principles we must follow and remember if we are to move forward in the way I know we can.
Unpacking the 201 trade case
The first 2.5 gigawatts of foreign-imported solar cells will be excluded from the tariff, giving unprepared companies relying on foreign imported solar cells more breathing room than expected. To give you an idea of how much 2.5 gigawatts actually is, that’s roughly 5% of all solar modules installed in America in the third quarter of 2017; a significant figure to say the least.
Although America imports roughly 80% of its solar cells, making the tariffs loom large, there are upsides to the decision when we unpack the legislation piece by piece.
The 30% tariff issued is far less than the 50% tariff advocated by Suniva and SolarWorld, the two companies who petitioned the International Trade Commission to create tariffs. Although 30% seems like a lot, the bulk of American solar companies’ costs aren’t in panel imports.
Rather, the majority of costs go toward customer acquisition. After assessment software, staffing, lead generation, sales processes and operational costs are factored into the average solar company’s expenditures, the cost of American solar business will only go up by 10% as a result of the tariffs, and only for the first year the tariff is imposed.
The tariff will be reduced each year over the span of four years, and in 5% increments. This means that by 2022, the tariff will only be 15%, bringing the actual cost of operating an American solar business to a net price increase of roughly 4% in the fourth and final year of the tariff, making the hit entirely surmountable. Then the tariff goes away completely.
Tariff impacts on customers
The tariff will reveal which solar companies can be trusted to invest in the customer experience.
The payoff on rooftop solar takes years for customers to receive and sometimes decades to magnify, so it’s imperative consumers invest their hard-earned money in solar companies that are profitable enough to maintain a positive customer experience.
Given that the tariff will only cause job losses and cut corners in the customer experience for solar companies that have over-leveraged themselves with debt, consumers will be less overwhelmed by the options made available to them. They will therefore have an easier time picking from a smaller bucket of players that are capable of doing right by the customer.
This positive impact will only be magnified by reducing the amount of negative lead generation practices many solar companies engage in, from harassing homeowners who never expressed interest in solar to selling solar leads they know have no value.
Doing the math
Given the 2.5-gigawatt installation threshold before the tariff took effect, financially stable solar companies had plenty of time to import a large number of panels to offset the effect of the impending tariff.
It becomes easy to point a finger at the government when a trade case doesn’t weigh in our favor, but we must remember that the government has also done a lot to help residential solar, from federal to state tax incentives.
Although tariffs tend to have unintended consequences, if the tariffs achieve their intended results, Suniva, SolarWorld and other companies who felt hamstrung by the low cost of foreign-imported residential solar cells over the past decade will be back in the ring as competitors, creating more competition and therefore innovation. While that may not mean immediate return for American solar companies that have relied on foreign imports, it means a better outcome for solar prospects, which should be the objective of every American solar business.
Additionally, the tariff will bring solar companies closer to forecasting how price changes affect the real consumer demand for solar panels, a step the American solar industry must be able to make within the next five years if it’s to bring solutions to consumers at the appropriate price without federal and statewide incentives.
Although these incentives aren’t in immediate threat of disappearing, it won’t hurt our industry to learn how we can function without them. Subjecting our rooftop solar industry to a natural and domestic pricing environment will make this possible.
This becomes increasingly true if the future holds fewer solar tax credits and rebates. However, even if fewer tax credits and rebates for residential solar become a reality, solar company technology and innovation may be able to outpace the resulting hike in solar cell prices.
When major trade decisions that impact an entire industry are set forth by a select few and intended to benefit only a select few, the market will correct these small players’ mistakes, even if many fear the mistakes to be incorrigible.
Once the tariff has ended, we will be able to laugh at the fear it once caused our industry.
Scott Cramer is the CEO of Go Solar Group, a Utah Solar Company. Green Business has always been a part of Scott’s life. At the age of 11, Scott started Cramerco—a curbside recycling business. After graduating from university, Scott started Simple Solutions, an energy consulting firm designed to save business owners money and help the environment. Scott has immersed himself in solar since 2009 when he first saw the effect it could have on the lives of others.