The cost of solar panels will likely double next year. This is not a drill, people; this is real life.
Last week, the United States International Trade Commission (ITC) ruled that suppliers of inexpensive solar panels from other countries had caused “serious injury or threat of serious injury” to manufacturers of those products here in the U.S. The next step of the process is for the ITC to make recommendations to the President for a “remedy,” and for the president to decide whether to implement that remedy.
They’ll make those recommendations by November 13th, 2017, and then President Trump will get to have his say. The President will likely calls for new tariffs on foreign solar panels, effectively doubling the cost of buying them as early as January, 2018.
Wait, why is this happening?
We covered the important parts of this story back in May, when it was just heating up. Here are the basics:
- A U.S.-based solar panel manufacturer, Suniva, filed for bankruptcy, and brought a petition to the ITC claiming that the reason for the company’s failure was cheap panels from other countries.
- Suniva asked the ITC to recommend tariffs of $.38/watt of solar panels, with a market “price floor” of $.78/watt.
- The ITC held hearings and researched the matter over a period of 120 days
- During the course of the case, another U.S. panel manufacturer, Solar World, joined as a co-petitioner
- The panel came back last week with a unanimous finding of injury
What’s the remedy?
If Suniva gets what it wants, panels made in foreign countries will be subject to a $.38/watt tariff and a $.78/watt price floor. Between them, they’ll essentially double the price of solar panels. That’s bad, and for homeowners, it’ll mean a roughly 15% increase in the price of installing solar.
Have you ever had a coupon you wanted to use for some big purchase, but you just let it slip your mind? The day after the coupon expires, it’s almost like the retail price is way too high. It’s like: “why would I buy a new smartphone today for $350 when I could have gotten it yesterday for $300?”
That’s what’s happening with solar panels right now. And in states like Oregon, which has incentives that expire at the end of 2017, the change in the cost of installing solar between this year and next will be stark and immediate.
Whatever the ITC recommends to the President in November, there will almost certainly be action. Trump wants tariffs, and he wants them now. This will be his first chance to get them, and we suspect he’ll be putting some big league tariffs into place here.
If you’ve been thinking about installing solar, don’t let this coupon expire. Get quotes from solar providers near you, and take a look at the numbers to see whether solar can work for you. You might regret it if you wait.
Who will be the winners and losers of solar panel tariffs?
So here where it gets a bit complicated. The ITC found injury from inexpensive panels generally from “not here,” but separate rulings were made for countries with current trade agreements. So panels from China, Mexico, and Korea are out, but panels from Canada and Singapore, among other countries with far less solar manufacturing capacity, are not.
Specifically, that indicates that companies like REC Solar, from Singapore, and Canadian Solar, which ironically has only about 10% of its manufacturing capacity in Canada (a figure that will likely change if the tariffs are bad enough).
Other winners will presumably be U.S.-based solar manufacturers, like SunPower, SolarWorld, and First Solar, all of which manufacture generally excellent, generally more-expensive panels within the U.S.
Ironically, Suniva, the original petitioner in the ITC case, will have to first survive bankruptcy, re-structuring, and re-starting production to take advantage of any remedy imposed on the marketplace.
Tesla will be well-positioned to weather the storm
As of September, 2017, solar cell production has begun at Tesla’s new solar Gigafactory in Buffalo, New York. By the end of 2017, the company will ramp up production of its solar roof cells, which it expects to sell for $21.85 per square foot. That price point will see the company in direct competition with manufacturers of traditional solar panels, but Tesla will have a leg up, because their product also replaces a home’s roof, with a lifetime warranty for construction.
Interestingly, Tesla was one of many companies that told the ITC they weren’t affected by cheap panels from overseas, and even lobbied against the ITC ruling. That’s probably because the company, especially in its former guise as SolarCity, has long relied on cheap solar panels to go into its home installations. And not being able to offer prospective customers a competitive price is counter-intuitive to its ends.
Needless to say, if you had your choice of panels at around the likely-to-come $.78/watt, you could do worse than Tesla’s solar roof, or its sleek new traditional panels.
And now for the losers
As for losers, tariffs might have some havoc to wreak on southeast Asian manufacturers of solar panels, whose oversupply problems would get worse with the relatively large U.S. market unavailable. Those panels were already artificially cheap in a world market that included the U.S., and without it, the law of supply and demand would lead to ultra-low panel prices and ultra-slim or nonexistent profits for those companies.
What’s going to happen to the solar industry?
If our prediction of a 15% increase in retail price of installation comes true, home solar will likely suffer a setback. But that 15% will put prices back to about where they were in 2015, which wasn’t a bad year for home solar at all. As electricity prices rise, home solar will still be a good deal for people in most states even after the price increases.
But for utility-scale solar, where economies of scale mean installed prices are now averaging $1.03/watt for large-scale installations, a $.38/watt tariff would be completely devastating. These deals often hinge on the difference of 1 or 2 pennies per watt. A ~35% increase here would mean utility-scale solar couldn’t compete with coal in many places in the U.S.
How convenient for the people who still want to cling to coal.
If tariffs and price floors happen, it’s going to be a chaotic year or two in the U.S. solar power industry, with the Solar Energy Industries Association (SEIA) predicting 88,000 job losses as a result of the decision.
To put that into perspective, the solar industry employed around 260,000 people at the start of 2017, so we’re talking about one-third of people working in solar possibly out of their jobs in 2018.
SEIA and other solar interests will have their lobbyists working overtime to try to mitigate those losses, but if the President wants tariffs, and wants someone to bring him tariffs NOW, he’ll likely get a good chance here.