Earlier this year, President Trump caused a stir in the U.S. solar industry when he implemented protectionist tariffs on imported solar panels and cells. While Trump’s decision may have seemed sudden and dramatic to the public, the main impetus for the tariffs actually occurred during the spring of last year. EnterSolar’s Director of Procurement, Edgar Lim, elucidates all you need to know about the solar trade case leading up to Trump’s decision and the impact of the tariffs on commercial solar projects moving forward.
Suniva, a majority Chinese-owned manufacturer of solar cells and panels based in Atlanta, Georgia, declared bankruptcy in April of last year. They claimed that they could not compete with the lower-priced solar panels flooding the U.S market from China and other Asian countries. Shortly after going bankrupt, they filed a petition with the United States International Trade Commission (USITC) under Section 201 of the 1974 Trade Act to seek protection from foreign solar cell and module imports (click here to learn more about Section 201 Case). SolarWorld Americas, a German-owned manufacturer of photovoltaic products based in Oregon that was also struggling financially, decided to join with Suniva in the trade case petition.
As a part of the petition, Suniva requested the USITC to impose significant tariffs on imported solar cells and modules. Third party experts in the solar industry, the Solar Energy Industries Association (SEIA), immediately responded, claiming that the U.S. solar workforce would be reduced by an estimated 88,000 jobs, or approximately a third of its current size, if the tariffs were imposed as petitioned.
After months of briefings and hearings conducted at the USITC by both sides (Suniva/SolarWorld versus the U.S. Solar Industry), all four USITC Commissioners found injury inflicted upon the petitioners caused by imported cells and modules. The Commissioners offered three sets of recommendations, one of which included a 35 percent ad valorem tariff on imported modules that would reduce incrementally over a four-year period. The recommendations also included a tariff-rate quota on cells for four years.
On January 22nd of this year, President Trump decided to implement a four-year tariff starting at 30 percent in the first year and declining 5 percent in each of the three subsequent years on both modules and cells. However, the first 2.5 Gigawatts of solar cell imports will be exempt from the tariffs throughout the four-year duration.
How does this impact solar projects in 2018?
This is only the second time in recent U.S history that a trade case has been petitioned under Section 201 of the 1974 Trade Act, which many view as a relatively ineffective instrument for trade policy. The last Section 201 investigation was in 2001 when U.S. steel makers filed a petition for tariffs on imported steel. Then-president George W. Bush placed a 30 percent tariff on imported steel that was originally intended to stay in effect until 2005, but he withdrew the tariffs early due to pushback from the World Trade Organization and adverse effects on U.S. GDP and employment.
Since the tariff announcement by President Trump, there has been a barrage of complaints and criticism from the international community, including trade allies of the U.S. It remains to be seen whether we will experience a similar outcome as the steel tariff’s reversal in 2001, but it will be several months before the results of the international trade negotiations play out.
There is no doubt that the tariffs result in increased pricing for imported solar panels. However, we have come to learn that current price points of imported panels are still competitive with respect to locally assembled solar panels. This is partly due to improved production efficiencies and downward trending prices of raw material. Moreover, solar panels are only one cost component of a completed solar project. An increase in module and cell pricing has little to no effect on the prices of the other components (inverters, wiring, racking, etc.) that comprise the installation of a solar array. The unfortunate outcome of this protectionist, anti-trade measure will likely be slower growth of U.S. solar installation jobs with little to no growth in U.S. manufacturing.
EnterSolar has always and will continue to utilize best value procurement strategies, which look at important factors, such as quality and bankability in addition to price, when selecting solar panel suppliers to partner with to ensure the long-term performance of your solar assets. Additionally, there are federal and local incentives in place that still support compelling project economics for solar. If you are interested in going solar, EnterSolar can provide a tailored, complimentary technical and financial analysis based on your real estate portfolio, energy usage, and available state and utility incentives. EnterSolar is agnostic to project structuring and provides a turnkey solar solution for corporate clients. You can reach us at email@example.com or 888-225-0270.