Is the U.S. Solar Boom In Jeopardy?

Jerri-Lynn here: This short post analyzes what the impact on the soaring U.S. solar industry would be of imposing a 35% tariff on solar panels, as recommended earlier this week by the U.S. International Trade Commission (ITC).  Although the ITC has recommended a tariff be imposed, the final decision rests with Trump, who has until January to determine whether to implement or ignore the ITC’s recommendation, or craft a completely different policy.

By Nick Cunningham, a Pittsburgh-based writer on n oil and gas, renewable energy, climate change, energy policy and geopolitics. You can follow him on Twitter: @nickcunningham1. Originally published at OilPrice

The U.S. solar industry has surged in recent years, accounting for the largest source of new electric capacity in the past year, with plenty of room to grow. However, the Trump administration is weighing a trade tariff that could seriously curtail the explosive growth figures for U.S. solar.

On Tuesday, the U.S. International Trade Commission (ITC) recommended a 35 percent tariff on imported solar panels in response to a complaint from a U.S.-based solar manufacturer over cheap imported panels. The trade case has been cited by the solar industry as one of the most significant dangers to its otherwise bright future, labeling potential tariffs an “existential threat.” Many solar project developers use cheaper panels imported from places like China, and trade barriers could upend the economics of new solar projects.

But all is not lost. The 35 percent tariff proposed by the ITC is actually less than what Suniva Inc., the company lodging the complaint, had asked for. Suniva filed for bankruptcy earlier this year, blaming a wave of cheap imported panels for its demise. Suniva wanted tariffs on the order of 32 cents per watt, which is roughly equivalent to the full price for a panel on a per-watt basis. The proposed 35 percent tariff would translate into about 10 to 11 cents per watt, about a third of the 32 cents Suniva wanted.

As a result, the solar industry is breathing a sigh of relief, having potentially dodged a massive bullet. “That’s below the price that people have been hoarding panels for,” Jeffrey Osborne, an analyst at Cowen & Co., told Bloomberg. “On the demand side, jobs cuts won’t be as bad as feared, but on the manufacturing side, job creation won’t be as big. This would have a limited effect.”

But it’s not as if the tariffs would have no impact. Adding 10 to 11 cents per watt to the price of a solar panel would set the cost structure of developers back to about September 2016, erasing a year’s worth of gains, according to Bloomberg New Energy Finance (BNEF).

Still, solar developers believe it could have been much worse. “Nobody likes to pay more for their products,” said Nathan Serota of BNEF. “But it’s hard to see how much better of an outcome the industry reasonably could have asked for.” For its part, Suniva said the ITC’s recommendation didn’t go far enough, and “we’ll see very shortly the extinction of what remains of this manufacturing sector, and the jobs of American workers.”

The recommendation is still just a recommendation, and it will be sent to the desk of President Donald Trump, who faces a January deadline to decide what course of action to take. He doesn’t have to adhere to the recommendation and actually has a lot of leeway to come up with a solution. He could do nothing, stick with the recommendation, or go further.

There are some unexpected alliances forming over the tariff fight. Conservative groups, often hostile to renewable energy, have come to the defense of solar developers. Ten conservative, free-market groups wrote a joint letter to President Trump to oppose any tariffs on imported panels. “If trade restrictions are imposed, the cost of solar products in the United States could double, endangering tens of thousands of good-paying domestic jobs within the solar industry,” the conservative groups wrote. The tariffs “would amount to nothing more than a crony capitalist giveaway to failing foreign-owned companies,” the letter read. Also, Fox News host and key Trump ally Sean Hannity has railed against the proposed tariff, blaming foreign companies for trying to “manipulate U.S. trade laws” to get preferential treatment from the White House. Suniva’s majority owner is a Chinese company.

For solar installers, the hope is that the proposed tariff doesn’t take away the substantial momentum that was built up in recent years. In 2015 and 2016, for example, solar accounted for 30 percent and 39 percent of total installed electricity capacity, respectively. That is a larger market share than any other source of new electricity, including natural gas (which had a 29 percent share in both years).

Costs have plunged by roughly 75 percent in the past eight years, and will continue to fall, making solar one of the cheapest forms of electricity in the near future. The trade barriers under consideration by the Trump administration might be the only thing that could slow the industry down.

