U.S. Trade Representative Robert Lighthizer on Jan. 22 announced that President Donald Trump approved recommendations that will impose tariffs on foreign manufactured solar cells and modules.
The recommendations, from the U.S. International Trade Commission, call for 30% tariffs on solar modules and cells in year one, declining 5% annually to 15% in their fourth and final year. The tariffs exempt 2.5 GW per year of solar panels but do not exclude solar modules.
The International Trade Commission’s investigation and recommendations were made in response to a complaint filed by crystalline-silicon solar PV manufacturer Suniva in May 2017 under Section 201 of the Trade Act of 1974 that argued that imported cells and modules had caused serious injury to the U.S. industry. SolarWorld Americas later joined the petition.
Suniva, which is majority owned by Chinese interests, has manufacturing facilities in Georgia and Michigan. The company filed for Chapter 11 bankruptcy protection in April 2017. Solar World Americas is the U.S. unit of a German company and has a factory in Oregon.
Solar World welcomed the news. “We are still reviewing these remedies, and are hopeful they will be enough to address the import surge and to rebuild solar manufacturing in the United States,” the company said in a statement.
But the tariffs were met with criticism by many in the solar power industry who fear they could slow the growth of U.S. solar power.
The tariffs “will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs,” Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, said in a statement.
According to a USTR fact sheet, solar imports grew by about 500% from 2012 to 2016 and prices for solar cells and modules fell by 60% prompting “most U.S. producers” to cease domestic production, move their factories overseas or to declare bankruptcy. By 2017, the fact sheet says, “the U.S. solar industry had almost disappeared, with 25 companies closing since 2012.”
The tariffs are in keeping with Trump’s campaign promises to strike a more aggressive trade posture with China and other foreign countries as a way of bringing back American manufacturing jobs.
The SEIA, however, says the tariffs will eliminate, not add to, American manufacturing jobs.
GTM Research estimates the tariffs will result in an 11% decrease in U.S. solar PV installations over the next five years, representing a 7.6 GW reduction in installed solar PV capacity between 2018 and 2022.
GTM estimates that the tariffs will result in an average $0.10/W increase in solar modules in the first year, stepping down to a $0.04/W premium by the fourth year. GTM expects the utility-scale solar segment to be more heavily affected than the residential and commercial segments, taking 65% of the expected 7.6 GW of reductions over the next five years.
Using data from the National Renewable Energy Laboratory, Timothy Fox, vice president at ClearView Energy Partners, estimates the tariffs could increase the cost of residential rooftop solar systems by about 4%, the cost of commercial solar projects by about 6%, and the cost of utility-scale solar projects by about 10%.
Investor-owned utility Duke Energy has major expansion plans for solar power, but the tariffs “will increase the cost of delivering that to customers,” spokesman Randy Wheeless said. He added, though that “It’s premature to say if that’s a major or minor increase.”
Fox also noted that U.S. solar manufacturing, as of 2016, only had capacity to make 2.8 GW of modules a year, which is less than 20% of solar capacity brought online in 2017. Domestic manufacturers seem unlikely to be able to increase capacity swiftly enough to meet future demand, Fox said.
Some foreign manufacturers may respond to the tariffs by opening U.S. factories. Bloomberg reported that JinkoSolar Holding of China and Neo Solar Power of Taiwan are studying that possibility while Hanwha Q Cells of South Korea has said it would diversify its sales away from the U.S. to avoid the tariffs.
“While tariffs may delay investments in solar generation at first, we think the long-term impact will be limited since the tariffs expire in four years and the recent pricing of solar energy for 2023 reached record lows,” Lesley Ritter, a utility analyst at Moody’s Investors Service, said. She also noted that the near-term impact will be partly mitigated by annual tariff declines, as well as by the exceptions for the first 2.5 GW of imports and the exemption of Canadian panels.
And while the tariffs are not as aggressive as some may have expected, “We are inclined to view it as posing greater trade risk for all types of energy, particularly if other nations establish new trade barriers against U.S. products,” Fox at ClearView said. He noted that China has demonstrated a “formidable capacity to retaliate” and that risk could be heightened if other U.S. industries feel emboldened to seek Section 201 trade remedies.