Distributed Energy Resources

Trade commission’s ruling sets stage for possible tariffs on solar imports

Imported solar photovoltaic cells are causing “serious injury” to the domestic solar manufacturing sector, according to a Sept. 22 ruling by the U.S. International Trade Commission that sets the stage for possible tariffs on imports.

In a news release, the ITC said that it had “determined that increased imports of crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) are being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the domestic industry producing an article like or directly competitive with the imported article.”

Solar companies, utilities and others have warned that tariffs on imported solar components could drive up the overall cost of solar, stalling the fast-growing sector and costing jobs.

The case centers on an April petition brought by two domestic solar manufacturers — SolarWorld and bankrupt Suniva — that argued that imports were hurting their businesses.

The complaint was brought under section 201 of the Trade Act of 1974 that allows for up to four years of relief from imports of fairly traded products that cause serious harm to a U.S. industry.

The ITC agreed with the companies in a unanimous 4-0 decision. ITC Chairman Rhonda Schmidtlein, Vice Chairman David Johanson, and Commissioners Irving Williamson and Meredith Broadbent made affirmative determinations.

The ITC noted in the news release that when it makes an affirmative injury determination in a global safeguard investigation, it is required to make certain additional findings under implementing statutes for various free trade pacts, including the North American Free Trade Agreement with Canada and Mexico and the U.S.-Korea Free Trade Agreement.

With respect to imports from the NAFTA countries, Schmidtlein, Johanson, and Commissioners Williamson and Broadbent found that imports of crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) from Mexico account for a substantial share of total imports and contribute importantly to the serious injury caused by imports.

Johanson, Williamson and Broadbent made a negative finding with respect to imports from Canada. Schmidtlein “found such imports from Canada account for a substantial share of total imports and contribute importantly to the serious injury caused by imports,” the ITC said.

With respect to imports from Korea, Schmidtlein, Johanson, Williamson and Broadbent “found that imports of crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) from Korea are a substantial cause of serious injury or threat thereof.”

Public hearing scheduled for October 3

The commission is slated to hold an Oct. 3 public hearing on possible remedies to reduce the harm of imported solar panels. The trade commission must make a recommendation by November 13 on potential remedies, such as tariffs and quotas. Once the ITC submits its recommendation, President Donald Trump will have 60 days to make a decision. Trump has expressed support for imposing tariffs to protect U.S. manufacturing.

SolarWorld and Suniva want to see a 40-cents per watt tariff on solar panel imports, subject to a floor price of 78 cents/W, which would roughly double the cost of solar panels from the current market price, Moody’s Investors Service noted in a Sept. 21 report.

The report, released a day prior to the ITC ruling, looked at implications from an ITC injury finding in the case.
In the report, Moody’s said that the imposition of tariffs would likely affect the pace of decarbonization in the U.S. “by delaying investments in solar generation and, in turn, extending the life of some coal plants.”

The report notes that many utility companies “have announced plans to make meaningful investments in solar generation as a means to help meet their future generation needs.”

Examples listed in the report include investor-owned NextEra Energy Inc., a Florida utility, which has plans to build up to 5.4 GW of solar generation through 2020, and North Carolina-based IOU Duke Energy, which plans to procure 2.5 GW of solar generation over the next five years.

“Many of these projects will likely be put on hold if the solar economics change and these investments are no longer competitive relative to other sources of power,” Moody’s said.

Implications for U.S. solar asset-backed securitization market

Moody’s said that the imposition of tariffs on solar panels would further stall the US solar asset-backed securitization, or ABS, market.

“A decline in rooftop solar installations owing to the imposition of tariffs would likely decrease solar companies’ originations volume of rooftop solar financing contracts, including loans, leases and power purchase agreements,” it said. “Originations would decline because the tariffs would increase PV system costs and therefore decrease the economic savings that new solar customers would receive from financing PV systems.

As a result of lower contract originations, US solar ABS issuance volume would decline further from the already low level in 2017.”

Solar sector has seen rapid growth

The threat of tariffs come as the solar sector is seeing rapid growth, driven by a sharp drop in solar costs, Moody’s said.

Installed solar capacity has jumped from less than 1 GW in 2008 to about 30 GW currently, and the industry “is expected to keep growing at a fast clip,” with the assumption that no trade barriers are imposed.  “Some experts forecast an incremental 72.5 GW of installed capacity, double current levels, being added between 2018 and 2022,” the rating agency said.

Earlier this month, the Solar Energy Industries Association, which opposes adopting tariffs or quotas in solar imports, reported that the U.S. solar sector installed 2,387 megawatts of solar photovoltaics, the largest total in a second quarter to date. This topped the first quarter 2017 total and represents an eight percent year-over-year gain, GTM Research and SEIA said.

Moody’s said that the “precipitous decline in the cost of solar panels and modules has been the driving force behind the rapid adoption of solar generation.”

According to Moody’s, since 2010, the price of utility scale solar PV system cost has gone from $4.57/W in 2010 to $1.03/W in the first quarter of 2017, a 77% reduction in price. Other segments of the industry like residential and commercial solar have similarly experienced material reduction in price as well, with the costs falling to $2.8/W and $1.85/W respectively, the rating agency noted.

“All this will change if the ITC finds that the influx of imported CSPV solar panels has been the ‘substantial cause’ of injury to the domestic panel manufacturing industry as the plaintiffs claim. The US solar industry has grown to rely on cheap imported panels to meet demand and compete with other sources of electric power,” Moody’s said.

Governors weigh in

Prior to the ITC ruling, the governors of Colorado, Massachusetts, Nevada and North Carolina sent a letter to ITC Chairman Schmidtlein “to express our opposition to Suniva and SunWorld’s Section 201 petition requesting a high tariff on imported crystalline-silicon solar products and high minimum price floors for imported solar modules.”

The “requested tariff could inflict a devastating blow on our states’ solar industries and lead to unprecedented job loss, at steep cost to our states’ economies,” the governors said in their Sept. 21 letter.
“According to a study conducted by GTM Research, if granted, the tariff and price floors would cause module prices to double, leading solar installations – both utility-scale and consumer-installed – to drop by more than 50 percent in 2019,” they wrote.

“At a time when our citizens are demanding more clean energy, the tariff could cause America to lose out on 47 gigawatts of solar installations, representing billions of dollars of infrastructure investment in our states,” the governors said.

Along with SEIA, other parties that have opposed adopting tariffs or quotas in solar imports include Duke Energy, the National Retail Federation and the Heritage Foundation.

SolarWorld, based in Oregon, is owned by Germany’s SolarWorld Industries GMBH, which is in bankruptcy. Georgia-based Suniva is majority owned by Shunfeng International, a Chinese company.