Pending Decision by Trump Could Pummel Growing Solar Industry
Conservative and clean tech groups unite against tariff that would drive up solar costs in the US
Update: On Monday, January 22, Trump announced that the US will impose steep tarfiffs on imported solar panels. The tariffs will start at 30 percent in the first year, and decrease to 25 percent in the second year, 20 percent in the third year, and 15 percent in the fourth year.
Earlier this year, a bankrupt domestic manufacturer of solar equipment brought a trade case in front of the United States International Trade Commission (USITC). The allegation? That foreign manufacturers of solar modules are unfairly hurting US manufacturing. A USITC recommendation to slap tariffs on solar module imports, a result of the case, now sits on President Trump’s desk — he is the sole and final decision maker on the issue. Such a tariff could significantly increase the cost of solar energy in the US.
photo by 100% Campaign, Flickr
The case — known as “Section 201” within the industry due to the relevant section of the 1974 Trade Act — stems from a complaint filed by Suniva, a Georgia-based manufacturer of solar modules, alleging that solar module imports are damaging domestic manufacturing. Suniva asked the government to impose tariffs or minimum-price-floors on imported solar modules. Although the manufacturer had already declared bankruptcy when they brought the complaint, they thought that a tariff could support the value of their assets. The Solar Energy Industries Association (SEIA), the main industry group for the solar industry, quickly came out against the petition request.
The case involves a lot of moving parts and competing motives by the involved parties. SQN Capital Management, an “alternative investment manager” and Suniva’s main creditor, forced Suniva to file a complaint with the USITC as a condition of their bankruptcy filing. In a letter to a Chinese trade group, SQN then tried to leverage the trade case into a buy-out, suggesting that if Suniva’s equipment were purchased that there would then be nobody left to pursue the case. But the buy-out never occurred, and the trade case has been moving along. Suniva was later joined by SolarWorld Americas, another bankrupt solar manufacturer.
Because the economics of solar are often thin, putting a tariff or price floor on solar module imports would lead to price increases that could damage the ability to economically install large solar facilities. Industry analysts projected that 88,000 jobs and nearly 50 percent of projected solar installations would be at risk if Suniva’s requests were met, a huge blow to communities and the climate. A prominent lawyer for Stoel Rives, Morten Lund, told GreenTech Media that new tariffs could “completely obliterate the utility market” in states like Texas, in reference to large utility-scale plants that sell into the wholesale markets.
Before the final USITC ruling, the case pitted Suniva, SolarWorld, and First Solar — which also has large domestic manufacturing operations — against almost the entire US solar industry, including large firms such as SunPower and SunRun. The broader solar industry has argued that the three solar manufacturers failed due to poor business acumen and low quality products. They say the companies were targeting the wrong business segments with their products, and ultimately failed for other reasons. SEIA was also concerned about the 260,000 other jobs that would be impacted by a ruling, including those of installers and domestic component manufacturers.
The case has also brought out some strange bedfellows: conservative anti-regulation groups like The Heritage Foundation and the Wall Street Journal editorial board came out against a ruling alongside clean tech and environmental groups. Sean Hannity even made a commercial laying out why a finding would be bad for the USA.
At the end of an editorial on the subject, the Wall Street Journal concluded that “solar tariffs would be another destructive exercise that benefits a handful of Suniva and SolarWorld investors at the expense of everyone else — including the rest of the solar industry. This is protectionism at its worst.”
However, the arguments were for naught. In late September, the USITC found “injury” to the bankrupt companies. On October 31, the commissioners came out with their recommendation, and in mid-November they forwarded the recommendation to President Trump.
The USITC commissioners prepared a proposal for the President. Fortunately, it was less severe than Suniva’s original request: the proposal would add 10-13 cents per watt for imported solar modules, which would ultimately be passed onto the consumer. This would increase the price of an average residential system $600-800, and would have a significant impact on the viability of larger utility-scale power plants. Analysts project it would soften solar installations by about 10 percent.
Robert Lighthizer, the US Trade Representative who sits in the oval office and briefs the president on trade issues, accepted public comments on the tariff through midnight on November 20, 2017. At the end of the day, however, the final decision is up to President Trump. The President will have until January 13, 2018 to make a decision. For a president who famously quipped “Bring me tariffs!” in August of this year, it is unlikely he will not impose tariffs. The industry anxiously awaits his decision, as the final ruling will have a big impact on the growth of solar over the next few years.