Solar growing more slowly with Trump tariffs

Source: Benjamin Storrow, E&E News reporter • Posted: Tuesday, June 19, 2018

America’s solar industry has ridden a roller coaster over the first half of 2018.

A series of record-low utility solar contracts and a strong first quarter of installations have been offset by President Trump’s tariffs on imported solar modules, which have cut into growth and prompted some companies to cancel projects.

The good news for solar installers is that they have demonstrated a measure of resilience in the face of Trump’s tariffs. While growth has slowed, it has hardly disappeared. The Solar Energy Industries Association, a trade group, reported installations of 2.5 gigawatts in the first quarter of 2018, a 13 percent increase over the same period last year.

The big installation number for the first three months of the year was owing to the fact that many installers delayed their projects until the tariffs were announced.

“The good thing that came out of the tariff announcement is it was announced,” said Dan Whitten, a SEIA spokesman. Once companies have certainty, he said, “they can make things work.”

The bad news for the solar industry is that the impact of the tariffs hasn’t yet been felt. Modules for installations that came online this year were ordered prior to the tariffs.

Parts ordered this year will be subject to the 30 percent import fee imposed under Trump. The fee declines to 25 percent in year two, 20 percent in year three and 15 percent in years four and five.

The impact stands to be greatest in regions like the Southeast, where the economics of solar were already borderline, said MJ Shiao, a power and renewable analyst at Wood Mackenzie, a consulting firm.

“We think the impact of the tariffs will be felt most next year,” he said.

Cypress Creek Renewables, the top utility-scale solar installer in America last year, is emblematic of the trends. The solar developer still expects to install more panels this year than it did in 2017. Nevertheless, the company’s pipeline of new projects would have been 20 percent larger without the tariffs, said Cypress Creek spokesman Jeff McKay.

“In other words, we now have some projects, due to the price sensitivities around utility-scale solar, that no longer have a clear path forward,” he said.

There are signs that a slowdown in the solar market may be temporary. When the Central Arizona Project, a municipal water utility, signed a $24.99-per-megawatt-hour contract with AZ Solar 1 earlier this month, Greentech Media called it the cheapest solar contract ever signed.

The record was short-lived. News broke shortly thereafter that NV Energy, Nevada’s largest utility, had struck a deal for a $23.76-per-MWh contract with Eagle Shadow Mountain’s 300-megawatt development.

Both deals hint at two encouraging trends for the industry. AZ Solar 1 and Eagle Shadow’s projects are expected to come online in 2020 and 2021, respectively. Developers are essentially betting that further cost reductions, the increasing availability of cheap financing and the reduction in the tariffs will continue to produce overall cost declines for new solar developments, Shiao said.

“For the industry, it has proven itself to be quite resilient to a number of policy challenges,” he said. “Despite all these challenges along the way, it continues to grow.”