Anticipating the Effect of Trump Administration’s Solar Tariff
On January 22nd, President Trump approved a tariff on imported solar cells to safeguard US producers from cheaper international prices. The tariff will begin at 30% the first year and decrease annually by 5% over the next four years. Additionally, the first 2.5 gigawatts of cells imported each year will be exempt from the tariff. While this tariff is significant, it is not as steep as many in the solar industry feared it would be. The question remains though, what will its impact be on solar energy production in the U.S?
The authority to pass the tariff comes from section 201 of the Trade Act of 1974, in which the president is granted the authority to use tariffs in response to a finding by the U.S. International Trade Commission (ITC) that increased imports are a substantial cause of injury to domestic producers. The ITC investigation into the potential injury to US solar cell producers came after a petition was filed by Suniva and later joined by SolarWorld. As a result of its investigation, the ITC found that increased solar cell and module imports were a cause of significant injury to domestic solar manufacturers and recommended a tariff of 35%.
The Trump administration hasn’t been shy about its distaste for renewable energy while championing fossil fuels. In fact, the explanation that the tariff’s purpose is to increase domestic production of solar cells seems to contradict the administration’s efforts to “bring back coal” in the US. So what will the impact actually be on solar throughout the country? Green Tech Media projects that the tariffs will keep 7.6 gigawatts from being installed nationally from 2018 to 2022 as access to cheaper imported solar cells and modules disappears. It has been estimated that the tariffs will more greatly affect utility scale solar projects than residential systems, with one analysis estimating increases in utility scale project costs by approximately 9% and residential scale project costs by approximately 3%.
These increases in price will not have a uniform effect across the country. States like California with legislation pushing for renewable energy procurement will experience some dips in projected solar installation, but won’t see the industry vanish. In 2016, the Sierra Nevada installed nearly 330 megawatts of solar capacity** and as of November 2017 the Sierra Nevada has installed a cumulative 1,383 megawatts of solar capacity*. The tariff is expected to cause California a drop of 1,079 megawatts from solar installation over the life of the tariff. This would be the largest reduction in forecasted megawatt installations of any state, but the smallest percentage decrease, (only 7%), because the state is so supportive of solar procurement.
In other parts of the country where solar isn’t as established and state support is minimal, projected solar installation could plummet. Of these forgone installations, Montana could see a 48% decline from previously forecasted installations, the largest percentage of any state.
Having looked at how the tariff will affect solar installations in the next four years, it is also important to consider how the tariff will affect actual domestic solar cell manufacturing. Given the tariff will only last for four years it seems unlikely that it will spur the domestic solar cell manufacturing renaissance it aims to encourage. With such a short time frame it likely won’t be worth it for many solar cell producers to set up or greatly expand operations in the US. Meanwhile, international manufacturing is going to keep innovating and once the tariff ends in four years it’s unlikely domestic producers will be able to compete with international prices.
The short time frame of the tariff is likely to result in many utilities and families currently considering solar energy to push back planned projects until the tariff ends and cheaper solar cell imports can become available again. It Is unlikely to increase the competitiveness of our domestic solar manufacturers. We could be looking at four years of stalled renewable energy production at a time when much of the world is innovating, which makes me ask the question, was that the point?
*Estimate based on data aggregated for counties listed by Sierra Nevada Conservancy as belonging to the Sierra Nevada region.