Trump’s Solar Tariffs

Less than ideal for the industry, but certainly survivable

Laura_Sanchez_Editor

The Trump administration’s decision last week to apply a 30% solar import tariff for crystalline-silicon solar cells and modules has been met with a broad spectrum of responses. While some expressed outrage, others felt that the decision could have been worse and may even present opportunities for industry expansion.

The tariffs come in response to complaints filed with the International Trade Commission in May 2017 by two foreign-owned US companies: Suniva and SolarWorld Americas. The enterprises both insisted that they were forced into bankruptcy because of competition from cheap imports.

The tariff rates are structured to reduce by 5 percentage points each year to 15% by the fourth year and offer exemptions for 2.5 gigawatts of cells each year. So what will they mean for distributed energy markets?

Some feel that the added cost will create barriers to solar deployments, while others believe that it may not be entirely destructive. In fact, several executives expressed confidence this week that solar is on such a well-established cost-reduction trajectory that the tariffs will have minimal impact. They see opportunities in systems design, supply chain, and finance models to reduce costs that, going forward, can be used to soften the effects of the trade restrictions.

Jules Kortenhorst, CEO of Rocky Mountain Institute, told Energy Manager Today that “…the unrelenting reduction in costs, not just of the solar panels itself but of the integrated costs of solar installations, will continue and will ensure that the new tariff only have a modest impact in the short run.”

However, one concern among industry insiders is that the tariffs will impact the cost of complete energy solutions that include solar generation. They explain that the solar component of any given project has a significant bearing on the economics of the entire system and added costs can be a deal-breaker. Therefore, some worry that a price increase may have a ripple effect beyond solar markets and impede the adoption of microgrids and decentralized systems.

“This is certainly a negative,” said Dr. Peter Lilienthal of HOMER Energy in a phone interview. “While the tariffs aren’t going to kill the industry, they will slow the growth rate.” From his perspective, any action that raises the price of individual components makes establishing the value proposition for microgrids more challenging.

GTM Research estimates that, overall, the US solar market will see a net reduction in installations of around 11% as a result of the trade and an average 10 cent per watt increase in year 1 prices for modules, stepping down to a 4 cent per watt premium by year 4.

Dr. Lilienthal also sees this as strengthening the rationale for the industry to shift to a more global focus. “The tariffs will hurt the US markets but not global markets. 90% of load growth today is outside of the US. My sense is that this may prompt companies to think globally.”

What are your impressions? How will the solar tariffs affect your organization?

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Comments
  • Mark A Hoppe.

    Hi Laura, I thoroughly enjoy your reports. I also want to say, I appreciate your balanced reporting by showing a couple of sides and options to the issues. This allows the reader to make their own conclusions! I am completely fed up with the larger media trying to sway options and politicize, especially on the liberal left. I am also a climate denier as there is no conclusive proof that a planet size climate such as ours can be influenced by human activity. If it were so, our atmospheric CO2 levels (which have doubled) should have already caused our extinction. All of these renewables are not going to make a bit of difference in the worlds climate and no one country can make a big enough difference to save everyone if it was true (The California lunatics are going save the whole world though . . .) Keep up the great work!

    Reply
    • Jonathan McClelland.

      Mr Hoppe,
      I am one of those California lunatics who is quite happy with the day to day improvement in the quality of my life because I installed solar hot water in 1991 and a photovoltaic system in 2001. My conventional gas water heater is still going strong 27 years later, due to its limited demand. They normally fail in less than 20 years, and my well water has a significant manganese content that would hasten that by about 30%. In other words, about 14 years. The PV has virtually eliminated my electricity bills, which gave the system a payoff of 8.5 years (not too bad, considering that mortgages are usually 30 years, and the fact that enough of us “lunatics” have installed PV has resulted in nearly eliminating peak demand brownouts and blackouts during hot spells. Maybe we aren’t single-handedly saving the world, but at least we’re doing something to move the needle in the right direction. 190 countries think that’s right, and Trump and his minions stand alone on this issue. A tariff on imported PV panels might slightly slow their ultimate (in conjunction with wind turbines) replacement of fossil fuels and large scale hydropower (which has its own negative environmental effects), but the economic math doesn’t lie. It is inevitable if fauna and flora continue to populate this planet.
      The sooner you accept this, the better your life will be.

      Reply
  • Bob Pope.

    It’s been my experience that tariffs are put in place to keep a level playing field for products made in the USA. When tariffs were put on car imports, car assembly and some manufacturing was moved here and created jobs, which I think is a good thing. I believe we need to think locally not globally on this issue, we’re trying to rebuild the US manufacturing industry. Solar technology was developed here in the US had we stayed the course we’d be the global leaders in Solar. I think the tariffs are a good thing.

    Reply

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