A Cloudy Future for U.S. Solar?

Posted November 02, 2017

Dr. Conway's Climateside Chat, November 2, 2017

With Special Guest Co-Author Shannon Nichols

While the news is preoccupied by the many gaffes of the Trump administration, the trade petition threatening to unravel the US solar industry continues to develop.

As a refresher, US-based solar manufacturer Suniva, Inc filed a petition with the US International Trade Commission (ITC) under Section 201 of the Trade Act of 1974, claiming that foreign imports of cheap crystalline silicon photovoltaic (CSPV) cells seriously hurt the domestic manufacturing industry. Section 201 allows for short-term blanket tariffs as industry relief in the case that imports are found to have hurt domestic industry. Interestingly, Suniva has found only two allies in their fight: SolarWorld Americas, the largest solar panel manufacturer in the US, and more recently, First Solar, a manufacturer of cadmium telluride thin-film cells.

On Sept. 22, the ITC unanimously found that the CSPV imports had caused injury to the domestic industry. Now, the four commissioners on the ITC board have released three separate quota/tariff remedies that will be debated and consolidated into a single proposal that will be sent to President Trump later this month. The President has the final say to approve their remedies, reject them, or tweak them appropriately, although if his remedy is determined to be too different than the final ITC recommendation it will trigger a congressional review. This makes the ITC’s recommendation critically important in determining the remedy that is eventually put into place. So what are the ITC commissioners recommending?

The three proposed remedies are similar in structure but range in severity. The middle-of-the-road proposal currently has the most support, being backed by commissioners Irving Williamson and David Johanson. They are requesting a four-year 30% tariff on CSPV imports quantities over 1 GW of capacity, with the tariff decreasing 5% annually and the 1 GW starting quota increasing by 0.2 GW annually.

The most solar-friendly remedy comes from commissioner Meredith Broadbent, and would only impose a quota on CSPV imports without tariff. The primary quota would be initially set at 8.9 GW to increase by 1.4 GW annually over four years, with a separate quota of 0.72 GW for Mexico, set to increase 0.12 GW annually. These quotas would be distributed through the sale of import licenses worth more than $100 million, which commissioner Broadbent is recommending be used to support US CSPV manufacturers.

The most severe proposal was put forth by chairman Rhonda Schmidtlein and calls for a four-year tariff of 35% (decreasing by 1% annually) on imports over a 0.5 GW quota that would increase by 0.1 GW per year. Unlike the other proposals, Schmidtlein’s remedy would also impose a 10% tariff (decreasing by 0.5% annually) on CSPV imports under the quota.

As of yet, we do not know which if any of these proposals the ITC will submit to Trump, but it is notable that none of these three remedies align with requests from either the petitioning companies or the solar trade organization Solar Energy Industries Association (SEIA). Suniva and SolarWorld asked for much higher tariffs (around 100% of the current price of solar cells), price floors, and import quotas that together could more than double the price of solar panels. Despite opposing the ITC’s injury finding, SEIA responded with a friendlier remedy of an import licensing fee in the 0.5-1% range—similar to commissioner Broadbent’s proposal. However, the final remedy that will be chosen by the ITC, and what impacts it may have, remains unknown.

"It’s worth noting that in no case did a commissioner recommend anything close to what the petitioners asked for. That being said, the proposed tariffs would be intensely harmful to our industry." Abigail Ross Hopper, SEIA's president and CEO

Unfortunately for supporters of the solar industry, it seems that in Trump’s hands, some form of remedy is likely. Trump has already declared support for more tariffs in a near-sighted attempt to boost domestic manufacturing and has shown that he is no friend to proponents of renewable energy. Many former fossil fuel executives sit in his cabinet, and his repeated denials of climate change and clear desire to dismantle the EPA are well documented. This solar tariff threatens to slow our remarkable progress toward renewable energy just when solar has become one of the cheapest energy sources and just as communities are taking the reigns to combat the effects of climate change. We may see conditions that harken back to the 2002 steel import tariffs enacted by the Bush administration. These turned out to be so detrimental to the steel industry and other related industries that the tariff was repealed not long after it was put in place.

Additionally, the ITC is required to individually consider countries with which we have free trade agreements. Of those countries, Canada, South Korea, and Mexico were found to have caused serious injury. This means that the tariff could be made to apply to them, further alienating key allies by negatively affecting their industry. Domestically, the resulting job losses will also greatly affect states with large solar industries like North Carolina and Nevada—states with strong Republican support. Trump stands to lose more momentum if this backfires, but his “America First” playbook likely dictates that standing up to to manufacturing giants such as China will electrify his base.

We won’t know his final decision until later this year, but in the meantime, it’s fair to speculate based on his actions that we may be seeing a premature end to the solar industry’s momentum for now.

So what do Suniva, SolarWorld, and First Solar—all members of the domestic solar industry—seek to gain from this filing? First Solar’s interest is the easiest to explain. It produces a different type of solar cell than those that would be affected by the tariff. This means that it stands to increase demand and profits for its product as a cheaper alternative in the wake of import tariffs, and its stock price has indeed jumped following the ITC announcement. Suniva and SolarWorld’s motivations are more murky. Besides being based in America, they are both primarily owned by companies abroad—in China and Germany (though SolarWorld Americas is currently up for sale), respectively.

Additionally, Suniva already shut down its two factories during its bankruptcy filing, one of which was relatively new, and its Chinese parent company does not support the filing. Instead, the filing is being supported by Suniva’s largest creditor, SQN Capital Management, which even offered to drop the petition in a letter to the Chinese Chamber of Commerce if they bought $55 million dollars worth of manufacturing equipment from Suniva. SolarWorld has also already successfully petitioned the ITC to impose tariffs on imports of crystalline silicon photovoltaic cells from China and Taiwan, but they argue that Chinese companies then moved manufacturing to countries like Thailand and South Korea in order to bypass the tariffs. Since SolarWorld manufactures entirely in the US, it could stand to make a large profit if import prices are raised by tariffs.

The controversial filing has garnered bipartisan, industry-spanning opposition. SEIA represents 1,000 solar energy companies and vehemently opposes the move, which it says threatens the future of 88,000 jobs in the solar industry and a large amount of private investment. Other opponents range from a bipartisan group of senators to the Center for Biological Diversity and the Heritage Foundation (a Koch-affiliated, free market group). A key denominator between opponents, however, is the recognition that steep tariffs could greatly hurt the expansion of the domestic solar industry, which provides some of the cheapest energy in the US right now.

An increase in the price of solar cells, opponents argue, will decrease demand (as it already has in the wake of the uncertainty surrounding this case) leading to less solar development in the private sector as well as less large-scale utility expansion. This all comes during a time when the current administration has cut back on its commitment to combating climate change and expanding renewable energy, making it even more critical that we continue expansion in the right direction.

Stay tuned for more updates later this month as the ITC prepares their final recommendation for President Trump.

 

—Jon Conway, Ph.D., Greenpower Research Director

 

*A quick update about last week’s Climateside Chat: Following Puerto Rico Governor Ricardo Rosselló’s call for the retraction of the $300 million grid rebuild deal given to Whitefish Energy, their contract has been officially cancelled by the Puerto Rico Electric Power Authority. Puerto Rico will be aided by New York and Florida after Whitefish ceases operations—as they should have been in the first place! Due to the highly suspicious circumstances of the Whitefish contract, several agencies including the FBI are now investigating the Trump-linked Montana firm. Governor Rosselló called for the cancellation of Whitefish’s contract after details were exposed by the media, providing an example of why the Trump administration has engaged in an ongoing effort to delegitimize multiple news outlets.


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