3 takeaways from Trump’s solar tariffs

Source: Christa Marshall, E&E News reporter • Posted: Friday, September 14, 2018

President Trump slapped tariffs on the solar industry in January to both jeers and cheers, with groups on opposing sides predicting steep job losses and a manufacturing revival, respectively.

The Solar Energy Industries Association, along with a broad coalition of conservative think tanks and environmentalists, said the tariffs could stall sector growth and lead to the loss of 23,000 jobs this year. The companies behind the tariffs, Suniva Inc. and SolarWorld Americas, said the warnings were overblown and claimed trade barriers were needed to boost a struggling solar manufacturing industry.

How’s it going nine months in?

A report out this morning from SEIA and Wood Mackenzie Power & Renewables, one of the first to highlight post-tariff data, offers some clues.

Here are three takeaways from the analysis:

Solar falls

According to the data, the tariffs did take “a bite” out of the solar market, although the effect seems to be in the single digits. In the second quarter of 2018, installments in the U.S. market decreased 9 percent from the same period in the previous year. It’s also a 7 percent decline from the last quarter.

Over the longer term, in the next five years, the forecast for utility-scale solar is about 8 percent lower than it would have been without tariffs, according to the report.

“The data shows us that the tariffs have dampened solar’s growth, as previously announced projects were canceled or delayed” because of them, said Abigail Ross Hopper, SEIA’s president and CEO.

The report does not delve into job loss numbers, but a SEIA spokesperson said the group’s current surveys show that “at least” 9,000 solar jobs have been lost in the seven or eight months since tariffs were announced.

Earlier this year, Cypress Creek Renewables said it canceled $1.5 billion in planned investments and stalled a third of planned construction for 2018 related to the tariffs. Reuters also reported another $1 billion in canceled solar projects.

The solar industry says those losses offset any gains in manufacturing.

Tariff supporters say the data and announcements this year show Trump’s plan is working. In January, Chinese solar manufacturer JinkoSolar Holding Co. Ltd. said it was planning to open a solar manufacturing facility in the United States and tied the decision to tariffs.

“The tariffs have provided a powerful stimulus to the domestic solar manufacturing industry, with about a dozen companies planning manufacturing investments today,” said Jeff Ferry, research director at the Coalition for a Prosperous America, which supported new duties.

Solar rises

Despite the deflated growth, the industry is expected to face a “turnaround” this year, suggesting that some of the gloomiest predictions may not come to fruition.

More than 8 gigawatts of utility projects were procured in the first six months of the year, the most ever in that time span. Many of those projects were on hold in 2017 because of uncertainty surrounding the tariffs, according to SEIA. The group said the total includes 26 projects exceeding 100 megawatts. Most of the new utility solar is expected to come online around 2020.

“Once lower-than-expected module tariffs were announced in January 2018, developers and utilities began announcing new projects,” said Wood Mackenzie analyst Colin Smith. He said the planned phase-down of the investment tax credit for solar to 10 percent in 2022 should push more projects forward in the near term.

Also helping solar are the second-lowest module prices in history, even with a 30 percent tariff from the Trump administration.

Module prices rose sharply last year because of the uncertainty surrounding the tariffs, but then dropped, according to a SEIA spokesperson. They fell even more steeply in the last quarter because of cuts in Chinese demand that contributed to an oversupply of solar components.

“Except for residential PV, U.S. system prices are at their lowest levels ever,” SEIA and Wood Mackenzie said.

The non-tariff effect

Multiple factors are driving the solar industry outside of Trump’s actions, according to the report.

In the residential market, for example, 577 MW was installed in the second quarter, which is essentially flat growth. The numbers reflect a “leveling out” after customer acquisition challenges and after several large installers scaled back, more than a strong tariff impact.

Guidance issued by the IRS in June also could provide “stability” for the industry, according to SEIA. The IRS clarified requirements for the start of construction of solar energy projects and qualifying for the investment tax credit. Essentially, it would allow a project to claim a higher investment tax credit rate in some circumstances.

“It offers a fairly favorable interpretation of the statute and provides certainty on tax policy that was previously unconfirmed,” the report said.

Emerging state markets, like Nevada and Florida, also are countering challenges elsewhere. Nevada solar, for example, is benefiting from a decision to restore net metering there last year.

Community solar, in which local solar facilities are shared by multiple users, is a “bright spot,” particularly in Minnesota and Massachusetts. In Minnesota, the Public Utilities Commission backed a plan from Xcel Energy Inc. for community solar.

“Well over 300 MW of community solar have been installed over the first half of 2018 and buildout will continue for the rest of the year in core and emerging state markets,” the report said.

Overall, total installed U.S. photovoltaic capacity is expected to more than double over the next five years. Almost 30 percent of all new electricity generating capacity coming online in the first half of 2018 came from solar PV.