The booming solar power industry is stunned by President Trump’s recent decision to impose a massive tax on imported solar panels. The president says the tariff will create “a lot of jobs,” but industry insiders say it will destroy many more and slow the use of solar power.
The president announced new tariffs on imported solar panels on January 23rd. The tariffs will begin at 30% for the first year and decrease to 15% in the fourth year. The purpose for the tax is to protect the solar industry from what some companies interpret as unfair trade practices. But industry experts say the plan could backfire (1). They cite the response to a tariff on foreign steel imports imposed by President George W. Bush in 2002.
President Bush had imposed a tariff on imported steel that ranged from 8% to 30%. It was in effect for less than two years but resulted in the loss of about 200,000 jobs, according to TheStreet (2). That tariff was repealed by the World Trade Organization.
President Trump’s decision was apparently due to lobbying efforts by two companies that made solar panels in the U.S., and a vote by the International Trade Commission. Chinese subsidiary, Suniva and former German subsidiary, SolarWorld had argued before the Commission that imports were causing substantial harm to the U.S. solar industry. They said cheap imported solar panels have been flooding the market, and a tariff might force them to manufacture their products here in the U.S.
It’s true that most solar panels are imported from places like China, Malaysia, and South Korea. But the installation of solar systems actually make up a larger portion of the U.S. solar industry. Trade experts say installations accounted for more than a quarter million jobs by the end of 2016. That represents a 178% increase since 2010. They say a tariff could lead to a solar slow down and job losses.
SunPower Threatens to Halt Factory Expansion
The tariff was met with outrage by another U.S. based solar manufacturer called SunPower. Although the company is based the U.S., most of its manufacturing work is done in southeast Asia. SunPower is demanding a waiver for the tariff and threatening to halt a $20 million U.S. factory expansion if it doesn’t get that waiver.
Attorney Michael Didriksen, who deals with energy-transaction related issues, told TheStreet, “The U.S. has largely left the solar panel manufacturing business.” He said, “We are protecting an industry that doesn’t have a lot of manufacturing, and I don’t know if this tariff provides enough incentive for investment to change that.”
China Challenge Expected at WTO
China is also planning to present its opposition to the tariff before the World Trade Organization, but The Street says the council is so busy, it could take as long as two years for the case to be heard.
In the meantime, experts say the tariff won’t do much to encourage investment in U.S. solar module makers because, frankly, there aren’t many. First Solar is one of the few companies that may benefit. It’s a U.S. photovoltaics producer that specializes in thin film panels.
While industry insiders and experts are stunned by what they say could be a crippling effect on the solar industry, at least one Chinese company is getting the message.
JinkoSolar Announces U.S. Manufacturing Plans
Just a week after the president announced the tariff, JinkoSolar announced that its board of directors approved the building of an “advanced solar manufacturing facility in the U.S.” The company didn’t say whether those plans were a direct result of the new tariff; it only said that JinkoSolar “continues to monitor treatment of imports of solar cells and modules under the U.S. trade laws.” (3)
There are no further details yet on the building of this new plant, but there are signs that the company may be planning to open that plant in Jacksonville, Florida. According to city documents, a company called “Project Volt” wants to build a $140 million dollar solar manufacturing and assembly plant in Jacksonville. It also anticipates the creation of about 800 jobs by the end of next year.
The city also reportedly approved more than $24 million in incentives to get the project going. A spokeswoman for the city would not comment on whether Project Volt was linked to JinkoSolar.
Solar Installers Will Lose Jobs
As the dust settles on this tariff announcement and the U.S. solar industry regroups, the biggest loss could hit the workers who install the solar panels. Didriksen said in TheStreet article, “Most of the solar jobs in the U.S. are not in manufacturing, but in installation.” When it comes to protecting jobs, the big question is — which jobs are we protecting?
Lee Barken of solar financing company CollectiveSun said, “In the name of protecting so-called American factory workers, this tarif is hurting a lot of American construction workers — the folks climbing the roofs and installing panels.” He also criticized the tariff as something that interferes with not just job creation, but the effort to make the U.S. energy independent.
Barken said, solar panels make up 25% of the cost of a solar system. A 30% tariff on that costs results in a 7.5% overall increase in the cost. He says that’s a better figure to deal with than 30% but he said that 7.5% may also wipe out an installer’s profit margin.
Response from SEIA
The Solar Energy Industries Association issued a statement denouncing the tariff. It said the decision will result in the loss of about 23,000 American jobs in 2018. It will also either delay or eliminate billions of dollars in solar investments.
President of RBI Solar in Cincinnati, Bill Vietas, said, “There’s no doubt this decision will hurt U.S. manufacturing, not help it.” He said, “The U.S. solar manufacturing sector has been growing as our industry has surged over the past five years. Government tariffs will increase the cost of solar and depress demand.” That will reduce orders and cause job losses.
Association president, Abigail Ross Hopper said, “While tariffs in this case will not create adequate cell or module manufacturing to meet U.S. demand, or keep foreign-owned Suniva and SolarWorld afloat, they will create a crisis in part of our economy that has been thriving.” She said, “It will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs.”
Hopper has a more positive long-term view. She said the tariffs are sure to hurt the industry, but she said, “Our industry will emerge from this. The case for solar energy is just too strong to be held down for long.” But she added, “The severe near-term impacts of these tariffs are unfortunate and avoidable.”