GlobalData: U.S. solar developers to benefit from China’s solar subsidy cuts

solar panel prices

The move by China in May this year to slash subsidies for domestic utility-scale solar projects will ultimately benefit developers in the United States that rely on imported solar panels, resulting in revived projects that stalled out in 2018 and more jobs, says data and analytics company GlobalData.

We know that solar development slowed in the U.S. below the level it should have been at due to the 30 percent #Trumptariff on imports of solar cells and modules. Utility-scale solar developers like Cypress Creek Renewables, LLC and Southern Current cancelled or deferred projects worth more than $2.5 billion.

“Hit by higher costs of imports, many developers announced cancellation of their projects,” said Mohit Prasad, Power Analyst at GlobalData. “Some developers even started negotiations to restructure their power purchase agreements due to higher costs resulting from tariffs.”

On the other hand, China, which had been struggling to build infrastructure to link its solar projects to the grid, announced a cut in the feed-in-tariff subsidy in May 2018 to reduce the surge in solar installations — subsidies that originally kick started the abundance of cheaper Chinese modules that eventually led to the ill-conceived tariffs in the U.S.

RELATED: Bifacial Gains: How much will bifacial modules add to solar tracker value? We are about to find out

With those subsidies cut, Chinese solar demand has dropped significantly for solar products within the country. Subsequently, the global market is expected to witness an oversupply of solar panels, thereby reducing the prices, according to GlobalData. Local Chinese manufacturers are now looking to export more panels, resulting in an oversupply in the global solar photovoltaic module market, which will further reduce the prices.

As a result, developers such as Inovateus Solar have become more optimistic. The company has closed a deal to develop a 6 megawatt (MW) solar PV plant in the city of Pratt, Kansas. Pine Gate Renewables, a North Carolina-based solar installer, has welcomed the move, since the lower prices will help the economics of projects already in the pipeline.

“Following the announcement made in China, many developers will revive their hiring plans and the industry will witness an influx of jobs,” Prasad concludes. “So the drop in prices globally and in the US will help developers to revive projects and jobs which were put on hold after the import tariffs levied previously.”

— Solar Builder magazine

Bill to undo Trump Tariffs introduced in Congress

solar tariff bill

A last ditch efforts to undo the #TrumpTariffs has been introduced by Congresswoman Jacky Rosen. The Protecting American Solar Jobs Act (H.R. 5571) that seeks to repeal the Trump Administration’s misguided decision to impose duties and tariffs on imported solar panels. Under this legislation, duties and tariffs would default back to previous rates and would allow companies that imported any affected solar products under this new tariff to receive retroactive reimbursement.

“Solar energy’s success throughout Nevada has led to new jobs, cheaper power bills, and the growth of a new industry that is diversifying our state’s economy,” said Rep. Jacky Rosen (NV-03). “This Administration directly threatened the stability and finan-cial well-being of our local solar industry when the President decided to impose a 30 percent tariff on imported panels. An attack on solar energy is an attack on the count-less hardworking Nevadans who benefit from this growing industry, and my new bill will reverse this damaging decision.”

Rosen is stepping forward because of how much the tariffs could affect her constituents. The Solar Foundation found that in 2016 there were 8,371 solar jobs in Nevada (7,031 in Clark County), the fourth most in the U.S. and the second most per capita. Approximately 12% of the solar workers in Nevada are veterans. Around 95% of Nevada’s solar jobs are in the installation, sales, distribution, and project development sec-tors, all of which heavily depend on the availability of affordable solar panels.

RELATED: Price Points: How much will tariffs increase the costs of residential solar?

“President Trump’s reckless solar tariffs have threatened the booming solar industry growth that we’ve seen not only across California but across the country,” said Rep. Huffman (CA-02). “This clean energy industry is an American success story, and the President’s decision to slap 30% tariffs on all imported products, even components that are developed by innovative American companies, will harm our clean energy economy, costing tens of thousands of American jobs. I’m glad to work across the aisle with Reps. Jacky Rosen and Mark Sanford on this legislation to repeal the President’s harmful solar tariffs.”

“The U.S. should adopt an ‘all-of-the-above’ energy infrastructure approach,” said Rep. Knight (CA-25). “This means promoting every form of viable energy development, in-cluding, wind, solar, hydro, nuclear, and traditional power sources. Tariffs and other industry-specific costs impose artificial barriers to development and hinder our ability to innovate. This bill will ensure an equal playing field in this industry and I want to thank Congresswoman Rosen for her leadership on this issue.”

Does this legislation have a chance? Probably not. But can’t hurt to throw it out there and keep the conversation going.

— Solar Builder magazine

Price Points: How much will tariffs increase the costs of residential solar?

residential solar tariff modules

Now that the #TrumpTariffs are in place, we know that utility-scale solar will take a hit. GTM Research is expecting an 11 percent decrease in U.S. solar PV installations over the next five years — 7.6 GW reduction from pre-tariff expectations, 65 percent of which is in utility-scale.

