Tariffs would hurt demand ‘significantly’ — Goldman Sachs

Source: Christa Marshall, E&E News reporter • Posted: Monday, May 8, 2017

A solar company’s request to President Trump to impose new trade barriers could cause U.S. solar demand to drop “significantly,” according to a new research note from Goldman Sachs.

Earlier this month, bankrupt solar company Suniva asked the Trump administration to put new tariffs on solar cells made outside of the United States. The U.S. solar manufacturing industry is being hit with a flood of inexpensive panels from Asia, in particular.

The petition to the U.S. International Trade Commission made several requests, including for a levy of 40 cents a watt over a four-year period on all foreign solar cells and a price floor on imported solar panels (E&E News PM, April 26).

Goldman Sachs compared the situation to an earlier action from Europe to implement price floors for solar imports from 2013 to 2016. The European Union set a minimum price of about 14 percent above the global average, a lower rise than what Suniva is requesting.

As a result, solar installation volume in the European Union declined by about 20 percent over three years, causing the continent to lag far behind the global market. Goldman Sachs projected that a global glut of panels could also worsen, because China’s production would need to be absorbed in other regions.

“We expect solar installations would fall precipitously in the U.S. on the back of lower returns in a higher-priced module … environment, not dissimilar to what was experienced in Europe as mentioned above. While we cannot precisely estimate customer demand elasticity, we would expect it to be severe considering the top reason for solar adoption at utilities and among homeowners has always been costs,” the investment bank said.

As one example of the likely impact, Goldman Sachs estimated that a typical power purchase agreement for solar at $40 per megawatt-hour would have to be struck nearly 25 percent higher with tariffs in place.

Historically, trade complaints have a much better shot than many court cases, Stephen Munro, a policy analyst at Bloomberg New Energy Finance, said earlier this month. That is so even though Suniva must prove a “substantial cause of serious injury,” he said.

In a research note this morning, ClearView Energy Partners LLC estimated that the Suniva request, if approved, could increase the cost of foreign-made solar panels by 98 to 162 percent. It didn’t rule out the Trump administration supporting new tariffs, if the ITC backs Suniva.

“It is no secret that President Trump did not embrace renewable energy during his campaign, but he has already demonstrated a willingness to target imports he perceives as a threat to domestic jobs and bilateral trade balances, even imports from close allies like Canada,” ClearView said.

The petition from Suniva was the first filed in almost two decades under Section 201 of the Trade Act of 1974, according to a Suniva lawyer. Section 201 was last used by President George W. Bush in 2002 to protect U.S. steel companies.

The tariff would affect non-U.S.-manufactured imported cells and panels that contain non-U.S.-manufactured imported cells.

The ITC is required to make a determination within 120 days. If it sides with Suniva, it would have to notify the White House and provide a recommendation within 180 days.