President Trump may soon get to decide the fate of the U.S. solar industry.
On Sept. 22, the U.S. International Trade Commission (ITC) is expected to decide whether the importation of cheap solar modules from China has unfairly disadvantaged U.S.-based solar manufacturers. If it finds harm, the president will decide whether to grant the request of two companies to impose import tariffs on Chinese modules, or find a different remedy.
How the president views the issue is unclear, but solar insiders anticipate that he will be pressed into a decision. In conversations with more than a dozen solar manufacturers, financiers and installers at the Solar Power International conference last week, not one expected the ITC to dismiss the petition (201-075).
“It’s a very narrow case about solar cells and modules that are made with these solar cells,” said Barry Cinnamon, founder of installer Spice Solar and an board member alternate of the Solar Energy Industries Association. “Although I am opposed to it, I think they’re going to come to the conclusion that most rational people would that the U.S. solar cell industry was harmed.”
Other solar executives agreed that the decision on tariffs would likely fall to the president, implying an ITC finding of harm.
George Hershman, vice president of Swinerton Renewable Energy, acknowledged that the president has supported tariffs and protectionism in his rhetoric. But, he said, “I don’t see him approving a tariff that kills jobs for his hardhat-wearing supporters.”
Bill Vietas, president of racking manufacturer RBI Solar, was less confident.
“The president can do whatever he wants,” he said.
A finding of harm would be a significant victory for manufacturers SolarWorld and Suniva, which declared bankruptcy shortly before filing the petition. The companies have driven a wedge through the solar industry with their tariff push, proposing a $0.40/watt duty on imported cells and a floor price of $0.78/watt on imported modules.
"We have been injured by imports, many of which come from manufacturers with massive state support,” said Ben Santarris, communications head for SolarWorld. “The government will decide on the remedy. We have a lot of confidence in the facts and in the ITC.”
The Solar Energy Industries Association (SEIA), the major trade group for solar in the U.S., is leading the charge against the petition.
“One key argument against it is jobs,” SEIA President and CEO Abigail Ross-Hopper said during a panel discussion at SPI.
Analysts calculate the U.S. has about 260,000 solar jobs. Only about 38,000 are in manufacturing. The petitioners argue that a tariff on imported panels could restore “fair competition,” leading to an increase in manufacturing jobs.
SEIA and other solar companies say import duties would drive up the solar system costs and threaten far more non-manufacturing solar jobs. Dueling employment studies have fueled the debate, and SEIA argues the two manufacturers are not representative of the wider solar industry.
The two sides made their cases to the ITC during an all-day hearing in August. As the sector girds itself for the commission decision, some say the president has better options to support domestic manufacturing than a tariff.
A divided sector
SolarWorld’s post-hearing brief argues the evidence of injury to domestic manufacturers is “overwhelming.”
During the period of investigation from 2012 to 2016, U.S. solar prices fell “roughly 60%,” according to the brief. This led to a 350% increase in demand for solar systems in the U.S., but because imports grew over five times in that period, U.S. production growth was “minimal.”
SolarWorld presented evidence that 19 U.S. solar manufacturers shuttered facilities over the period of investigation, even as the rapidly expanding solar market experienced supply shortages.
The “staggering losses” suffered by domestic manufacturers during a period of rising U.S. demand "can only be explained" by “surging, low-priced imports,” the brief argues.
Despite domestic manufacturing losses, SEIA’s post-hearing brief notes that much of the U.S. solar industry is opposed to the tariff petition. The trade group filed with co-respondent SunPower, a major U.S. vertically-integrated solar company with manufacturing and installation arms.
The “unprecedented” pushback is because the tariff threatens far more U.S. jobs “than will ever exist in the cell and module producing sector,” the respondents argue. The “vast majority” of the shuttered companies cited by the petitioners occurred “primarily for reasons other than imports.” Many bankruptcies were because “companies bet on the wrong technologies.”
