President Donald Trump imposed an initial 30 percent tariff on imported solar products Monday, a decision that the growing solar installation industry fought against, fearing that higher prices will prevent homes and businesses from investing in renewable power.
The 30 percent tariff will decrease in 5 percent annual increments over four years, with a 15 percent tariff remaining by 2022. Throughout the life of the tariffs, the duties will not apply to the first 2.5 gigawatts of imported solar cells. The White House also announced steep tariffs on washing machines, the subject of a separate trade case, as U.S. Trade Representative Robert Lighthizer followed the president’s will for protecting American manufacturers from cheap imports, including goods from China.
Business leaders and solar industry executives in Arkansas and across the nation believe the decision will have a clear price impact on a $28 billion domestic solar industry that relies on imports for some 80 percent of its solar panel supply. But most experts agree it could be worse. A continuing tariff of 35 percent had been considered.
"We have not had an opportunity to thoroughly review the new tariff increase on solar cells and modules. However, we believe a 30 percent tariff will not have a significant impact on solar development," said Jennah Denney, marketing chief at Today's Power of Little Rock, told Arkansas Business. She said her company saw solar modules selling for 38 to 42 cents a watt before tariff talk was in the air; now those modules are selling from 52 to 44 cents per watt. "This shows the impact of the tariff is already built into today's pricing."
Trump and his advisers, as well as the independent International Trade Commission, had come to the conclusion that cheap imports are hurting U.S. industry. The decision was widely anticipated, and dreaded, by many solar installation companies.
“The president’s action makes clear again that the Trump administration will always defend American workers, farmers, ranchers and businesses in this regard,” Lighthizer told The New York Times.
However, Flint Richter of Richter Solar Energy of Fayetteville said the new tariff could raise the price of an average solar PV installation by $1,500 and increase the payback period by a year. "I do not see this tariff as protecting our U.S. manufacturers," said Richter, a certified solar installer, "but as another way to stifle the rapidly expanding solar industry, which is in direct competition with fossil fuels, the current administration's favored energy source and financial supporter."
A study by GTM Research computes that a 30 percent tariff will raise solar costs roughly 10 to 15 cents per watt, and could reduce utility-scale solar installations by 9 percent, according to Utility Dive, an industry publication. Two companies with U.S. manufacturing operations, Suniva of Georgia and Solarworld of Germany, which has a large factory in Hillsboro, Oregon, sought the tariffs. Suniva is under Chapter 11 bankruptcy protection, and Solarworld’s German parent company has filed for insolvency. Both blamed Chinese imports for accelerating their problems.
The Solar Energy Industries Association fought against any tariffs, arguing that nearly 90,000 potential jobs might be lost if customers considering solar power turn against it because of added costs.
Most of America’s current 260,000 solar jobs involve installation, Utility Dive has reported, and fewer than 40,000 jobs are in manufacturing.
Hugh Bromley, an analyst at Bloomberg New Energy Finance in New York, calculated that the average cost for a large solar farm might rise by 10 percent because of the tariffs; residential systems could go up 3 percent.
"This new tariff will reduce the number of jobs in the solar installation business in Arkansas and surrounding areas," said Terry Tremwel, chair of Picasolar Inc. of Fayetteville. "Just as solar was becoming very competitive for retail customers in this part of the country, the fossil fuel industries are resisting because they can't compete with a zero-marginal-cost producer of electricity."
Tremwell said one rule holds true: "As the price of solar goes down, the number of jobs installing solar panels goes up," he said. "Now this ill-conceived tariff will increase retail installed costs by 6 percent. This may not sound like much, but we are just at the point of competitive pricing at retail in Arkansas."
Nevertheless, Heather Nelson and Josh Davenport of Seal Energy Solutions, a North Little Rock company that has been growing its solar installation business, expected the tariff and are ready to adjust. "We’ve seen price adjustments for months as vendors anticipated Trump’s decision," the company said in a statement. "After speaking with our vendors in the last 24 hours, we believe that we will see a five- to ten-cent-per-watt increase once the smoke clears. This is a 3 to 5 percent cost increase on a system as a whole. As our labor costs continue to improve, and the cost of energy continues to increase, we see the tariff as ultimately nonconsequential."
Matt Beasley, chief marketing officer at Silicon Ranch of Nashville, Tennessee, also played down the tariffs' impact. "While we are all still digesting the news, I can say this: The solar industry is a resilient bunch, and now we at least know what the rules are." Silicon Ranch, a leading U.S. developer, owner, and operator of solar energy plants, installed a 150,000-module plant for Aerojet Rocketdyne and Ouachita Electric Cooperative at the Highland Industrial Park in East Camden. "We can now accommodate a structure that will continue to optimize the efficiency inherent to our industry."