New Solar Tariff on China May Slow Recent U.S. Solar Boom

The U.S. solar energy market has been booming for several years, due to falling solar component prices and stable government incentives. In an effort to boost domestic manufacturing, the Commerce Department recently ruled in favor of the petitioner SolarWorld, the largest U.S. solar producer for 40 years, to impose a solar tariff for Chinese solar products that may boost overall solar installation costs by an estimated 10 percent.

The new solar tariff on China may slow the recent U.S. solar boom. A preliminary duty of 35 percent on imports of Suntech, 19 percent on imports of Trina Solar, and 27 percent for most other Chinese solar producers are effective immediately. The ruling closes what SolarWorld calls a loophole in the solar tariff, where Chinese solar manufacturers used Taiwanese solar cells in Chinese solar panels to circumvent the solar tariff.

"Chinese producers evaded the duties by commissioning manufacturers in other countries to partially or fully produce solar photovoltaic cells for assembly into solar panels back in China" SolarWorld said in a recent press release. "State-controlled Chinese media said at least 70 percent of U.S. imports from China contain Taiwanese cells." SolarWorld’s petition states that Chinese solar manufacturers receive government assistance, including free land and utilities, cash grants, discounted loans and loan guarantees, and heavily discounted polysilicon, solar glass and aluminum.

Proponents of the tariff say that China is dumping solar components in the U.S., thus hurting U.S. manufacturing jobs in the process. The market will naturally favor low-cost manufacturing hubs, where wages and poor working conditions reduce costs. The tariff will level the solar manufacturing playing field.

Opponents fear the tariff will increase the price of solar panels by 20 to 40 percent, harming the solar industry that now employs 150,000 Americans. Brad Meikle believes the U.S. will never be a solar manufacturing hub, but that the economic opportunity lies in the installation, finance and distribution.

The recent solar boom, in fact, has been in large part due to a 70 percent drop in solar module cost. Boosting the module costs, either through a tariff on Chinese panels or encouraging more costly domestic panels is likely to decrease installations.

"The cost of solar energy has finally reached very attracted price levels of less than $3 watt installed,"said Kiril Lozanov, vice president of Capital City Renewables. "Increasing the price of the panels will not benefit the future growth of the industry."

The American Solar Energy Association (SEIA) is even calling for a negotiated settlement and expresses concern about the recent ruling. "Today’s decision by the U.S. Department of Commerce to impose new tariffs on solar modules from China threatens to derail the rapid growth of the U.S. solar industry."

SEIA President Rhone Resch said: "These damaging tariffs will increase costs for U.S. solar consumers and, in turn, slow the adoption of solar within the United States. Ironically, the tariffs may provide little to no direct benefit to the sole petitioner SolarWorld, as we saw in the 2012 investigations. It’s time to end this needless litigation with a negotiated solution that addresses SolarWorld’s trade allegations while ensuring the continued growth of the U.S. solar market."

The short-term impact of the ruling is already being felt. "The tariff has created fluctuation and uncertainty in the prices of solar panels and this is affecting me as a solar installer," says Lozanov. "I’ll give a bid for a solar installation to a client, and week later the panels are not available or the price has already increased."

The situation brings important issues to the surface. What is the role of government to offset market distortion effects? Are Chinese solar subsidies (called dumping by some) having a net positive effect on U.S. solar job creation, despite the potentially negative impact on U.S. manufacturers? In the interest of mitigating climate change, is the solar tariff counterproductive to reducing carbon emissions?

Image credit: WorldSolar 

Sarah Lozanova is a regular contributor to environmental and energy publications and websites, including Mother Earth Living, Green Building & Design, Triple Pundit, Urban Farm, and Solar Today. Her experience includes work with small-scale solar energy installations and utility-scale wind farms. She earned an MBA in sustainable management from the Presidio Graduate School and she resides in Belfast Ecovillage in Midcoast Maine with her husband and two children.