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  1. cnchal

    . . . But all is not lost. The 35 percent tariff proposed by the ITC is actually less than what Suniva Inc., the company lodging the complaint, had asked for. Suniva filed for bankruptcy earlier this year, blaming a wave of cheap imported panels for its demise. Suniva wanted tariffs on the order of 32 cents per watt . . .

    Here is the punchline.

    . . . Suniva’s majority owner is a Chinese company. . .

    I have to disagree with Mr. Cunningham. All is lost.

    The Chinese government can buy anything it wants in it’s “business” disguise. They are buying up all sorts of companies, the latest is a huge Canadian construction company and eventually the labor conditions and pay that we “enjoy” will be eliminated and we can all expect to live like broiler chickens in a cage, just like Foxconn’s slaves.

    For the cherry on top, China is now a one man dictatorship. No questions or dissent allowed, and for those that have the temerity to do so, can expect to be shot. Power flows from the barrel of a gun.

    1. Jim Haygood

      Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era (习近平新时代中国特色社会主义思想) is the full, respectful name, comrade.

      Though as you doubtless know, I have proposed the more people-friendly formulation “Xi, Tea & Thee.”

      Don’t you love New Eras? ;-)

      1. Jim Haygood

        习茶&你 [Xi, Tea & Thee] … if I done it right.

        An exotic foreign touch, appropriate for a New Era, is imparted by the ampersand.

  2. oaf

    Solar tariffs will most hurt those who don’t receive subsidies, 30% Federal tax credits, or kickbacks from the Grid. *Homeowners* get a break; all others pay more. Renters who develop solar pay at least a third more; possibly more than twice as much.
    The Government might end up paying (at least) 30% of those tariffs for many who could afford to do so without assistance. That probably means the little person gets, uh, abused again, like usual…
    Ultimately; isn’t this just another case of price fixing???

  3. Scott

    The debate over solar panels is similar to all the other ones about foreign manufacturing. Manufacturers located in the U.S. and their employees are hurt by cheap, foreign-made products and complain to the government, hoping for some remedy. In response, the downstream industries, in this case the installers but retailers in the case of consumer products, line up in support of the cheaper product, stating how many jobs they produce. If it was Walmart making the case for Chinese electronics, who would more people side with? There is a reason that U.S. manufacturing jobs are disappearing.

    I’m largely ambivalent about the subject, but I’m mostly interested in seeing how the story plays out in the press and public opinion

    1. Altandmain

      Working in manufacturing, I generally believe that the working and middle class needs to stand up for each other.

      Otherwise, Wall Street and the rich are going to dominate us. You saw this starting with Reagan’s decisions on firing the striking air controllers in the 1980s. That set a very dangerous precedent. Since the early 1970s, real wages have stagnated for the middle class, while productivity has doubled. The rich have stolen all the gains for themselves.

      I think that the solar industry should be subsidized. Given the fact that global warming is a big part of the long term problems that we face,

      Let’s face it, the problem is that the rich on top are very greedy. This is the root cause for most of our society’s economic problems.

  4. johnnygl

    It sounds like we need to combine the solar tariff with tax hikes on the oil/gas industry and a ban on fracking. That should keep the solar installation business humming along, in spite of lower margins.

  5. JimmyV

    One thing that the article and a lot of people are not taking into account is the large amount of carbon that gets pumped into the atmosphere from cross pacific shipping. If solar panels were made domestically it would be much greener than importing them from Asian countries across the Pacific so I feel that there is actually a pro-tariff argument in favor of the environment here.

    1. JohnnySacks

      Diesel particulate from shipping is the least of the problem with Chinese solar panels. They’re poisoning themselves far into the future by allowing extremely toxic byproducts such as silicon tetrachloride to, basically, be dumped into their environment. Advanced industrial societies who are, sometimes in vain, trying to recover from the environmental sins of the past, mandate proper disposal of Toxic Solar Byproducts, adding a cost to their products which put them at a huge competitive disadvantage (by design).

