Trumps wants tariffs, and he’ll get a solar tariff

This is the third of a multi-post blog series by the BERC-Action community. The opinions expressed here do not necessarily represent the opinions of the entire BERC organization. 

 

President Trump has said “I want tariffs. And I want someone to bring me tariffs.” When it comes to solar, he will have a chance to levy a solar tariff that sets the industry back several years.

If you’re reading this, chances are you might be or are hoping to be one of the people lucky enough to get paid for fighting climate change. Recently, that prospect has been getting threatened with attacks on the EPA and DOE, and now of all things, solar power, as I detail further below.

Background

The cost of solar has declined dramatically over the past several years as deployment has increased and technology innovation has accelerated. Just this past year, the U.S. Department of Energy (DOE) announced that the solar industry met the 2020 utility-scale solar cost target set by the DOE’s Sunshot Initiative, three years early — meaning that the average price of utility-scale solar (without the investment tax credit) is under $1 per watt. Here’s more on how and why and a cool graph for you below from an NREL report, showing how solar costs have declined across all sectors.

PlotSolarcosts

Figure ES-1. NREL PV system cost benchmark summary (inflation adjusted), 2010–2017. The inflation-adjusted system cost differences between Q1 2016 and Q1 2017 are $0.18/Wdc (residential), $0.32/Wdc (commercial), and $0.42/Wdc (fixed-tilt utility-scale). Table ES-2 shows the benchmarked values for all three sectors and drivers of cost decrease

 

As a result of the falling costs, year 2017 has been riddled with great headlines reflecting that the price of solar electricity has reached record lows: Tucson Electric signs Solar + Storage PPA for ‘less than 4.5 cents/kWh’; TEP to buy solar power at under 3 cents per kWh; Buffett strikes cheapest electricity price in US with Nevada solar farm.

Notwithstanding, it’s still important to keep in mind we’re currently nowhere near the levels of solar deployment that are needed to combat the worse effects of climate change: if you take the famous Pacala and Socolow stabilization wedges as one reference point, we’re at about 300 GW  installed globally, versus the 7000 GW needed. And to put another data point out there, wind and solar together accounted for just 10% of U.S. generation in March 2017 according to the EIA. Ten percent renewables was an all-time high, with solar energy at just a mere 2%. To compare, Germany generated 35% of its electricity from renewable energy in the first half of 2017.

With so much more work left to do, it’s important to understand the forces that may threaten to slow our deployment of solar at such a critical juncture, just when solar is finally gaining real traction at the same time that U.S. has pulled out of the Paris Climate Accords and the EPA’s Clean Power Plan has been effectively put aside.  Before the end of this year, President Trump now will have the chance, at the stroke of his pen, to curtail solar deployment in the coming years and put 260,000 solar jobs in danger.

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Earlier this year on April 26, 2017, Suniva, Inc. (Suniva) declared bankruptcy and filed a petition with the U.S. International Trade Commission (ITC) under the rarely used Section 201 of 1974 Trade Act, which is designed to give temporary relief to an industry that has suffered because of increased imports. In its petition, Suniva requested a four-year tariff schedule on crystalline-silicon solar products imported from anywhere in the world. On May 25, 2017, Solarworld Americas (SolarWorld), facing insolvency, also joined Suniva’s petition.

The ITC reached a decision on the first part of the trade case back in September 22, 2017, determining that a substantial injury has occurred to the U.S. solar industry as a result of imports. You can learn more about that process here.

The next critical milestone is November 13, 2017, when the ITC prepares a final report for its remedy recommendations for President Trump, who will have 60 days and wide latitude to accept or expand the ITC’s recommendations to limit imported solar cells.

If President Trump imposes solar tariffs on imported solar cells and a floor price for solar panels made with foreign cells at the levels that Suniva and Sunworld request (in the range of 30-cents-per-watt to 40-cents-per-watt), Greentech Media Research estimates that nearly half of potential solar deployments would be eliminated over the next four years. Some lowlights:

  • Utility scale solar deployment would be nearly halved for a 30-cent-per-watt tariff.
  • Nascent state markets that have just begun to develop residential solar markets would disappear almost entirely.

Political outlook

The solar industry has been lobbying the White House, trying to educate decisionmakers on the range of manufacturing jobs that would be affected by the decreased demand for solar, including some 600 facilities located all over the U.S. that make inverters, tracks, cells, panels, racking and mounting systems. U.S. solar manufacturers have been a bit mixed on their response: Thin-film maker First Solar came out in favor of an ITC trade remedy but Tesla, Inc. has reportedly opposed the ITC proceeding, even though Tesla has a U.S. module factory, because it realizes that that it could harm the solar industry at large and negatively impact its U.S. production plans. It’s unclear that manufacturing capacity would be shifted to the U.S. given the short life of the tariff and the fact that it will almost certainly be challenged at the World Trade Organization (a two-and-a-half-year period may not provide enough runway to make a U.S. facility feasible), but most companies are waiting to see how the ITC-recommended remedy shapes up.

What’s odd though is that Suniva and SolarWorld, while located in the U.S., are owned by foreign companies: Georgia-based Suniva is majority owned by a Chinese company and Oregon-based SolarWorld is a wholly-owned subsidiary of a German company. And it is tough for them to guarantee that they can ramp up their capacities to full production in a timely manner after laying off all their workers, particularly if they could not even pass muster in the hey days of 2015 and 2016. There have been numerous accounts that the companies’ failures were not solely due to the flood of foreign solar cells coming into the U.S. (e.g., failing to meet timelines, suffering recalls, not honoring warranty claims, and delivering panels from other countries instead of the U.S.).

According to at least a couple of academic sources, here, and here, historically domestic industries that have received the safeguards under Section 201 of the U.S. Trade Act of 1974 have never been restored to sustained competitiveness.

President Trump, however, has said “I want tariffs. And I want someone to bring me tariffs.” He will be eager to fulfill campaign promises to revive U.S. manufacturing, and the solar tariff recommendations, released on October 31, and hitting his desk on November 13 will most certainly present a ripe opportunity. The ITC’s recommendations issued on October 31 are less severe than the tariffs requested by Suniva and SolarWorld, but if implemented, would still set the solar industry back, just when we have finally hit the cost targets set by DOE’s Sunshot Initiative.

What you can do

The trade case is complicated, but it takes a simple act to let your representative or senator know that you care about being able to work in the clean energy industry in order to tip the scales of helping the administration make an informed policy choice. Whether it’s the budget cuts to the DOE and the EPA, this solar trade case, the DOE NOPR or most recently, the House tax bill proposal, we can expect to see continuing attacks on clean energy, so make your voices heard.

 

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