Last week, President Trump announced plans to impose $50 billion more tariffs on Chinese products, including another 25% on solar cells and modules. But thanks to Chinese actions in its own domestic market, the U.S. market will continue to boom.
By Andrew Sendy, CEO of SolarReviews.com
The state of the U.S. solar industry is changing so rapidly these days it’s difficult to keep up. One day it’s down. The next it’s up. And it all seems dependent on the actions of U.S. leaders and the leaders of other countries.
As we’ve written about elsewhere, the Trump Administration imposed 30% tariffs on imported solar cells and modules back in January. The resulting job losses and project slowdown had many solar leaders in the United States singing the blues.
And then China did something extraordinary: It slashed its own domestic market severely, meaning an unexpected oversupply of modules is about to come on the market. Suddenly, U.S. industry observers were bullish again on the solar market, and happy days were here again.
So what precisely happened in China and what effect will it have on the U.S. market? And furthermore, will the new round of tariffs imposed on Chinese products just last week undo all the good done by the sudden market oversupply?
The answer, it turns out, should be good news for consumers looking to go solar.
What is the current state of play?
As with most policies surrounding solar companies these days, that is not a simple question. Last year’s trade war led to the imposed tariff regime we have today. At present, that’s a 30% import duty on all solar modules coming into the United States.
While that is not strictly directed at cheap Chinese modules, logic tells us that they are the ones most affected, given that the Chinese are the dominant force in solar manufacturing in the world, at least as far as modules are concerned.
Just the debate over the tariffs cost 9,800 jobs last year and caused the bankruptcies of at least two major national residential installers. That made consumers nervous and helped stall many consumers’ decisions about whether to play their part in the renewable energy revolution.
We know from our own data that the consumer hesitancy was causing some of our partner companies distress, and that distressed us. But that distress may soon be coming to an end.
Didn’t China just devastate its domestic industry?
Yes, it did. And the devastation the government’s decisions have wrought on its own country could spell good news for U.S. companies and consumers.
To recap: The Chinese government earlier this month decided to stop building new utility-scale solar plants and reduce the amount of money electricity consumers were being paid to use solar-based electrical sources.
That’s a domestic issue, I hear you saying. What does that have to do with the United States?
Well, here’s what it could mean (and the smart commentators are pretty sure it does mean): With no growth in the Chinese domestic market, all those modules the companies are producing are going to have to go somewhere—and people believe that the majority of those modules will come in the direction of the fastest-growing solar market in the world…the United States.
The last time the United States saw an influx of inexpensive Chinese solar modules flood the market, the amount of solar installed here skyrocketed as prices for modules plummeted. If the same phenomenon happens again, look for prices for residential solar to drop slightly. And if that happens, that means it will be a great time for consumers to consider installing solar again. If this does happen in the next few months it will be relatively short lived, probably only a year or so, as eventually Chinese factories will slow production.
However, Chinese manufacturers can’t cut immediately because they have already signed contracts to buy the raw ingredients to make solar cells and solar panels, mainly refined ingots and wafers.
But did Trump just impose more tariffs on Chinese products?
It’s true that the Trump Administration decided to impose $50 billion more in sanctions, this time specifically on Chinese-made products. At press time, however, it’s not entirely clear whether those duties will include additional penalties on solar cells and modules or not.
If not, then it’s full speed ahead under the scenario we painted above. And if they are included, then the smart money says we won’t be significantly worse off than we were after Trump imposed the initial sanctions—meaning the industry will have adjusted to the price volatility and installations are bound to pick up.
Either way, despite what seems on the surface to be a chaotic time for the solar industry, for solar consumers, it might be the best time in U.S. history to install solar panels on their homes, particularly given the 30% federal solar tax credit is still available for another 18 months.