Tariffs Shake Up The Solar Manufacturing Industry

Four months after the U.S. announced tariff increases on solar cells and modules from China, the industry continues to respond with new investments while also preparing for flat growth in the future.

The tariffs were designed to level the playing field for U.S. solar manufacturers, but some experts say a bigger issue is that it will raise the cost of solar power and its deployment. Much of the U.S. solar industry, including manufacturers and installers, opposed tariffs because they are expected to slow solar deployment by roughly 10 percent over the next five years.

A government fact sheet released on the tariffs said a flood of cheap Chinese solar panels forced the market priced of cells and modules to fall by nearly 60 percent between 2012 and 2016. While it led to a tripling of the solar generation capacity installed annually in the U.S., it also hampered American solar product manufacturers. The U.S. government noted that the China’s government had unfairly used state incentives subsidies and tariffs to “dominate the global supply chain” for solar cells and modules. The Department of Commerce also noted that in 2011, China had subsidized its producers which were selling goods in the U.S. for less than their fair market value. China’s share of global solar cell production grew from 7 percent in 2005 to nearly 70 percent in 2017.

While tariffs were intended to punish Chinese solar giants such as JinkoSolar, Yingli Green Energy Holding Co. and JA Solar, they have led to negative impacts here at home as well. In January, the Solar Energy Industry Association said in a press release that the tariffs could put at risk more than 23,000 American jobs, including many in manufacturing. SEIA noted of the 38,000 jobs in solar manufacturing in the U.S. at the end of 2016, only 2,000 of those jobs were related to cells and panels. The other 36,000 jobs were involved in manufacturing metal racking systems, inverters, and other electrical products.

“Despite the investments, U.S. solar manufacturers may have to deal with slow growth in the future.”

“The U.S. solar manufacturing sector has been growing as our industry has surged over the past five years. Government tariffs will increase the cost of solar and depress demand, which will reduce the orders we’re getting and cost manufacturing workers their jobs,” said Bill Vietas, president of RBI Solar in Cincinnati.

Yet some companies are making new investments in solar manufacturing in the U.S. SunPower will soon announce plans for a U.S. plant to take over some of the panels it makes abroad. The company currently makes most of its panels in Mexico and Asia. CEO Tom Wener told Bloomberg it was deciding between sites in two western states and that production would begin in less than 10 months. The company also announced it would acquire SolarWorld and reopen a manufacturing plant in Oregon.

“The time is right for SunPower to invest in U.S. manufacturing, and SolarWorld Americas provides a great platform for us to implement our advanced P-Series solar panel manufacturing technology right here in our home market,” Werner said.

There was little doubt the tariffs at least partly influenced the decision. Werner told Inside Sources with tariffs costing up to $2 million per week, the money could be otherwise better spend on investments in domestic manufacturing. “There are in fact tariffs, and the tariffs influence both the political environment and the economic environment,” Werner said.

China-based JinkoSolar Holding Co. also announced in early-April it would open a plant in Jacksonville, Fla., which would employ more than 200 people and make seven million solar panels over the next four years for Florida utility company NextEra energy.

And First Solar Inc. announced in late-April that it would expand manufacturing operations with a $400 million solar panel factory in the U.S. First Solar senior vice president of global manufacturing Mike Koralewski told Reuters the decision was led by strong domestic demand and by changes in U.S. tax policies. The Tempe-based company is one of the world’s largest solar companies and manufacturers most of its products in Malaysia. The expansion in Ohio will triple the company’s domestic capacity.

“These factors, combined with our own economies of scale in high tech manufacturing, make expanding U.S. operations an attractive, win-win opportunity,” Koralweski said.

Despite the investments, U.S. solar manufacturers may have to deal with slow growth in the future. GTM Research said in its annual review of the industry that while 2017 marked the second year of double-digit gigawatt growth, that growth is expected to remain flat in 2018. GTM also lowered its forecast for solar installations between 2018 and 2022 due to changes in federal and state policies, market headwinds across solar power segments and fallout from tariffs and corporate tax reform.