Legal & Regulatory

South Korea Will Fight Solar Tariffs; Others Will Wait

The global solar industry on January 23 reacted to President Trump’s announcement on Monday that the U.S. will enact a 30% tariff this year on imports of solar cells and modules, a levy that could begin as soon as next month. Some groups said they will take a “wait and see” approach to the charge, while others—including South Korea—promised swift action against the assessment.

Trump on January 22 said imported photovoltaic (PV) products would be subject to a 30% tariff in 2018, with the levy falling by 5% each year, to 15% by 2022.  The decision came after the U.S. International Trade Commission (ITC) in 2017 said imports of PV products are causing “serious injury, or threat of serious injury, to the domestic [solar] industry.” The ITC acted after Suniva, a bankrupt solar panel manufacturer with a Chinese majority owner, and SolarWorld Americas, the U.S. arm of a German solar company, asked for tariffs and a floor price to be imposed on imported solar cells and panels. The majority of the U.S. solar industry, including power generators, have opposed tariffs, saying the levies will raise the cost of solar installations and slow the adoption of solar power across the country.

Trump signed the levy into law on Tuesday and said it would create jobs. “You’re going to have people getting jobs again and we’re going to make our own product again. It’s been a long time,” Trump said during the signing.

Republican Sen. John McCain of Arizona disagreed with the president. In a Twitter post, McCain said the tariffs are “nothing more than a tax on consumers.”

SEIA ‘Not Happy with the Decision’

Abigail Ross Hopper, president of the Washington, D.C.-based Solar Energy Industries Association (SEIA), who on Monday said the tariff would cost at least 23,000 U.S. jobs in the industry, on a conference call Tuesday reiterated that the solar industry is “not happy with this decision. It’s just basic economics—if you raise the price of a product it’s going to decrease demand for that product.”

SEIA said the tariffs, in addition to costing jobs, could lower the forecast for U.S. solar installations in 2018 by 2 GW. SEIA had forecast 11 GW of solar generation would be installed this year. The group also says the U.S. solar industry has about 260,000 workers, or about five times more than the U.S. coal industry. About 14% of solar jobs are in manufacturing, with installers comprising most of the rest.

The tariffs could be challenged in court, and while Hopper did not say SEIA would take that route, the group could marshal its membership to fight Trump. The usual way to combat such a tariff declaration is to ask for a court review of whether the president has authority from Congress for such a move. Hopper did say she expects some of the countries targeted by the tariff to ask for relief from the World Trade Organization (WTO), but added that could be a lengthy process.

South Korea: Measures ‘Violate WTO Rules’

Nonetheless, South Korea on Tuesday said it will “actively respond to U.S. trade protectionism.” Kim Hyun-chong, the country’s trade minister, said “It is clear that the … measures would violate the WTO rules. We will actively respond to protectionist measures. The U.S. opted for a measure that puts the domestic political situation above international rules.”

More than 80% of U.S. solar installations use imported panels, according to Bloomberg New Energy Finance, with most coming from Asian nations including China, South Korea, Malaysia, Vietnam, and Thailand.

At least one company bought a large inventory of solar panels in anticipation of Monday’s tariff announcement. Brooklyn SolarWorks, based in Brooklyn, New York, invested in equipment in advance of the expected levy.

“Our team knew that the tariff was coming and so we made a bulk purchase of solar panels using [a] Kabbage loan to help float the upfront cost,” T.R. Ludwig, the company’s cofounder and CEO, told POWER on Tuesday. “There is a strong chance we will do it again if we can get an early line on non-tariff panels. Nevertheless, we can’t arbitrage non-tariff panels forever, and eventually the costs will need to be borne by customers and installers providing the services.”

Ludwig agreed with the majority of the U.S. solar industry that the tariffs will have a negative impact on the sector. “On the whole we think the tariff is only going to make solar projects less economically viable,” he said. “Solar will press on, but likely at a slower clip than recent years, and it will be at the expense of well-paying [non-outsourceable] sales, marketing, permitting, engineering, design, installation, electrical, maintenance jobs that come with a solar system.

“We find it ironic that Trump wants to claim he is helping American jobs with this protectionist move, but really putting tens of thousands of jobs at risk in the process,” Ludwig said. “We think he should use his aggression to focus the country on a clean energy revolution, and that will certainly create jobs.”

China Will ‘Defend Legitimate Interests’

The Chinese Commerce Ministry in a statement on Tuesday said it had “strong dissatisfaction” with the tariff. The ministry added that the tariff measure “aggravates the global trade environment” and called it “an abuse” of trade. “China hopes the U.S. will exercise restraint in using trade restrictions,” the ministry said, adding that it will “resolutely defend its legitimate interests.”

Even Mexico, a smaller trading partner when it comes to solar equipment, with exports to the U.S. of about $1.1 billion in 2016 according to the U.S. Census Bureau, expressed its anger. The country’s Economy Ministry in a statement Tuesday said “Mexico will utilize all legal resources available in response to the U.S. decision.”

Like other U.S. utilities, Duke Energy—which owns more than 800 MW of solar power capacity, with plans to add more than 3,000 MW over the next five years—issued a statement Tuesday saying the president’s action would not stop its investment in solar power, but the utility will closely evaluate projects moving forward.

“We are planning a significant number of projects across our commercial and regulated businesses,” the statement said. “The imposition of this tariff will increase customer costs and hurt our ability to deliver on that promise. We will continue to invest in this resource. But we are carefully evaluating the economics of each of our solar projects with a focus on minimizing adverse impacts on our investments and costs to customers while supporting the growth of renewable energy.”

Randy Wheeless, a spokesman for Duke Energy, on Tuesday told POWER: “Duke Energy has major expansion plans for solar, and this tariff will increase the cost of delivering that to customers. But it’s premature to say if that’s a major or minor increase.”

SACE Charges Market Manipulation

The Southern Alliance for Clean Energy was among several environmental groups that decried the president’s action. “SACE is disappointed that the president felt compelled to manipulate the solar market,” said Bryan Jacob, who directs the solar program for SACE, in a Tuesday statement. “This maneuver will increase the cost of solar and slow growth in one of the most vibrant segments of the U.S. economy.”

ClearView Energy Partners, a Washington, D.C.-based energy research and analysis group, estimated this year’s 30% tariff could hike the cost of a residential rooftop solar system by about 4%. It estimated the cost of a commercial solar projects could rise by about 6%. Earlier, Wood Mackenzie’s GTM Research group said a 30% tariff has a cost of about 10 cents to 15 cents per watt. The group estimates that additional cost could reduce U.S. utility-scale solar installations by 9%.

Despite the industry’s disappointment with Trump’s action, some in the solar sector remain optimistic and expect growth will continue.

“We are disappointed by the administration’s decision on the trade case,” said William J. Berger, CEO of Houston, Texas-based solar company Sunnova, in a statement Tuesday. “The solar industry embodies innovation, resiliency and job creation—all of the characteristics that have made our country great. Residential solar costs have come down significantly across the industry over the last five years and we expect those cost declines to continue, despite tariffs.”

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)

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