      1. Anon

        Yes. Manufacturing single_crystal PV (solar) panels has toxic by-products. Though thin-film PV panels are much more environmentally “friendly”.
        While single-crystal PV dominates the market (85%) other types are growing in acceptability.

        How many jobs are created in automated PV manufacture? Probably not as many as in the design, installation, maintenance/service retail solar sector.
        Oh, and there’s that “sustainability” factor. Go Solar!

  6. Louis Fyne

    the one thing that has always irked me about solar, especially in blue states/municipalities, is that there are not many excuses left to mandate that if you’re Mega Lo Mart or with a building that’s more than xxxxxx sq ft, it must have solar panels covering y% of the roof.

  7. LyonNightroad

    I don’t think the EROEI on Solar is that great. Especially if you consider the energy currently provided by fossil fuels used to maintain all of the infrastructure needed to make solar viable. Those energy costs dont get included when we think about how viable solar is in the long run. Sure the panel pays for itself after several years, but then you have all the rest of the infrastructure and heaven forbid if you need to store that energy, any battery takes a lot of energy to produce and needs to be replaced frequently!

    Here is a study looking at this question:

    1. Troutwaxer

      Green infrastructure is growing irregularly, but that’s much better than having it not grow at all. Eventually we’ll have it all together, and an electric truck will haul an electric compressor to the all-electric jobsite to run everyone’s tools. Meanwhile, don’t pretend that irregular growth is a horrible obstacle. If anything, it is symptomatic of our governments not having a transition plan plus all the work that is being done to kill green energy.

  8. peter VE

    Storage facilities are missing in all the discussion about solar panels and the plummeting installed cost. Will Elon Musk actually be able to deliver all the Powerwalls he promises? How many more pumped storage facilities can be built? Has anyone actually shown us the numbers?

    1. JohnnySacks

      Until the day when solar production comes within 95% of consumption, those numbers are irrelevant in any context other than for usage in protecting the fossil fuel industry. Hopefully before then we’ll have some newer generation nuclear options to replace our 40+ year old technology pressurized water reactors such as liquid salt reactors from the likes of Transatomic Power on line to backfill our needs. If we don’t, China and other countries certainly will and we’ll be left whining in the back seat.

      1. JTMcPhee

        The problem, in among all the others like nuke waste and Murphy’s Law and corruption and bezzle that will invest every nuke project, is that word used as a trump card: “needs.” What you talk about servicing, in very large measure, is more accurately characterized as a whole lot of wasteful, needless, duplicative and destructive WANTS. And you know how likely it is that given marketing and pleasure seeking, those wants will just grow until the lights finally go out.

        Touching faith in technology to bring us nukes that will be cheap and safe. Like those folks at GE and Energy who told us the nuke power would be “too cheap to even meter.” In a neoliberal word, that’s going to happen? And will Tech somehow end the ascendancy of neoliberalism? Don’t think so.

    2. polecat

      Unless the battery storage issues are resolved ( a big if !) Then this subject is just water over the dam (sorry about the metaphor) … as it STILL remains to be seen if our civilization can run a society on such an energy source, WITHOUT reducing our entire way of living in this planet we call home, let alone the negative consequences/externalities of such technological processes on a planet-wide scale ! .. and that’s just ONE of a plethora of tech processes that are highly problematic as they relate to the biosphere.
      I just don’t see it as feasible … we can’t, all 7 billion of us, attain, AND maintain, a modern high energy consumption life-style. It’s an impossiblity, as if to believe in magic !!

  9. Helios

    Long time reader working in the solar industry. A couple of things to consider:

    1. For other manufacturing industries that participate in a finished dry goods market, tariffs on key raw material inputs harm resident manufacturers’ ability to not only export, but also be injured by finished goods importers not affected by such tariffs. But U.S. buyers of the panels affected by the tariffs described above are ultimately participants in the electricity market, which is strictly national, and ultimately are affected by competing against other forms of electricity generation (coal, nuclear, NG).

    2. By and large, if DT actually follows the USITC’s recommendations in his actions, demand will be affected some, but early calculations indicate it won’t affect the value proposition of any size solar plant that much in relation to other generation sources. So not as clear a slam dunk as before, but still a compelling investment from the homeowner up to the largest utility.

