Trump’s Solar Tariffs

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The Trump administration’s decision last week to apply a 30% solar import tariff for crystalline-silicon solar cells and modules has been met with a broad spectrum of responses. While some expressed outrage, others felt that the decision could have been worse and may even present opportunities for industry expansion.

The tariffs come in response to complaints filed with the International Trade Commission in May 2017 by two foreign-owned US companies: Suniva and SolarWorld Americas. The enterprises both insisted that they were forced into bankruptcy because of competition from cheap imports.

The tariff rates are structured to reduce by 5 percentage points each year to 15% by the fourth year and offer exemptions for 2.5 gigawatts of cells each year. So what will they mean for distributed energy markets?

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Some feel that the added cost will create barriers to solar deployments, while others believe that it may not be entirely destructive. In fact, several executives expressed confidence this week that solar is on such a well-established cost-reduction trajectory that the tariffs will have minimal impact. They see opportunities in systems design, supply chain, and finance models to reduce costs that, going forward, can be used to soften the effects of the trade restrictions.

Jules Kortenhorst, CEO of Rocky Mountain Institute, told Energy Manager Today that “…the unrelenting reduction in costs, not just of the solar panels itself but of the integrated costs of solar installations, will continue and will ensure that the new tariff only have a modest impact in the short run.”

However, one concern among industry insiders is that the tariffs will impact the cost of complete energy solutions that include solar generation. They explain that the solar component of any given project has a significant bearing on the economics of the entire system and added costs can be a deal-breaker. Therefore, some worry that a price increase may have a ripple effect beyond solar markets and impede the adoption of microgrids and decentralized systems.

“This is certainly a negative,” said Dr. Peter Lilienthal of HOMER Energy in a phone interview. “While the tariffs aren’t going to kill the industry, they will slow the growth rate.” From his perspective, any action that raises the price of individual components makes establishing the value proposition for microgrids more challenging.

GTM Research estimates that, overall, the US solar market will see a net reduction in installations of around 11% as a result of the trade and an average 10 cent per watt increase in year 1 prices for modules, stepping down to a 4 cent per watt premium by year 4.

Dr. Lilienthal also sees this as strengthening the rationale for the industry to shift to a more global focus. “The tariffs will hurt the US markets but not global markets. 90% of load growth today is outside of the US. My sense is that this may prompt companies to think globally.”

What are your impressions? How will the solar tariffs affect your organization?

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