U.S. solar manufacturing also failed to take advantage of protections in a 2015 ITC ruling against Chinese manufacturers for unfair trade practices, the filing adds.
Suniva takes exception to those claims in its post-hearing brief.
Until its bankruptcy in April 2017, “Suniva made every effort to compete,” the filing argues. But it “was steadily forced out of that market by the relentless deluge of low-priced imports.”
Imports were needed to meet U.S. demand for modules not because of U.S. manufacturers’ failures but because of loopholes in the 2015 ITC ruling against Chinese manufacturers, Suniva’s filing argued.
Other market factors do not explain the fate of U.S. manufacturers in recent years and arguments that low quality products caused U.S. manufacturers’ failures are “not supported by the facts,” Suniva argues.
Regardless of harm to domestic manufacturers, SEIA’s brief stresses that a tariff would also damage the ability of solar generation to compete against fossil fuels and other renewables. Solar’s newly achieved cost reductions have left most of the U.S. solar industry “thriving,” respondents argue.
“Although petitioners have experienced recent self-inflicted difficulties, other members of the U.S. cell and module industry are investing,” they wrote. “And the U.S. government continues to provide strong support for R&D.”
During a panel appearance at SPI, Hershman of Swinerton Renewables argued that a letter to the Chinese Chamber of Commerce revealed in May undermined Suniva’s tariff arguments.
Venture capital group SQN Capital Management is the largest creditor of Chinese-owned Suniva, having provided $51 million in equipment financing. In a May 3 letter, the company’s president outlines a plan that would see Suniva drop its tariff push if a member of the Chinese Chamber agreed to buy $55 million worth of Suniva equipment so the manufacturer could repay its debts to SQN.
If such a deal went through, the trade case “would be withdrawn,” SQN President Jeremiah Silkowski wrote, as the company would stop providing funding to Suniva under its bankruptcy.
“If SQN were to arrange a sale of the equipment that secures its investment, SQN would have no interest in providing additional funding to Suniva and the company would have to convert to a Chapter 7 Bankruptcy where the assets are liquidated and the company ceases to exist,” he wrote.
Swinerton called SQN's offer “an attempt to extort money out of manufacturers that has now put all our jobs at risk.” Suniva did not respond to requests for comment.
Competing job claims
Competing job claims and economic impact analyses have animated the solar tariff debate.
SolarWorld’s concern is that cheap imports have cost the U.S. high-wage manufacturing jobs that have "a relatively bigger impact on the economy” than jobs in the installation sector, Santarris said.
“We can compete with any company in the world but we can’t compete with countries on the scale of China and we shouldn’t have to,” he added. “With the tariff, there will be a pretty sizable job gain in manufacturing employment.”
A employment study by law firm Mayer-Brown funded by SolarWorld concluded effective remedies from the ITC “would result in a net gain in employment of at least between 114,796 and 144,298 jobs for the U.S. solar industry.”
Using data from The Solar Foundation and forecasts from GTM Research, the study found there would be “as many as 45,000 U.S. manufacturing jobs” in cell and module manufacturing and in upstream sectors supported by manufacturing.
“It also includes an increase of 98,020 U.S. non-manufacturing jobs, including 65,830 U.S. installation jobs,” the study added.
Mayer Brown assumed all U.S. manufacturing capacity would remain operational and at least 2 GW of production capacity would be added. That would add between 37,500 and 45,500 jobs, between $2.5 billion and $3.3 billion in wages, and other investment which would generate "significant" new economic benefits, the study concluded.
Those findings are significantly more optimistic than studies from SEIA and independent parties.
A GTM Research report found the petitioners’ proposed penalties — a $0.40/watt tariff on imported cells and a floor price of $0.78/watt for modules — would cause profound harm to the U.S. industry.
Without tariffs, GTM forecasts cumulative U.S. solar installations from 2018 to 2022 would be 72.5 GW. With a $0.78/watt minimum module price, that forecast falls to 36.4 GW. Add in the $0.40/watt cell tariff, and the forecast reaches only 25 GW over that time.
