While It Could Have Been Worse, Solar Tariffs May Hit Trump Country Hard

Source: BY MARIANNE LAVELLE, Inside Climate News • Posted: Thursday, January 25, 2018

President Trump's 30 percent tariff on foreign-produced solar cells and modules will not be as devastating a blow as he could have dealt.

Most industry analysts agree that President Trump’s 30 percent tariff on foreign-produced solar cells and modules will not be as devastating a blow as he could have dealt. Credit: Mike Theiler-Pool/Getty Images

President Donald Trump‘s decision to slap temporary tariffs on imported solar panels opens up a difficult passage for the industry, but there are good reasons to believe most United States solar ventures will emerge intact—if not entirely unscathed.

Most industry analysts agree that the 30 percent tariff on foreign-produced cells and modules, phased out over four years, will not be as devastating a blow as Trump could have dealt.

The damage will be done mostly to big utility-scale projects within the booming U.S. solar energy installation business, which opposed the trade barriers because they will raise the costs of imported photovoltaic panels. The tariffs announced Monday will constrain any push into new markets, but will not send the industry into a tailspin.

Any crimp in solar’s growth could, however, forestall the kind of rapid clean energy transition that climate science says is urgently needed.

“The climate crisis is here, ripping apart communities and threatening wildlife with devastating storms, wildfires and floods,” said Howard Crystal, senior attorney for the Center for Biological Diversity. “With Americans in Puerto Rico and Houston still struggling to recover from climate disasters, Trump should be supporting renewable energy rather than making it more costly.”

Most of the reaction to the move centered not on its implications for climate change, but on its impact on jobs.

The Solar Energy Industries Association, the industry’s main trade group, projects that Trump’s tariff decision will result in the loss of roughly 23,000 American jobs this year, including many in manufacturing.

Solar jobs have tripled since 2010 to more than 260,000, according to the Solar Foundation’s most recent National Jobs Census in 2016. In contrast, coal mining employs about 50,500, according to December figures from the Federal Reserve, well below the industry’s recent peak employment of 90,000 in 2012.

“It boggles my mind that this president—any president, really—would voluntarily choose to damage one of the fastest-growing segments of our economy,” said Tony Clifford, chief development officer of Standard Solar, a Rockville, Md.-based financer.

Not Exactly Laissez-Faire Energy Policy

The irony is that Trump’s instinctive protectionism would leave a domestic industry so vulnerable to job losses.

If it discloses anything about energy policy in the age of Trump, it’s that decisions are being made more or less willy-nilly, without a master plan or central organizing principle.

As a result, the solar business is left to spend the next few years navigating through an uncharted passage, neither completely unchained from regulatory anchors nor wholly at the mercy of the market’s tides.

Whatever the druthers of his conservative allies, Trump is not implementing the type of laissez-faire energy policy favored by some in his administration. Environmental Protection Agency Administrator Scott Pruitt, for example, has said he would like to see solar and wind energy “stand on their own and compete against coal and natural gas and other sources, and let utilities make real-time market decisions on those types of things as opposed to being propped up by tax incentives and other types of credits that occur.”

But few expected Trump to rely entirely on the market’s invisible hand. Quite aside from his anti-free trade proclivities, Trump repeatedly has been willing to intervene or uphold interventions in the energy marketplace.

To be sure, his impulse has been to promote fossil fuels as part of an “America First” energy dominance policy, manifested in his climate regulatory rollback and retreat from the Paris climate accord. But Trump also backed preservation of the federal ethanol mandate, let solar and wind tax credits stand, and proposed subsidies for nuclear as well as coal.

Partly it’s a matter of steering to the prevailing political winds. Partly it is just haphazard policymaking without regard for the need to address greenhouse gas emissions and the risks of climate change.

Trump did mouth some free-market bromides when he talked about energy on the campaign trail. “The government should not pick winners and losers,” he told North Dakota frackers. But that sentiment was overpowered by his hostility to imports, particularly from China.

Economists and conservatives who believe that the government should be addressing climate change have urged a cleaner, simpler type of intervention than any of those he has chosen: put a price on carbon and allow the market to do its work. Many states are doing just that, with cap-and-trade policies. Some are considering carbon taxes, anathema to the Repubican majority in Congress.

Rooftop Sales Likely to Hold Strong. Except in Trump Country.

While carbon pricing has no support in the Republican-controlled Congress, solar jobs do. That’s why the tax credit has survived, and why anti-solar provisions were mostly stripped from the latest tax bill—which lowers corporate taxes on solar installers just like everyone else, and will help them survive the tariffs.

And perhaps in response to this political support, Trump’s tariff was less onerous than the remedy that two bankrupt, foreign-owned panel makers, Suniva and SolarWorld, had sought in their petition for relief.

The tariff phases down 5 percent per year through 2021, then lifts completely. (This phase-out mirrors the gradual elimination of tax credits that subsidize solar installations, an example of two policies cancelling each other out.)

Also, the White House is exempting the first 2.5 gigawatts of imported solar panels from the levy. That provides some buffer for a U.S. industry that was on track to install 12 GW in 2017, and was expected to add 15 GW annually through 2022.

“Not even close to worst-case for the domestic market,” tweeted Shayle Kann, a senior advisor at Greentech Media. He and his colleagues predicted a roughly 10 percent negative impact on the market over the next four years (compared to as high as 40 percent under the remedies Suniva and SolarWorld sought.)

Still, SEIA President Abby Hopper said the tariff decision likely will cut 1.2 GW of solar deployment in 2018, and 6.7 GW thru 2021. That’s equal to about 1.2 million houses not powered by solar.

Rooftop solar sales likely will be resilient, especially in markets like California and Massachusetts, where incentives are strong and electricity prices are high, a number of analysts said. But they expect that the tariffs will put a damper on growth of big projects and expansion of solar into new markets. Tom Matzzie, CEO of CleanChoice Energy, predicted that the Southeast, Southwest and Texas—all big growth areas for utility-scale solar—will see the greatest impact, noting those areas encompass Trump’s geographic base. “Trump country will lose out the most,” he tweeted.

The utility-scale market, where large arrays are built to feed directly into the grid, will be the most sensitive to the higher price of imported panels because “two-thirds of the project pipeline is driven by solar’s razor-thin economic competitiveness,” Greentech Media said in its pre-decision analysis. “Every segment, in every state, will be impacted in a unique manner….nascent state markets that have just begun to develop vibrant residential solar sectors could disappear almost entirely.”

A utility industry coalition, the Energy Trade Action Coalition, said the decision “risks the grid parity that utilities have achieved in using solar as part of their energy generation mix. Unfortunately with these tariffs on solar, utilities may choose other energy options.”

A day after the decision, United Nations renewable energy chief Rachel Kyte had an opportunity to reflect on its meaning at the opening session of the World Economic Forum. Beyond the disruption she anticipated in the U.S. solar market, she saw a larger problem.

“One of the things we have not done yet is internalize the struggle to combat climate change into the trade regime,” she said.

Or into any policy regime at all, she might have added.