Image: Solar panel installers – courtesy Yelp dotcom
By Charles F Moreira, Editor
United States President Donald Trump’s statement on Wednesday 15th January 2018, that he would soon decide on whether or not to impose import tariffs on solar panels has drawn mixed responses from stakeholders both within and outside his country.
According to a process governed by the United States International Trade Commission, Trump has until Friday 26th January 2018 (or Saturday 27th January in Malaysia) to make his decision.
Millions of Americans now get at least part of their electricity supply from solar panels, especially since 2010 when prices fell, making them more affordable.
However, SPV Market Research estimates that about 95% of solar panels installed in the US in 2016 were imported, mostly from China, as well as from Malaysia, Philippines, Singapore, South Korea, Canada and other countries, so if the United States were to impose import tariffs on solar panels, solar panel manufacturers who export into the US could potentially be adversely affected.
On his presidential election campaign trail, Trump had frequently threatened populist measures to impose import tariffs on products from China, Mexico and other countries to gain the support of Americans concerned with the state of the economy, their employment opportunities and job security.
After all, not every worker has been able to move up the proverbial skills and value chain and find employment in knowledge-based high-tech industries and even if they did, it is unlikely that there will be enough jobs for them up that value chain.
Whilst American customers, including home owners, businesses, utilities and solar panel installers were delighted with the wide availability of cheap solar panels, however American manufacturers were not, as the glut of cheap solar panels was driving over a dozen of them almost to bankruptcy or even out of business.
In April 2017, the bankrupt American panel maker Suniva (ironically majority China-owned), filed a petition with the US International Trade Commission, seeking steep tariffs and minimum price guarantees on certain imported solar energy equipment manufactured outside the United States. SolarWorld Americas, the US based subsidiary of a now bankrupt German panel maker, joined Suniva in its petition.
“Without global relief, the domestic industry will be playing Whac-a-Mole,” the petition says. “The way that the world’s largest producers have reacted to anti-dumping and countervailing duty claims demonstrates that global relief is required”.
“Whac-a-Mole” is an arcade game in which players use a mallet to hit toy moles, which appear at random, back into their holes.
The commission had set to vote on the merits of the case by 22 September 2017 and in October 2017, four of the commission’s officials announced several recommendations which would protect domestic solar equipment manufacturers from “unfairly priced imports”, especially from China, as well as calls for limits on the import of certain solar components and for tariffs of 10 to 35% to be imposed on certain solar energy products.
A potential zero-sum game
However, whilst the tariff protections petitioned for could save American solar panel manufacturers and create more jobs for their workers, however such measures could adversely affect panel installers, increase costs for their home or business customers and quite probably result in higher electricity costs – all of which could result in a public backlash against such measures, if Trump decides in favour of them.
“Workers who install solar power projects, utilities who purchase the power and major commercial users of solar power, like retailers, could all be damaged by such restrictions, said Frank Maisano, a spokesman for the Energy Trade Action Coalition, which represents those groups. “You can play with the numbers and tweak things, but the bottom line is it’s going to put those groups at risk,” he added.
Also, the trade group, the Solar Energy Industries Association (SEIA) which has actively opposed any tariffs or barriers to imports, said that whilst the International Trade Commision’s commissioners had recommended much less radical measures than the petition called for, however it maintains that even these much moderated recommendations, if adopted, would be “intensely harmful to the industry”, by raising prices across the supply chain and ultimately cost more American jobs than they would save.
Opponents argue that hundreds of thousands of workers could lose their jobs in an industry slowdown, including those of workers who install, finance and oversee the development of large-scale solar projects, as well as manufacturers of support structures for the panels and devices that regulate the flow of electricity from them.
Consultancy firm GTM Research which tracks the solar industry and provides data and analysis for the the SEIA believes that such measures could likely reduce expected installations over the next five years by 50%.
The SEIA argues that cheaper solar products from China have actually been a boon to their businesses and accelerated the adoption of solar energy in the United States, where it now powers millions of American homes and businesses.
Trump also faces opposition to these proposed measures from powerful business lobbies which argue that such tariffs benefit a narrow slice of the industry at the expense of other companies and consumers who have to pay higher costs. Other proposed trade tariffs, including on imported steel and aluminium, appear to have stalled under such pressure.
A long-running war
Suniva’s latest petition is another battle in the protracted war between the United States and China which began in 2011.
The dispute involved crystalline silicon cells, the major electricity-producing components of solar panels, as well as panels into which they are assembled.
Back then, SolarWorld Americas, a subsidiary of a now-bankrupt German panel maker, filed a trade complaint along with six other domestic solar manufacturers, accusing China manufacturers of using “unfair” government subsidies to finance their operations and then selling their products below their cost of manufacturing and shipping.
SolarWorld, won that case, as well as a second case which included Taiwan, to which China manufacturers had resorted for cells to avoid anticipated tariffs.
After tariffs of between 20 and 55% on the largest cell and panel makers, manufacturers outside China and Taiwan — including those in the United States like SolarWorld and Suniva — saw their fortunes rise.
In 2014, the Oregon-based SolarWorld Americas, announced a $10 million expansion of its plant and plans to hire hundreds more workers to meet surging demand for solar panels; whilst Suniva, which benefited from government-supported research at Georgia Tech, became one of the largest American makers of solar cells and finished modules.
However, the much larger Chinese manufacturers that came to dominate the global market kept up the pressure on price. Seeking a much-needed infusion of cash to finance an anticipated expansion, Suniva sold a majority stake in 2015 to a Chinese company, Shunfeng International Clean Energy, which wanted to get a foothold in what it believed was a growing American market.
The glut in cheap, new panels resulted from China manufacturers which set up operations or contracted out manufacturer to factories in countries like Malaysia, Thailand and Vietnam, the petition charges.
In 2016, the China government suggested it might cut its domestic incentives for buyers of solar panels, sharply reducing demand for equipment and adding to the oversupply. Manufacturers cut their prices to compensate, which drove global prices down sharply,even though China cut subsidies slightly and only for large power-plant arrays, prices remained low.
As panel prices dropped to about 40 cents per watt in late 2016 from 57 cents per watt in 2015, American solar installations reached a record high, making solar energy the biggest source of new electricity generation in 2016.
However, US-based panel makers, whose market share had been declining since 2013, saw their share drop 11% in 2016 from 17.1% the previous year, according to the market research firm IBISWorld.
Thus, Suniva could not compete and in March 2017, it closed its two factories in Michigan and Georgia, and retrenched 250 workers, and the following month, it filed for Chapter 11 bankruptcy protection.
Now with Suniva under the control of the bankruptcy court, Shunfeng declared in May 2017 that it no longer supported the company’s trade case, saying it was “not in the best interests of the global solar industry”.
Let’s see what President Trump decides by Friday (or by Saturday in Malaysia).
Meanwhile, whilst Asian panel makers may regard exporting to the US as prestigious and highly lucrative, however it would be wise not to put all their eggs in one basket and diversify their export portfolio across many countries, including places such as Haiti and in Africa.