Reuters reports that the Trump Administration is mulling over the idea of putting in place tariffs that would more than double the cost of solar …
(Reuters) – U.S. solar companies are snapping up cheap imported solar panels ahead of a trade decision by the Trump administration that could drive up costs and cloud the fortunes of one of the economy’s brightest stars.
Domestic consumers and businesses have been embracing solar energy at a furious pace – thanks to a big assist from China. Low-cost photovoltaic cells and panels made in China and other Asian countries have helped drive down costs by around 70% since 2010, enabling more Americans to go solar.
Installations in the United States last year hit a record. Jobs are mushrooming too. The domestic industry now employs more than 260,000 people, according to The Solar Foundation, most of them construction workers hammering panels on rooftops and erecting utility-scale solar plants in the nation’s blistering deserts.
Why would they do this?
The root to all this is that a Georgia manufacturer named Suniva filed a formal complaint with the U.S. International Trade Commission (ITC) regarding cheap imports killing their business … literally. They filed the complaint two weeks after filing Chapter 11, and within it requested that tariffs should be imposed that would double the cost of the imports and thus enable them to compete.
The reality of the solar industry is that about 95% of the solar cells used within the US are manufactured in places such as China, Malaysia and the Philippines.
Could such tariffs really happen?
Yes.
There is nothing to prevent a protectionist policy being implemented.
Impact
Rather obviously such tariffs would have a huge impact. It might indeed grant Suniva, the Georgia manufacturer, a distinct business lifeline, but it would also greatly impact the entire solar industry. If you doubled the prices, then for many it ceases to be viable.
The one bright and shining star within the US economy has been the solar industry. It now employs over a quarter of a million people who are all busy constructing solar power plants or deploying solar panels on domestic roofs.
As you might anticipate, those within the industry are becoming increasingly nervous about all of this and the reaction can perhaps be best encapsulated by the phrase … “You have got to be F**cking kidding me” [that word there is “Fracking” :-) ] …
Panic buying has sent spot prices for solar panels up as much as 20 percent in recent weeks as installers rush to lock up supplies ahead of potential tariffs.
Skittish U.S. energy customers are putting some solar projects on hold. Manufacturers are eyeing other markets to develop. And some investors are running for cover. Funding for large U.S. solar deals fell to $1.4 billion in the second quarter, down from $3.2 billion in the first quarter and $1.7 billion a year earlier, primarily due to concerns about the trade case, according to research firm Mercom Capital Group.
Developers of solar farms that provide utilities and big companies with energy are particularly vulnerable; panels account for as much as half of the cost of their projects.
A steep rise in panel prices “could be huge and disastrous for large-scale solar,” said Tom Werner, chief executive of San Jose-based SunPower Corp (SPWR.O), a top U.S. solar company that is majority owned by France’s Total (TOTF.PA). “Developers are alarmed and planning.”
Solar firms that cater to homeowners are nervous too. A spike in panel prices could slow residential installations and all the jobs that come with them.
Ed Fenster, chairman of San Francisco-based Sunrun (RUN.O), said moves by Trump to punish foreign manufacturers could harm American blue collar workers he has vowed to help. The solar industry employs more than five times as many workers as the coal mining industry that Trump has championed.
“A solar-panel tax imperils what our country needs most: well-paying jobs that can’t be exported or automated,” Fenster said.
Where did Trump ever get the idea that being in charge was easy?
Being in a position of responsibility puts you into a place where on an almost daily basis you will be faced with competing demands that are mutually exclusive. It should perhaps be almost mandatory to insist that anybody getting elected must also get a tattoo that reads “It’s not that simple”.
Permitting one-way free trade means that foreign nations can swamp other nations with cheap goods. Its kills local industry and so in the longer term they also gain a distinct market monopoly. The big complaint regarding China has been the observation that they do not permit a two way street and tend to be very protectionist regarding outsiders being permitted into their market, yet their government subsidised businesses often dump goods into other markets.
So far the US response has been the imposition of 40% tariff in 2012 on goods from China and 20% on goods from Taiwan in 2014. The problem is that it has not worked. China and Taiwan simply shifted production to other low-wage countries and so they avoid the duties.
What has now happened is that Suniva, the Georgia manufacturer, filed for bankruptcy protection in April. Two weeks later they then started all this by lodging a rare form of trade complaint with the U.S. International Trade Commission (ITC). Within this it asked the government to establish a minimum price of 78 cents a watt on panels produced anywhere outside the U.S. to keep companies from circumventing the penalties. It is this specific case that it all pivots on. If such a tariff did happen, then that would of course more than double the current price of 35 cents.
It might be an obvious step to help Suniva, but such decision is not simple because clearly it would also greatly impact what is currently a thriving industry. Doing this helps save the jobs in Suniva and other similar companies, but then many others will no longer have jobs due to the downturn in solar installations that this would trigger.
If the decision was yours to make, then what would you do?
If you decided no tariffs, then you are letting US companies go to the wall.
If you decided to have tariffs, then you decimate activity within the US solar industry and also perhaps hinder progress on addressing climate change.
Either way, how do you justify such a decision?
Trump-like sound-bytes, the easy answers, often don’t actually work and so whatever the choice, there will be consequences.
How will this play out?
Reuters reports …
The ITC has said it will decide by September 22 whether imports have harmed domestic producers. If it finds serious injury, the commission by November 13 will recommend remedies to the president, who is free to implement ITC’s advice or do something different.
So yes, in the end, Trump, who thinks that he has lots of easy answers, really will be be making the final decision on this, and will be wholly oblivious to the consequences.
One Last Twist
Since 2015, the Georgia manufacturer Suniva who started all this is majority owned by a Chinese firm.