    3. If demand isn’t affected, DT gets to posture against the Chinese, but ultimately not affect severely job growth trajectories in services (construction, engineering, finance) or U.S.-based dry goods manufacturers (wiring, racking) that support solar, nor the dry goods producers’ ability to export to other solar markets. These jobs are now overwhelmingly in red states and red areas of blue states.

    4. Yes, Suniva is majority-owned by a Chinese group, but their DIP provider was a U.S-based private equity shop that also owned a tranche of Suniva debt, and it was this PE shop that forced the trade case filing. U.S. predatory finance is the most important part of this story, but gets discussed very little, IMO.

    So why any action if it won’t help the filers become dominant participants? Why any action if the amount of revenue generated from tariff collection is still relatively low? Why was it the Obama-appointed Dem on the ITC panel that developed the most strict recommendations?

    IMO, the only answer that makes sense is that the recommendations give some breathing room to the filers, maybe 1-2 years, to reduce their losses with a higher market price for their finished goods, and ultimately prepare their businesses to be sold off rather than liquidated now.

    In essence, another investor bailout that regressively impacts most those whose electricity consumption is a greater portion of overall spending capacity, i.e. the poor. I believe another “thanks, Obama!” is in order.

    1. cnchal

      . . . it was this PE shop that forced the trade case filing . . .

      Pirate Equity takes a cannon ball below the waterline, and abandons ship. Pension funds be damned.

      Do I have this straight? The solar panels made in China, the subject of these potential duties, is the same product that the Pirates have funded a Chinese company to produce in the US?

      If so, haaaaaaaaa, haaaaaaaaaaaaaaaa , haaaaaaaaaaaaaaaaaaaaaaaaaa!

  10. heresy101

    Unless the ITC bans panels that aren’t made in the US, it won’t matter.

    Other states will slowly follow California on its road to using renewables and hydro to be 100% GHG free. Check out Southern California Edison’s road map for the next 12 years. Even that laggard, PG&E, is being dragged into the future (although it may be forced out of business for starting all the fires in northern California).

  11. John

    Mixed feelings here. We will put 5kW of solar on the roof next year. I’m buying domestic from SunPower because they have the highest efficiency and most reliable panels. It seems like a good idea to restrict the lower quality panels, but I’m aware there may be unintended consequences.

  12. Mike R.

    Solar PV can play a significant part in reduction of global greenhouse emissions, but cannot solve the problem alone. The grid will still need to exist and utilities will still need to provide peaking power with whatever fossil fuels make sense. Plus we have the grid!

    Electric cars only really make sense if they are charged with solar PV. Otherwise, you’re simply trading a 30-40% fossil power plant efficiency against a 25% gasoline or 40 % diesel engine efficiency. What’s the point? Hybrids, different story. But solar PV charged electric vehicles….. that makes more sense.

    The biggest gain of all is conservation and reduction in energy usage. Period. No on talks about that much. Serious insulation and air sealing on houses. Grocery stores that don’t feel like a meat locker. On and on.

    Dumb ass America.

  13. lyle

    Intererestingly it turns out the current cost models show roof top solar costing a lot more that utility scale solar, costing between double and triple what utility scale solar costs. From Lizard’s 2017 report:… If you think about it, a lot of parts of utility scale solar scale much larger so the cost per watt is lower (not the panels but the inverters and the like) most of the difference is the cost is parts and the cost to erect the systems. Of course another piece is it is most sunny where a lot of folks don’t live like, in Eastern New Mexico and Colorado. Actually if you put the right transmission infrastructure in place you can mitigate the sunset fall of of solar in the east with solar power from the Mountain time Zone (2 hours or so difference).

  14. Tyronius

    Much is being made of a perceived lack of grid power storage. Denmark solved this problem long ago and elegantly; they don’t need power walls, they use the battery capacity of their citizen’s fleet of electric cars. The cars are charged with excess grid power and then during times when demand exceeds supply, like when it’s dark and the wind isn’t blowing, the grid draws a small amount of power from every electric car that’s plugged in- which is most of them at any given moment, considering the national push for plugs at home, shopping, office, etc. No one’s car is depleted, owners get credited for the power contributed and every car that’s plugged in anywhere in the country can participate.

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