Why the Solar Energy Tariff May Be Bad for Solar

A new tariff taxes foreign solar panels, and will likely hurt, not help, the American solar industry.

Getty ImagesSam Diephuis

Earlier this week, the Trump administration implemented a tariff on imported solar panels, which has understandably rattled the solar industry. Solar panel manufacturers, electric utilities, and clean energy advocates are still trying to figure out what the ramifications of the tariff are, and how this new rule will affect both their businesses and the industry as a whole.

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Here are the particulars: All imported solar panels will be taxed at a 30 percent rate to start. The first 2.5 gigawatts of panels per year are exempt from the tax. The tax itself is reduced by 5 percent every year, from 30 percent in the first year to 15 percent in the fourth.

The tariff was imposed at the request of two domestic solar panel manufacturers, Suniva and SolarWorld, which have been struggling recently against cheap solar panels coming from China. The tariff, recommended by the bipartisan U.S. International Trade Commission, is designed to help these companies compete for the domestic solar market. that reads, in part:

We are still reviewing these remedies, and are hopeful they will be enough to address the import surge and to rebuild solar manufacturing in the United States. We will work with the U.S. Government to implement these remedies, including future negotiations, in the strongest way possible to benefit solar manufacturing and its thousands of American workers to ensure that U.S. solar manufacturing is world-class competitive for the long term.”

While this tariff is clearly intended to help solar manufacturers, but that doesn’t mean it’s a blessing to the entire solar industry. In particular, many utilities and construction companies are worried about the tariff because most of the panels they use are imported.

“Government tariffs will increase the cost of solar and depress demand, which will reduce the orders we’re getting and cost manufacturing workers their jobs,” Bill Vietas, president of RBI Solar, a company that designs and installs solar panel mounting systems.

Panel manufacturers, the beneficiaries of this new tariff, make up a small part of the overall solar industry. An by the Solar Energy Industries Association (SEIA) estimated that the solar industry employed approximately 38,000 people in manufacturing jobs in 2016, and only 2,000 of those manufactured panels. The other 36,000 workers built mounting systems, inverters, tracking systems, and other auxiliary hardware.

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While not all of these jobs would go away under the tariff, many of them undoubtedly will. “U.S. [solar panel] installers will be forced to pay higher prices which will decrease demand and cause the layoff of tens of thousands of American workers,” says SEIA President and CEO Abigail Ross Hopper.

But the biggest losers under this new tariff may be American citizens. U.S. solar manufacturers may not have the capacity to step in and meet domestic demand, . With solar power suddenly more expensive to install, many utilities that would otherwise build new solar farms will choose instead to build more coal and natural gas plants. This would lead to more pollution, more greenhouse gases, and higher electricity costs.

It’s tough to say what impact this tariff will have on the solar industry in the long term. There’s a good chance it has a crippling effect, reducing our ability to modernize our electrical infrastructure and combat climate change. But industry leaders are hopeful.

“Our industry will emerge from this,” says Hopper. “The case for solar energy is just too strong to be held down for long.”

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