Cleantech Market Intelligence
When It Comes to New US Solar Tariffs, the Sky Is Not Falling
On January 22, 2018, President Trump announced the rates applied to solar modules and cells that resulted from the Section 201 trade case. Modules and cells have a tariff rate of 30% in 2018, to decline 5% in each of the 3 subsequent years, then stay at 15% from 2021. These are just below what the US International Trade Commission (ITC) recommended in October 2017. As I explained at that time, tariffs at this level favor the status quo, keeping the solar industry intact but slowing its growth.
No Need to Panic
At current international prices of around $0.30/W-$0.35/W, the impact of this tariff would be around $0.10/W in 2018. For utility-scale projects, costs could increase by 10%-15% compared to a tariff-free scenario. This would add $0.02/kWh-$0.04/kWh to the record solar bids, like Xcel’s disclosed earlier in January or TEP-NextEra’s announcement on May 2017. This increase would hardly make these utilities reconsider their investments.
The impact of the new tariff on the C&I and residential markets will be limited. For a commercial project, the tariff could increase the cost by about 5%; for a residential installation, only 2%-3%.
Winner and Losers
Currently, this ruling seems to have only one company as its beneficiary: First Solar. First Solar is in the middle of a technology transition as it tries to catch up with the prices offered by manufacturers of Crystalline modules. It is the only PV manufacturer with significant capacity in the US. On November 16, 2016, it made the decision to scrap its Module 5 product, which had been expected to debut next year. The new plan is to instead accelerate the production schedule of its Module 6 and introduce it in 2018, a year earlier than previously planned. The tariff bought First Solar some time to implement its new technology without risking losing significant market share in its home market.
The other two backers of the tariff, Suniva and SolarWorld, are unlikely to capitalize from its introduction. Even with the introduction of the tariff, local US prices of important modules will be below the costs that pushed both Suniva and SolarWorld into administration as the global prices of solar have dropped by more than 30% in the last 2 years. SunPower and Tesla, the other two US PV manufacturers, rely on the global value chain for their module operations and therefore will be affected by the tariffs.
If Nothing Else, Clarity for the Next Few Years
All in all, most of the players in the US solar sector should be glad that the uncertainty that plagued the sector in 2017 is now gone. They will need some time to absorb the fiscal changes and to find ways to mitigate the impact of the tariffs, but at least they will have a stable policy outlook for the next few years.