A tariff on international solar panels threatens to curb an important contributor to the nascent clean energy boom.and more »
Suniva was once among the top solar panel manufacturers in America. Then, in April, the Georgia company declared bankruptcy. A few days after, it revealed why: Foreign governments, like China, had subsidized competing solar cell manufacturers abroad, undercutting Suniva's prices. The company outlined its tale of woe in a petition filed that month with the US International Trade Commission calling for strong tariffs against foreign manufacturers.
A few weeks later, another US manufacturer, Oregon's SolarWorld, joined the petition. And last Tuesday, the plaintiffs made their case to the ITC: Since 2012, foreign competition has cost the US solar industry 1,200 jobs and a 27 percent drop in wages. The tariff, they argued, would help create 115,000 to 144,000 jobs by 2022.
But much of the rest of the US solar industry finds those figures far-fetched, and calls the tariff a terrible idea. See, manufacturing remains a small part of the US solar power industry. Most of the money—and work—lies in assembling panels into arrays and installing them for large corporate or industrial-scale clients (residential rooftop setups are small potatoes). Opponents of the tariff argue it would raise the material costs of generating solar electricity just as it is becoming cheap enough to compete with fossil fuels. Extend that logic, and the tariff threatens to curb an important contributor to the nascent clean energy boom.
So no, this isn't your average trade dispute. Starting with the tariff's origin story. When Suniva filed for bankruptcy, it still had a chance to survive. But the company needed money to ride out the rough patch. One investor, the New York firm SQN Capital, offered $4 million credit ... if Suniva complained to the ITC about artificially cheap solar panels imported from abroad. On the surface, this sort of makes sense. SQN Capital had already sunk tens of millions into Suniva. If US panel manufacturing rebounded, the company could recoup some of its investment. But it's also possible that SQN Capital cooked up the tariff idea to extort $55 million from the Chinese Chamber of Commerce. More on that later.
First, the tariff petition. It offers a two-pronged strategy to protect domestic solar panel manufacturing. The first part requests that any imported crystalline-silicon (one of several panel chemistries) solar panels see an added charge of 40 cents-per-watt. The second part sets a minimum price of 78 cents per watt for any imported panel. That might sound redundant, but it's meant to ensure that foreign subsidies don't make an end run around that 40 cent duty.
The 78 cent price floor also effectively guarantees that domestic crystalline-silicon solar cells earn a healthy profit without having to worry about foreign competition. That's because, according to a Stanford University study, the average cost—which includes variable expenses like materials, labor, utilities, engineering, and administration—of making such a panel is below 40 cents per watt.
Sure, other countries do it cheaper. Figuring out why is dicey. Do Chinese solar power manufacturers receive government subsidies? Of course. But so do US solar companies: SolarCity got $750 million from New York for its yet-to-open factory in Buffalo. “It comes down to the question of what does a thing cost a manufacturer to make, and what counts as product dumping,” says Stefan Reichelstein, faculty director of the Sustainable Energy Initiative at Stanford University and co-author of the study.
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Good luck finding irrefutable evidence that the Chinese government unfairly subsidizes Chinese manufacturers. But even if that did happen, a tariff on their products wouldn't be a decisive economic coup. Manufacturing is not the backbone of the US solar industry. “When I finance a solar array, I am paying for not just the solar cells, but a lot of civil engineering, bulldozers, steel, and other additional resources. To do that, I have to outcompete not only solar projects, but other sources of generation,” says Colin Murchie, an expert in corporate and institutional-scale solar project planning for Sol Systems.
You can credit those large-scale operations for most of recent solar energy demand. Last year, solar accounted for more than one-third of all newly installed electricity generation in the US. And solar's rising popularity is closely tied to its plummeting costs. Cut-rate panels from places like China are a big factor for those conjoined trends.
Which is why a study by GreenTechMedia, a renewable energy news and analysis organization, reported that the proposed tariff would erase two-thirds of expected solar installations over the next five years. The Solar Energy Industries Association framed the tariff's effects in terms of jobs. Namely, kiss 88,000 of them goodbye. And yes, that would affect manufacturing, too.
After GreenTechMedia published its study, Suniva and SolarWorld commissioned their own investigation of the tariff's effects. By correcting purported flaws in GreenTechMedia's methodology, the two companies say the tariff will create 115,000 to 144,000 US jobs in the next five years—44,000 of them in manufacturing alone. An ambitious figure, given the solar industry currently employs about 260,000 people (19 percent of whom work in manufacturing).
Which study the ITC commission favors remains anyone's guess. But that's not all it has to chew on. Remember that extortion thing? Well, back in May, the president of SQN Capital—the company that lent Suniva $4 million and demanded it petition for tariff protections—wrote a letter to the Chinese Chamber of Commerce. It was unsubtle: Buy $55 million worth of Suniva's equipment, and SQN Capital would make the tariff petition go away. Why $55 million? Well, that would allow SQN to recover the $51 or $52 million (including that $4 million loan) it sunk into Suniva over the years. Such an offer isn't against the law. But it does raise many questions about the motive behind the tariff petition.
The rival sides saw each other in court last Tuesday—for 10 hours—and the ITC commission is set make its call in about a month. On one hand, the exorbitant duty request, overwhelming opposition from the US solar industry, and a possible extortion attempt seems like a serious tarnish on the tariff petition. On the other, a clean industry-crippling punishment for Chinese imports fits nicely within the federal government's "America First" energy plan. Nothing is certain, even on the sunniest days.