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Solar tariff recommended at around 35% – Suniva tells Trump ‘weak remedy’, First Solar tanks

The US International Trade Court (ITC) made three separate potential tariff recommendations for Trump to consider in order to protect the domestic solar panel manufacturing industry. At a high level, the separate recommendations were a 35% tariff on all imported solar panels, a ~30% tariff on solar cells and panels, and an 8.9GW import cap for 2018. The tariffs would mostly be phased out after four years.

The most recent tariff request by Suniva called for a minimum solar panel price of 74¢/watt, and SolarWorld called for an import cap of 5.7GW/year.

Suniva’s initial response was that Trump should reject the ITC’s ‘weak’ recommendations. Suniva’s financiers stand no chance of getting their $50 million equipment loan back without being able to resell Suniva’s assets.

First Solar’s stock price is down more than 10% as of 3 PM. First Solar, it is thought, will be a significant benefactor of any tariffs as their thin-film solar panels were not included in potentially tariffed products. A lower tariff means their competitive edge is just a bit thinner.

When Suniva filed the tariff request in April of this year, they requested a minimum price of 78¢/W on all imported solar panels. With a large portion of solar panels being imported for utility-scale projects at a price well below 39¢/W (half of 78¢/W), Suniva had, in essence, requested a greater than 100% tariff be applied.

A 35% tariff on a solar panel at 39¢/watt would increase the price by 13.7¢/W, whereas, a 30¢/W solar panel – some of the lowest priced products available globally – would have an additional 10.5¢/W added. This 10-14¢/W tax on the best priced solar panels is 1/3rd the 39¢/W minimum price Suniva requested.

SolarWorld later joined the case and requested that a maximum volume of solar panels be allowed imported – 5.7GW. The US installed 14.6GW in 2016. SolarWorld made this request since they have functioning solar manufacturing facilities. Suniva has filed for bankruptcy and ceased the minimal production volume they had as of late 2016. Multiple countries, Singapore and Norway for example, are allowed to send panels to the US and not have the tariff applied. This volume could be a few GW/year.

Only one member of the group, Commissioner Meredith Broadbent, agreed with SolarWorld that a volume cap was appropriate – however – their recommended value was 56% higher than SolarWorld’s request, and increases by 1.4GW/year. Broadbent also suggested a 1¢/W import license fee on that 8.9GW of volume – roughly a 1-3% tax on all solar panels. This money would be used to fund workers hurt by global imports.

Electrek’s Take

First reaction – be cool, these recommendations can be dealt with, and the industry will soldier on. A key detail though – these are merely recommendations to Trump by the ITC. Trump is under no obligation to follow them. Some suggest Trump is looking specifically for ‘tariffs’ as a political tool to burnish his image as protecting American workers. If that’s the case – then two out of three recommendations gave Trump what he is looking for (and we might be looking at a high probability event of ~35% tariffs). On November 13th, the ITC panel will present their thoughts directly to Trump. Trump will have until January 12th, 2018 to decide on the remedy.

For most, the tariff recommendation is a broad win. A 10-14¢/W increase for the largest solar projects will increase total project costs 15% at most (from current best-priced systems at $1/W) – 15% is not trivial, but even at $1.15/W solar power will be among the best-priced sources of new electricity generation in the US. Commercial projects that range from $1.75/W through $2.50/W will fare quite well – with only a 4-8% overall price increase.

Since 80%+ of solar panel installations use these aggressively priced solar panels (<40¢/W), the majority of projects and jobs will be ‘ok.’

This benefit begins to go away when a large scale installation wants to use a premium product though. A rough situation arises for a group like SunPower – imagine you build a 100MW solar power system that costs $1/W for everyone else, but $1.30/W for SunPower. All of that additional 30¢/W comes from industry leading 22%+ efficiency solar panels. That means SunPower – and other higher efficiency/cost panels – will end up paying 10¢/W extra in tariffs.

That’s an extra 5-8% for being the best at what you do. The irony of this is that the original lawsuit was filed because of low priced imports, and now it might be that the world-class engineering coming from cutting-edge labs will be hurt the most.

This premium penalty will carry over to almost all residential projects since US residential customers have mostly migrated to higher efficiency panels already. A 35% tariff on higher efficiency residential system will end up adding a healthy absolute dollar amount to the bottom line. If you go with the most premium product on the market from SunPower – you’re going to be paying an additional 50¢/W. With the average US residential installation around 5.5kW – that’s mean $2,750. If you’re going to buy an LG Neon your tariff will add 28¢/W ($1,540). Even though the percentage price increase is actually smaller than for largest projects due to solar panels making up a lesser percentage of costs, that tariff is still going to add 1.5-2 years onto the payback period of a residential system.

A final note – since the USA has a 30% investment tax credit that goes toward all solar power installations, a 35% tariff on solar panels ends up being a 24.5% tariff at the end of the day.

Considering residential solar? Understand Solar will connect you with local contractors. Tweet me to pick apart quote.

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