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New US Solar Panel Tariff
For months, the renewable energy industry waited for the decision on a case brought to the US International Trade Commission (ITC) by solar cell manufacturers Suniva Inc, and SolarWorld Americas, Inc. That decision arrived in late January in the form of a US solar panel tariff on imports of crystalline silicon photovoltaic (CSPV) cells and modules. The US government imposed a solar power tariff of 30 percent on solar cell and module imports. The solar energy tariff decreases to 15 percent in its fourth year. In each of the first four years, the government provides an exemption for the initial 2.5 gigawatts of cells.
The Road to the Solar Energy Tariff
The result of the Suniva and SolarWorld case came at the end of a long road of US attempts to ensure fair trade. Since 2005, China subsidized its solar manufacturers. Its government-funded manufacturers dodged many US regulations that apply to imports. In 2012, the US established an anti-dumping duty which applies to Chinese solar panels, among other products. To circumvent its applicability, the Chinese manufacturers moved final assembly to Taiwan.
In 2013, when the US imposed a different solar import tariff, the Chinese firms moved production to Germany, Malaysia, Singapore and South Korea. In 2017, Suniva and SolarWorld brought the case to the ITC arguing the unfair practices of the Chinese government and manufacturers that undercut US manufacturers. US solar manufacturers had watched domestic manufacturer, Solyndra, go bankrupt, despite a $535 million loan guarantee from the US federal government. The need for leveling the playing field has been building for 13 years, something the new US solar panel tariff attempts to do.
How The Tariff Will Affect the US
In the immediate year, since the solar tariff doesn’t apply, solar sales won’t experience an effect unless people rush to buy the cheaper materials. Beyond that, for four years at a minimum, the cost of creating new US solar power facilities will increase. Currently, solar ranks as the quickest-growing source of new energy. Worldwide, installers will add 86 gigawatts this year. Since the solar power tariff ‘s implementation has the effect of returning the price of panels and modules to their 2015 to 2016 prices, its actual impact on development probably won’t amount to much. In 2016, domestic manufacturers provided just over 10 percent of the solar panels in the US. The modules and panels also comprise less than one-third of a solar installation. The other costs, include labor, permitting and taxes. When hardware has gone up in the past, soft costs have come down.
The solar import tariff may slow utility-scale adoption slightly by returning modules costs to the 2016 prices. That means an increased project cost of approximately 10 percent for utility-scale solar installations. It’s likely to impact residential installations less, raising their cost only three percent. A GTM Research analysis report forecasts a rise in solar installations during 2018 to 2022, despite the solar tariff. According to GTM, the projects will use 11 percent fewer panels. The growth slow down will most likely occur in states with stiff competition from natural gas. These include the southern states of Florida, Georgia, South Carolina and Texas. While sales staff and installers may not like the temporary increase in material costs from the solar energy tariff, the manufacturing segment of the US solar industry could see almost immediate growth from it.
Will Solar Manufacturing Be Affected
Although predictions abound, the industry won’t see the overall effects until they play out. While 2016 marked a record growth in the industry, 2017 brought massive cuts. The difference was the possibility of losing a tax credit in 2016 to no incentive the following year. Thankfully, the federal tax credit was renewed through 2022. Last year brought the first year of declining jobs in the US solar industry since 2010. This year, the US solar industry anticipates losing another 23,000 jobs.
Four years of a US solar panel tariff probably isn’t long enough to completely resuscitate the tiny segment of US solar module manufacturers. It does provide a brief respite to encourage growth though. The City of Jacksonville, Fla. is in talks with a company that wants to open a module assembly plant that would provide 1,000 jobs. In the US, solar panel manufacturing provides approximately 38,000 jobs of the 374,000 total solar energy jobs, says the Department of Energy. The remainder of jobs lies in areas related to installation and sales, or to other parts manufacturing, such as the steel racks that hold the panels.
Solar Industry Outlook
While in the short-term the industry has lost jobs, during the next 10 years, solar installations will provide the fastest job growth. Analysts don’t expect the solar power tariff to slow the growth of that position. The solar industry creates jobs 17 times more quickly than other sectors of the US economy. Don’t expect a radical change in development or installation from the solar tariff. It will only add a few cents to the price per Watt for modules. Also, unless renewed, the solar energy tariff lasts four years. By its fourth year, it reduces from a 30 percent charge to a 15 percent one. Don’t expect it to cause a four-year turn around in the US solar panel manufacturing.
The US solar panel tariff really sends a message more than causing an extreme fiscal dent. The message from the US government says American made still matters. US manufacturers may take the opportunity to set up new plants, but after four years, countries offering extremely low wages will still undercut US business that pays a living wage. Cheaper doesn’t mean better though and quality matters, especially in solar energy and technology.