But optimism remains in the residential market. Let’s start with just how much the tariff will increase the price of a residential solar installation. Based on the cost breakdown by component provided via SolarReviews (Fig 1. below), a 30 percent tariff would add $0.21 per watt or 6.8 percent to the retail cost of a solar system. But as Andrew Sendy, chairman of Solar Investments Inc., points out, this isn’t quite true. His analysis via Solar Estimate:

“The 70 cents average wholesale cost of solar panels in the United States is a blend of the cost of premium panels which can be around 90 cents per watt at the wholesale level [i.e Sunpower, Panasonic and LG] and the widely used Tier One Chinese solar panels such as Canadian Solar, Trina, ReneSola and Jinko, which have been sold during 2017 in larger volumes at the wholesale level for around 50 cents per watt,” Sendy writes. “If we look at the effect the new tariffs have on the cost of Tier One Chinese modules, selling for $0.50 per watt in 2017, then all things being equal the 30 percent tariff would add 15 cents per watt to the wholesale cost of panels themselves. This would equate to around 4.9 percent of the retail price of a solar system based on SolarReviews research.”

figure 1

A 4.9 percent increase would increase the average residential cost of solar to $3.23 per watt and the cost of an average sized solar system of 6-kW by $900 to $19,380 before the solar tax credit or $13,566 after the tax credit.

Obviously this is some back-of-the-napkin calculating, but a useful exercise to show how minimal that bump in price could be for a residential system after factoring in:

  • The impact of more widely available financing mechanisms that provide more financial flexibility and payment terms (much more on this on page 24).
  • The further reduction of solar company margins and installation labor costs.

“With the solar tax credit in place nationally and net metering laws in place in around 30 states, many Americans simply do not know how good an investment installing solar panels on their home is,” Sendy continues. “As we come towards the end of the 30 percent solar tax credit in December 2019, I predict consumers will rush to get solar installed while this incentive and net metering are available. This will mean that solar companies will be able to spread the recovery of their fixed costs over more jobs. That means the fixed costs per job and per watt will fall.”

Conclusion (educated guess)

Overall, Sendy and Solar Estimate’s best guess is that the average falls in retail solar costs seen in recent years will be replaced by stable solar prices in 2018. His rationale:

  • The immediate impact of a 30 percent tariff will be reduced because of the large volumes of stock already shipped into the United States prior to the announcement of this tariff. In some cases, there is enough stock to meet almost six months of demand.
  • There undoubtedly will be rises in the wholesale price of modules, but these will be less than 30 percent as Chinese companies continue to lower costs.
  • What increases there are in cell prices and module prices at the wholesale level will be offset by increasing volumes for residential installers (ahead of the reduction in the solar tax credit at the end of 2019) that will lower the amount of fixed costs per job and per watt sold.
  • This lowering of fixed costs per job, solar company margins per job and installation costs through the greater use of internal electricians and roof laborers will at least compensate for the increase in wholesale module prices, meaning that despite the new tariffs, the retail cost of installed residential solar power systems will remain flat in 2018 at $3.08 per watt. This equates to $18,480 for an average-sized 6 kW system before the 30 percent solar tax credit, and $12,396 after the tax credit is claimed.

This will be the first year that solar panel installation costs haven’t fallen in the last decade, and it is a remarkable feat by the industry to be in a spot where it can adapt and possibly absorb such a big hit.

— Solar Builder magazine

Solar Power Northeast: More mature solar market ready to weather Trump Tariffs

SEIA solar power northeast

Photo courtesy of SEIA Twitter account (since I didn’t have the cord to get the photos of my camera).

Solar Power Northeast in Boston is the first solar industry conference in this post #TrumpTariffs world, and the collective mood of the room seemed to be “Eh. Could have been worse.” A speed bump rather than a brick wall. This isn’t to downplay the realness of the job losses or price increases that will most definitely be felt, but to note how just the whole thing being over seemed to lift a burden off everyone.

Setting the tone for the event in the opening session was a CEO panel moderated by Abigail Ross Hopper, president and CEO of SEIA, that included Costa Nicolaou, CEO of PanelClaw (with a C&I perspective), Zaid Ashai, CEO, Nexamp (speaking to C&I and community solar), and Sara Ross, CEO, Sungage Financial (talking about residential). Each CEO seemed pretty optimistic about what the future was going to hold, beyond the tariff obstacle. And the overarching reason, to our ears, is solar is a way more established, mature, proven industry than even three years ago, and therefore better equipped to handle speed bumps like this.

Commercial and industrial segment approaching a boom?

PanelClaw, Nicolaou says, had its foot on the gas in 2017, froze hiring as soon as the trade case was filed and is now looking at a “flatish” 2018, but he was the most bullish about the future. One positive trend he sees is the mix of excited, wealthy players out there looking to develop in the C&I space.

