Will The New 30% Tariff Help Or Hurt The Solar Industry?

Loren Henry

Broker, Worldwide Facilities – San Diego

March 13, 2018

In January 2018, the government imposed a 30% tariff on solar components and modules made outside of the US. Some reactions from the solar industry have been dire.

The Solar Energy Industries Association issued a statement that expressed strong disapproval of the measure, predicting the loss of more than 23,000 American jobs. One major solar manufacturer, Sun Power, put a $20 million factory expansion on hold as a result of the tariffs.

The irony is that two solar manufacturers, Suniva and SolarWorld Americas, petitioned the US International Trade Commission to impose these tariffs as a way to bring more business to American solar manufacturers.

The Trade Commission proposed several options—from a 35% tariff on all imported components to a more lenient four-year import quota system. The 30% tariff was actually the middle-of-the-road option.

The current law imposes 30% tariffs on imported solar modules and cells in the first year; the tariffs reduce 5% annually, settling on 15% in the fourth year. After that, the tariffs end. They also exempt 2.5 gigawatts of unassembled solar cells per year.

Why the tariffs will be a blow to solar

The US solar industry has been growing exponentially in the past few years. In 2016 alone, more than 15 gigawatts of solar power were installed in homes and businesses across the US—this is up from 2 gigawatts in 2011.

Partially this is due to strong government incentives at the federal, state, and local level to encourage solar adoption. But it’s also due to falling costs. The price of solar panels has dropped significantly in the past year, fueled mainly by an influx of cheap components from China. Approximately 80% of the parts and components used in US solar manufacturing come from Chinese factories.

Many in the solar industry believe the tariffs will raise costs—resulting in fewer orders and fewer jobs in the solar industry. It’s very possible that any increase in jobs will be offset by reduced demand as a result of rising costs.

Why it’s not as bad as you’d think

That said, at the climate change conference in Davos, Former Vice President Al Gore called the decision “not an utter catastrophe.” He went on to agree that cheap components from China were hurting the industry: “The large subsidies from China for exporting solar panels have put some other companies in the world out of business.”

Several experts—including Bloomberg New Energy analyst Hugh Bromley and author and technologist Ramez Naam—predict that the tariffs will only raise solar manufacturing and installation costs by about 10% at most. That’s enough to have an impact, but not enough to kill demand altogether.

In addition, it’s worth noting that these tariffs only apply to silicon solar panels—not the thin-film panels used by First Solar, a US-based manufacturer and one of the top solar producers in the world. It’s possible that more companies will adopt this technology in order to get around the tariffs and keep costs low.

The question isn’t whether the solar panel tariffs will hurt the industry. The question is how much. While it’s possible that manufacturing costs will skyrocket and jobs will be lost as a result of this legislation, it’s reasonable to predict that the slowdown won’t be catastrophic—and that the US solar industry will adapt and continue to thrive.

For more information, contact Loren Henry at lhenry@wwfi.com or (619) 541-4265.

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