In a separate calculation, SEIA took the existing solar deployment forecast for 2018 as a baseline and assumed the petition’s remedies would increase the cost of solar to what it was in 2015. A comparison of 2015 jobs to the jobs needed to achieve the 2018 deployment forecast concluded the industry would lose 88,000 jobs.
Additional SEIA numbers raised further questions. SolarWorld’s 550 MW factory employs less than 500 people, the trade group noted. If the Mayer Brown study is correct that the tariff will produce 2 GW (2,000 MW) of new production capacity, that would account for about 2,000 jobs, not 100,000 jobs, SEIA argued.
Hugh Bromley, lead U.S. solar analyst at Bloomberg New Energy Finance, said comparing the studies is complicated by their distinct assumptions.
The Mayer-Brown study takes solar job numbers for 2015 as a baseline and calculates job growth going forward. This allowed it to include already achieved record-breaking 2015 and 2016 solar job growth in its projections.
Bromley said a more accurate approach would compare, as SEIA did, an accounting of what would happen under a business-as-usual case with a statistical profile of what would happen if there was a tariff.
Even with a tariff, the solar industry will grow and create jobs, Bromley said. The important question is how many fewer jobs would be created if there is a tariff than there would be in a business-as-usual case without it. The SEIA answer was 88,000 jobs; Mayer-Brown does not answer that question.
Bromley suggested an alternate statistical approach.
“The current generation of PV cell production facilities require around 800 personnel per GW of annual production capacity,” he said via email. Current U.S. local demand will require about 8 GW of additional cell production capacity.
That means a “maximum of 6,400 jobs” could be created in manufacturing, Bromley calculated. With a tariff driving prices up and demand down, “downstream job losses would almost certainly exceed any manufacturing gains.” And, Bromley added, it is likely much of the 8 GW of required local capacity would grow offshore jobs rather than U.S. solar manufacturing jobs.
If President Trump approves the proposed tariffs, he could “wipe out the U.S. solar industry,” warned Jigar Shah, president of Generate Capital.
But the White House knows a severe tariff would “hurt Republican investments in solar and solar businesses and jobs in states that support him,” Shah said. The likely compromise is a tariff that just “levels the playing field for U.S. manufacturers.”
Shah called for better policies than tariffs to support U.S. manufacturers, saying “the federal government has done little to protect U.S. manufacturing since the Carter administration.”
Shah suggested using DOE grants or the estimated $1.5 billion to $2 billion collected in 2015 tariff duties to fund manufacturing centers.
Other solar executives echoed Shah’s calls.
“I’m disappointed with U.S. industrial policy towards solar cell and module manufacturing,” said Cinnamon of Spice Solar. “Manufacturers are working hard but U.S. policy does not support them and, more disappointingly, our industry lobbying organizations don’t support them.”
Steve Ostrenga, vice president for sales with China-based module manufacturer Seraphim Solar USA, said a production-based incentive would better support U.S. manufacturers.
“A buyer who gets paid for kWhs is more concerned about production and reliability and quality and that would support high quality domestic manufacturing over imported products,” said Ostrenga. He also suggested support for worker retraining programs.
SEIA’s Ross-Hopper said the association has supported U.S. manufacturing by fighting for the investment tax credit and net energy metering.
“We have created a market so that manufacturers have customers,” she said.
SEIA might, she said, also advocate for better manufacturing-specific policies, funding for worker retraining programs, and DOE grants to fund manufacturing centers. The duties from the 2015 tariffs are being held “until all litigation is finalized,” she added.
How the White House will respond to an expected ITC harm ruling remains an open question. Though the president reportedly issued a broad call for tariffs to his economic team earlier this year, the administration did not respond to requests for comment and Trump has not directly addressed the solar issue.
Like most at SPI, Cinnamon said he is not hopeful the White House will choose solar growth over the political appeal of protectionism. “In which case,” he said, “we’re looking at tariffs."