Here we are, four months after 30% panel tariffs were placed on imported crystalline silicon solar panels. Who are the winners, and who are the losers?
Utility-scale contractors are hurting more than those in the residential or C&I markets because their work is more price-sensitive. Cypress Creek Renewables recently said it has canceled 1.5 GW of projects because the tariffs have made them uneconomical. That’s 20% of its project pipeline, and a significant number of contracting jobs.
Strata Solar has experienced similar setbacks in its national EPC work. Brian O’Hara, senior vice president of strategy and government affairs, said the uncertainty leading up to the tariff decision was a hard blow even in 2017.
“When we were going through the process of whether there would be tariffs, [it] injected so much uncertainty in the market that it drove prices up anyway and made it difficult to secure panels, difficult to plan for the future,” he said. “That’s behind us. We still have a bad policy with bad tariffs in front of us. There are projects that would have been economic without the tariffs that are no longer economic. We’re building less solar than we would have and employing less people than we would have without the tariffs.”
That’s a bummer about fewer megawatts installed in the utility-scale market, but at least we’ve entered an American manufacturing renaissance, right?
Although China-based JinkoSolar has started plans on a 400-MW panel assembly plant in Florida and South Korea-headquartered Hanwha Q CELLS recently said it is setting up a 1.6-GW module plant in Georgia, those projects aren’t contributing to a surge in American manufacturing today, right now. Chinese manufacturer CSUN confirmed with Solar Power World that it is expanding its Sacramento plant from 400 MW to 600 MW and should start producing U.S. modules this summer (the original plan was to begin producing modules in January 2018). Panasonic/Tesla has said it will pump out 1 GW of cells and panels from its New York facility, but ramp-up has been slow and unconfirmed.
That leaves only a handful of actually functioning American panel assembly sites today. Mission Solar has a 200-MW (soon to be expanded to 400-MW) plant in Texas, Itek Energy has 210 MW of manufacturing capacity in Minnesota and Washington, Seraphim Solar has a 160-MW plant in Mississippi (with plans for an additional 200 MW), with a few smaller manufacturers in between. They may all be jointly taking advantage of a 2.5-GW tariff exclusion on imported cells, but 2.5 GW is a drop in the bucket compared to the expected 61.3-GW demand of installed U.S. solar over the next four years. All segments will be importing tariffed modules.
“We’ve seen announcements, but it’s unclear to what extent capacity actually will grow,” said Dan Whitten, vice president of communications for SEIA, of manufacturing expansions. “We do know that any new manufacturing won’t begin to fill our nation’s demand for solar panels, so the increased costs of projects are real and unfortunate.”
When two “American” module manufacturers first requested tariffs on imported solar panels last year, they cited the need to safeguard U.S. manufacturing jobs and increase competition with foreign suppliers. Suniva (Chinese-owned) and SolarWorld Americas (German parent company) are both essentially kaput now, even after the tariffs were initiated on their behalf. Suniva never climbed back from its bankruptcy filing, and SolarWorld was bought by SunPower in April.
American-headquartered SunPower has long been a critic of the tariffs, as they affect its high-efficiency solar modules assembled in Mexico and the Philippines. The company provided extensive documentation to the U.S. trade commission seeking exemption from the tariffs (no possible exemption decisions have yet been made). SunPower said without the exemption, it would have to lay off hundreds of non-manufacturing employees and halt a $20 million manufacturing expansion (possibly for its smaller California line).
In what may be an increased effort to show the U.S. government that it is all-in on American manufacturing, SunPower started the SolarWorld acquisition. The company plans to keep the SolarWorld brand name on certain modules but will manufacture its own high-efficiency modules out of the Oregon plant. SunPower hopes the government looks favorably on this acquisition and grants the tariff exemption, because the company still needs it. By restructuring its focus from large-scale project development to manufacturing, SunPower believes the tariff exemption will allow it to spend more money on R&D to produce a world-leading solar panel.
Losing R&D dollars
Solaria feels similar woes. The U.S. company manufactures the majority of its panels in South Korea but was already expanding its U.S. lines (right now at 40 MW capacity) before the tariffs were announced. Solaria produces a high-efficiency PowerXT module that is constantly being retooled for higher outputs. The current models top out around 350 W, but CEO Suvi Sharma said the company wants to push past 400 W. If only they didn’t have to pay tariffs on their Korean modules, they could invest more money state-side.
“Ironically for a U.S. company, it’s been quite disruptive for us,” Sharma said of the tariffs. “We’re writing checks to the U.S. government instead of investing in R&D. We have an aggressive technology and product roadmap. To meet that, we have had significant growth plans in R&D expenditure. Paying the tariffs has reduced money available for that. This is an unintended consequence of the tariffs. U.S. companies reducing R&D makes us less competitive in the long-term.”
There has always been special interest in Solaria’s product as it’s a premium U.S. module, but Sharma said there hasn’t been any more significant or meaningful interest since the tariffs were put in place. This may also be because Solaria caters to a residential and commercial crowd that hasn’t felt the pinch of the tariffs yet.
Maybe no one is looking for un-tariffed American modules because there are still plenty of pre-tariffed foreign modules in warehouses, waiting to be installed. Before the tariff went into effect, many distributors and installers imported large quantities of modules.
“We have been actively working on reducing our inventory levels as we believe that there is current oversupply in the market,” said Thomas Enzendorfer, president of distributor Soligent. “We see pricing for Q2 and Q3 deliveries to come in below pre-tariff product.”
Enzendorfer said the industry is currently reassessing the term “American-made,” and installers aren’t sure what the go-to brand is anymore. There are successful American panels that distributors have available, but they’re not well known enough to be requested as an American option.
“As more players such as Panasonic, JinkoSolar and others are setting up U.S. production sites, it will be a while before a clear and new ‘American panel’ will emerge on the market,” he said.
American-made in the residential market
Florida’s SolarTech Universal is trying its best to become that go-to brand. Director of marketing Nathan Rosenstein said the company plans to increase its original 80-MW manufacturing lines to 280 MW, a direct result of the tariff and increased interest in its high-efficiency modules.
“Premium modules have suffered due to the tariff, and we feel that a premium American-made module will help to bridge some of those market gaps,” Rosenstein said. SolarTech Universal is also working out a plan with an unspecified U.S. cell manufacturer for product starting in September. Although the 2.5-GW solar cell exclusion is more than enough to fuel U.S. manufacturers (until Hanwha and other new plants get going), SolarTech still wants a fully American product.
National residential installer Green Solar Technologies has always tried to install American panels and has a good relationship with SolarWorld that COO Edward Harner said he hopes continues as SunPower’s acquisition is completed.
“We’ve seen zero effect of the tariffs,” Harner said. “It’s been good for our business. We can go after the consumers who are more pro-American manufacturing and say we were part of this from the beginning.”
Green Solar Technologies testified in favor of the tariffs at an International Trade Commission hearing and still stands by its decision. Harner said the company installs SolarWorld on 90% of its projects, and when it does have to use imported panels, a total project increase of $1,000 on a 5-kW system barely registers with the customers. It appears to be business as usual for the residential market.
So here’s a tally, four months in to the tariffs:
Losers: utility-scale installers, module R&D
Neutral parties: residential installers
See news that also came out today: Why China’s abrupt halt on solar development may affect U.S. module buyers