Energy

A Looming Trump Decision Could Dim the Lights on the US Solar Industry

A recent trade commission decision could allow the White House to impose import tariffs on cheap, Chinese solar components, which might lead to an estimated loss of 90,000 solar jobs in the United States.

Employees of SPG Solar mount a photovoltaic panel onto a steel rack on top of one of seven public school rooftops on April 16, 2008 in Pleasanton, California. | Robert Nickelsberg/Getty Images
Employees of SPG Solar mount a photovoltaic panel onto a steel rack on top of one of seven public school rooftops on April 16, 2008 in Pleasanton, California. | Robert Nickelsberg/Getty Images

Inexpensive solar panels have helped fuel a boom in renewable energy. But a recent decision by a government agency might cloud that bright picture.

The US International Trade Commission has found that American-based solar manufacturers were damaged by cheap imports, opening the door to steep tariffs on photovoltaic modules. The buck will stop with President Donald Trump, who’s no fan of either renewable energy or what he calls “unfair” foreign trade.

The companies that brought the complaint to the ITC say more than two dozen solar-cell makers have shut down due to competition from overseas, particular China — where massive investments in renewable energy have driven prices down worldwide. But the broader solar industry opposed the ITC decision, with its leading trade association arguing that tariffs could cost nearly 90,000 American jobs.

“An increase in tariffs may very well still not make US manufacturing competitive,” Marilyn Brown, who studies energy markets at the Georgia Tech, told Seeker. “So the domestic market ends up with higher-cost solar panels, and still no domestic manufacturing.”

Solar energy provided about 1 percent of US electric generation in 2016, according to Energy Department statistics.

But it’s growing rapidly as prices fall, with output jumping 45 percent between June 2016 and June 2017. Companies that make and install solar systems now employ about a quarter of a million people, Brown said.

But the flip side has been that several companies have gone under. The most famous was probably Solyndra, which cost taxpayers more than half a billion dollars in federally backed loans when it went broke in 2011. Another was Georgia-based Suniva, which filed for bankruptcy in April after laying off nearly 200 workers.

Suniva and Oregon-based SolarWorld took their complaints to the ITC, arguing that imports were causing “devastating financial losses" that required federal intervention. They proposed a 40-cent-per-watt tariff on imported solar modules, along with a minimum price of 78 cents a watt.

“We don’t believe fair competition is going to destroy the industry,” SolarWorld spokesman Ben Santarris said. “What we want is a remedy that will solve this problem while continuing overall growth for the industry.” SolarWorld announced plans to hire 200 more people after the decision, even though the ITC has yet to decide what to recommend to the White House.

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A tariff could spur some companies to open factories in America, Brown said. But even that is a longshot. Any tariff the president approves would last only four years — much shorter than the timelines companies eye for investing in new factories — and a drop off in demand would make building an American plant less appealing.

“Already, we’re going to see, because of the of ITC decision, a great deal of uncertainty in the marketplace for solar,” Brown said. “There could already be an emerging dip in demand just in anticipation of a problem.”

The proposed penalties would basically double the current price of solar modules, said Roberto Rodriguez Labastida, senior analyst who leads distributed energy research for the consulting firm Navigant Research. That in turn would raise the price of residential solar systems about 13 percent — and the effect would be magnified for commercial and utility-scale solar projects, raising the price about 35 percent, Rodriguez Labastida said.

“Large end-users and unsubsidized installations are most likely to suffer more, as economics are a main driver for them,” he said. The proposed minimum price in particular “seems out of proportion,” he added: The European Union imposed a minimum import price on Chinese-built solar modules in March at the equivalent of 47 cents a watt.  

It could also make it tougher for utilities to meet state rules for renewable energy that are aimed at reducing planet-warming carbon emissions, Brown said. That could mean a bigger share for wind turbines than before — or it could spur state or local governments to step in with their own subsidies to keep solar in the mix.

Another possible result might be to spur more investment in research toward more efficient solar cells and cheaper systems, she said — “But everybody else seems to be losers.”

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The Solar Energy Industries Association said the rest of its members — about 1,000 companies — are opposed to jacking up import duties. SEIA President Abigail Ross-Hopper said tariffs could cut demand by about two-thirds, resulting in an estimated 88,000 layoffs.

“This really is not a case about a divide within the solar industry,” Ross-Hopper said in a press briefing. “This is a case of two companies bringing a petition about which almost the rest of the solar industry is in agreement in opposition.”  

The Obama administration also imposed tariffs on solar cell imports from China in 2012. But Santarris said the Chinese evaded those tariffs by purchasing components from other countries and assembling them domestically, or by setting up operations in third countries. This time, the proposed remedy would cover imports from most countries, he said — and industry leaders made the same claims about lost business and jobs five years ago, he said.

The SEIA also noted that Suniva and SolarWorld are themselves foreign-owned companies — Suniva is majority-Chinese, SolarWorld is based in Germany — and said they were victims of their own mistakes, not unfair competition. Santarris rejected that criticism, telling Seeker it was “blaming the victim.”

“Nearly 30 solar manufacturers have gone out of business, and we happened to be the two that are left to try to save the industry,” he said.

The ITC decision was roundly condemned by other figures in the US energy industry, including utilities planning solar projects and conservative groups who opposed tariffs on free-trade grounds. The American Legislative Exchange Council, which pushes conservative bills at the state level, called the ITC decision a protectionist move “that will ultimately harm the US economy and cost American jobs.”

“We urge the president, who will make the final determination on whether to accept or reject the ITC’s recommendation, to choose free market principles over protectionism,” said Karla Jones, who leads ALEC’s Task Force on International Relations and Federalism.

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Commissioners are moving swiftly toward a proposed remedy, urging organizations with a stake in the dispute to file briefs this week and scheduling a hearing Oct. 3. After that, they’ll send a recommendation to the White House by mid-November. That could include tariffs or other sanctions aimed at protecting solar manufacturers.

That will leave a decision in the hands of Trump, whose campaigned featured hostility toward trade he considers unfair to US businesses and full-throated disdain for renewable energy. He proposed slashing energy research along with most other scientific programs in his 2018 budget, though it’s not yet clear how much spending will survive the appropriations process in Congress.

Brown told Seeker it’s difficult to say what the president will end up deciding — and he could ignore the ITC recommendation altogether.

“That’s what I think,” she said. “And actually, that’s what I’d recommend.”

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