“In the nonresidential space, there’s been an uprising of well funded national, players that can finance anywhere with a fully formed national stack,” he said. “This wasn’t the case five years ago. You had small players, medium-sized players trying to become national players. That dichotomy has changed.”

The reason, he says, is the learning curve of early-adopting Fortune 500 companies has now hit the point where the model for C&I solar – developed through trial and error – is no longer an unknown. This means big players like Wal-Mart or Apple are now ramping up, and others who weren’t early adopters can now easily follow those established models.

The room was polled to see how many developers had ample capital to buy projects at any stage right now, and half the room’s hands went up.

Another interesting dynamic to watch in C&I is how the tax code will change the mix of the players in the tax equity space, which was typically limited to very large multinationals.

“If tax equity becomes less abundant among that group, we think there is a good amount of built up tax equity in small to mid-sized corporations that were maybe looking at the solar space, and now that it’s much more mature, they may look at this with a lot more confidence.”

Residential space still driven more by local policy

Ross mentioned how Sungage had already seen some decreases in the residential space due to large the national players shifting gears, and the change in the mix of third party ownership – all of these shifts putting growth in neutral (to keep the shifting analogy going) until the next growth model emerges, or more smaller companies mature enough to fill the void. Here’s how Ross broke it down:

“If I were to take the blood pressure of our clients across the 14 states we are in as a proxy of how the tariffs will affect their business, I’d say in California, they didn’t bat much of an eye. In talking to folks in Texas and Florida, the economics are tighter and have people concerned, but our partners in Texas have learned how to sell residential solar without month-one savings – have learned to speak to the other attributes of solar and life time savings.”

Honestly, here in Boston, the crowd seems way more up in arms about the demand charge Eversource just got approved, and Ross’s blood pressure test bears that out.

“Change in the policy and regulatory environment, is distraction from honing your business, which is already hard work. So, folks here are much more concerned about changes coming with the SMART program and changes with the demand charge from Eversource.”

Community solar model bridges the gap

Born in the Northeast, Nexamp understands this market more than most, handling development, EPC, asset management and O&M work. But the company’s most recent venture into community solar has Ashai most excited.

“I think the future is bright for community solar,” he said. “Look at the Northeast and Midwest. There’s a strong appetite from rate payers and citizens for it, but in Mass., only about 20 percent of roofs are suitable for solar. So, there’s a strong desire to find a way to participate without having to install a system.”

This has been the case for awhile, but again, a new world, with an even more complicated financial structure made community solar a challenge – but maybe no more.

“The hybrid model, of having an anchor tenant and then residential buy-in created a lot of complexity,” Ashai said. “But a lot of success has allowed more lenders and equity providers to come in, and now we see this as the most promising segment from our vantage point in the Northeast.”

In New York, community solar is becoming even more viable with a model that allows customers to change on a monthly basis, whereas in Massachusetts they do this every six months.

“What this allows you to do, when you finance it, you create a wait list and then you can keep replacing customers and know those credits will not get lost.”

And that’s the summation of the chatter in Boston. Tariffs are going to depress the market as much as predicted, but the momentum, proven models and policy interest today will allow the industry to roll with this punch much better than was every possible before.

“We can counteract some of the activity at the federal level with strong state level changes, such as an expansion of the state tax credit for homeowners going solar in Massachusetts,” Ross said. “So expanding that with one tool we have in the tool kit will help counteract that.”

— Solar Builder magazine

Solar installation five-year forecast reduced 11 percent due to Trump tariff decision

According to new analysis by GTM Research, the tariffs on imported solar cells and modules set forth by the Trump administration will result in an 11 percent decrease in U.S. solar PV installations over the next five years. This represents a reduction of 7.6 GW of installed solar PV capacity between 2018 and 2022.

FIGURE: Annual U.S. PV Installations with and without Tariffs, 2017E-2022E

solar installations with tariffs

Source: GTM Research U.S. Downstream Solar Service

GTM Research notes that the tariffs result in an average $0.10/W increase in year 1 prices to modules, stepping down to a $0.04/W premium by year 4.

According to the analysis, the utility-scale solar segment will be more heavily affected than the residential and commercial solar segments, taking 65 percent of the expected 7.6 GW of reductions over the next five years.

FIGURE: Annual U.S. PV Installation Reductions Due to Tariffs by Segment

GTM Research solar reductions

Source: GTM Research U.S. Downstream Solar Service.

Projects under construction or with modules already in inventory will damper the effect on 2018 installations, with the effect of tariffs hitting the downstream market more heavily in 2019.

The analysis also shows that new and emerging state markets are disproportionately affected, with southern states like Texas, Florida, Georgia and South Carolina amongst the most impacted by the tariffs.

“Trump’s decision on solar tariffs matches closely to recommendations from the US International Trade Commission,” said MJ Shiao, Head of Americas at GTM Research. “The overall effect is a meaningful but not destructive reduction to expected solar installations in concert with modest improvements to a still challenging environment for domestic solar cell and module manufacturing.”

— Solar Builder magazine