Solar industry roiled by trade ruling that some fear could lead to tariffs

Source: By Chris Mooney and Steven Mufson, Washington Post • Posted: Saturday, September 23, 2017

An array of solar panels are seen in Oakland, Calif. (Lucy Nicholson/Reuters)

The U.S. solar industry was roiled on Friday by a unanimous ruling in a much watched international trade case — one that some industry leaders fear could lead to steep new tariffs on imported crystalline silicon solar cells.

The bankrupt Georgia-based solar company Suniva joined forces with Oregon-based SolarWorld Americas to petition the U.S. International Trade Commission for relief earlier this year, saying that the U.S. solar industry “simply cannot survive” at a time when foreign imports of solar cells “have unexpectedly exploded and prices have collapsed.”

 Solar World Americas is owned by a German firm and a majority of Suniva is owned by Shunfeng International Clean Energy, a Chinese company which has opposed the petition filed by Suniva’s restructuring officer.

The ITC, after considering the petition, ruled 4-0 Friday in favor of the two companies, finding that solar cells “are being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the domestic industry.” The commission will now weigh what remedy to suggest.

After the commission proposes a remedy, it falls to President Trump and his administration to determine whether and how to implement it, or what other action to take.

“We brought this action because the U.S. solar manufacturing industry finds itself at the precipice of extinction at the hands of foreign market overcapacity,” said Suniva in a statement. “The ITC has agreed, and now it will be in President Trump’s hands to decide whether America will continue to have the capability to manufacture this energy source.”

But Trump’s expected role is exactly where the fear lies for others in the solar industry. Trump, an ally of the coal industry and a frequent critic of China (a dominant force in the manufacture of cheap solar panels), might indeed be inclined to support some kind of trade remedy.

“The President will examine the facts and make a determination that reflects the best interests of the United States,” said White House spokeswoman Natalie Strom in a statement released after the ruling. “The U.S. solar manufacturing sector contributes to our energy security and economic prosperity.”

The U.S. solar industry’s main trade group has been vociferous in charging that the remedy requested by Suniva and SolarWorld would be damaging to most U.S. solar companies, saying that the two panel makers do not represent the interest of the industry as a whole. Much of the boom in solar jobs has been in installation.

“This is a case about two companies who are bringing a petition about which almost the entire rest of the solar industry is in agreement in opposition,” said Abigail Ross Hopper, the president and chief executive of the Solar Energy Industries Association, in a press call to react to the ruling. The association has charged that if the two companies get what they are asking for, prices for solar power will rise, demand will fall, and the industry will lose some 88,000 jobs.

That charge was at least partly supported by a statement from market analyst Moody’s Friday.

“The US International Trade Commission’s ruling that an influx of low-cost foreign solar panels caused injury to the domestic panel manufacturing industry will have negative consequences on the US solar industry as a whole,” said Lesley Ritter, an assistant vice president at the firm, in a statement. “Tariffs or import quotas would have a negative impact on the economics of solar generation, and could dampen the pace of decarbonization.”

But SolarWorld, like Suniva, hailed the ruling in its favor.

“We welcome this important step toward securing relief from a surge of imports that has idled and shuttered dozens of factories, leaving thousands of workers without jobs,” Juergen Stein, chief executive of SolarWorld Americas, said in a statement.  “In the remedy phase of the process, we will strive to help fashion a remedy that will put the U.S. industry as a whole back on a growth path.” He invited the Solar Energy Industries Association (SEIA) and others “to work on good solutions for the entire industry.”

Paul Bledsoe, a strategic adviser at the Progressive Policy Institute, said in an email that electrical installers of solar energy earned about $76,000 a year, according to Labor Department figures for 2015. Solar mechanics earned about $73,000 and solar engineers well over $100,000 a year.

“These wages are more than competitive with the coal industry, where the typical coal excavating machine operators about $54,000,” he said. He said even the lowest paid solar installers get about $40,000.

The U.S. solar industry has boomed in the last decade, spurred on by Obama administration policies and ever lower panel prices. The development of rooftop solar, in particular, has led many homeowners to generate their own energy, lowering their electricity bills and, in some cases, being able to sell excess power back to the grid. Meanwhile, solar has grown increasingly influential as an industry, touting its power to create skilled, high paying jobs.

At the same time, though, charges have arisen that as electric grids become suffused with solar — particularly in California, where the industry has boomed and received major policy support — it is changing the nature of getting electricity, since solar energy is generated only during daylight hours, and large scale energy storage is still not widely available.

A recent report on the state of the electric grid by the Energy Department did say that renewable energy installations had played a secondary role in the retirement of some coal and nuclear plants, though it did not say they were the primary cause.

The ITC now has until Nov. 13 to determine how it thinks the injury to Suniva and SolarWorld should be remedied, after which President Trump will have 60 days to take action based on the recommendation.

Suniva’s petition asked for a 40-cent-a-watt tariff on solar cells and a 78-cent-a-watt floor on module prices. Moody’s said that would “virtually double the cost of panels.”

Height Securities, an investment research firm, said that “the likely remedies ITC recommends will be significantly softer than the proposed” penalties.

A similar take was offered by Mark Widmar, the CEO of the large U.S. solar firm First Solar, on the company’s July earnings call.

“If there is a determination of injury, a modest type of remedy, will not be harmful at all to the industry and I think we’ll continue to thrive and more jobs will be created,” Widmar said.

SolarWorld has argued that the industry has been badly hurt over recent years. In a statement, the company said that nearly 30 U.S. producers have shut down manufacturing operations since 2012. Between 2012 and 2016, imports into the United States from all countries increased nearly five-fold, it said, led by China.

Suniva’s petition could not continue without SQN Capital Management, a New York-based investment firm which lent Suniva money to purchase equipment and which is Suniva’s largest creditor. In a May letter to the China Chamber of Commerce for Import & Export of Machinery & Electronic Products, SQN said the trade petition would be dropped if SQN were paid about $52 million to cover its debts to Suniva.

In the meantime, other parts of the solar industry are expected to rally their opposition.

The Solar Energy Industries Association’s Hopper said the group would file a new brief with the ITC next week leading into a hearing on October 3 that will consider what remedy could be recommended.

“The ITC is statutorily required to consider the impact on the larger solar ecosystem as it’s considering what an appropriate remedy will be,” said Hopper. “So you’ll see a very strong case from us about the entirety of the solar industry and what impact tariffs would have on depressing demand and creating job loss.”