Solar trade case update: Here’s a report the ITC sent explaining how ‘unforeseen’ the PV import problem was

Trade case solar

The final outcome of the Suniva/SolarWorld  trade case still hangs over the solar industry as Trump has until Jan. 26 to make the final decision on a remedy, following the International Trade Commission’s injury ruling way back in September. It was our assumption at that time that this was just a countdown until tariffs were implemented by the president, and we still feel that way, but the administration appears to at least be doing its due diligence before deciding.

First reported in this excellent piece from Greentech Media, a U.S. ambassador requested a supplemental report in November to assist in the decision making process, specifically to explain what “unforeseen” events led to the injury of domestic production of crystalline silicon photovoltaic (CSPV) cells and modules. Read over how the ITC defined unforeseen and answered this question here: ITC_Report_Suniva.

Why request this? Well, it could be preparation for a potential challenge to a tariff decision by China, on appeal to the World Trade Organization, which has struck down such tariffs in the past, specifically on this question of whether the issue at hand was truly “unforeseen.” Here are some select portions:

As part of its WTO accession, the government of China made a series of commitments concerning a variety of topics, including non-discrimination; transparency; investment; state-owned and state-invested enterprises; pricing policies; and fiscal, financial, and budgetary activities by the central government and sub-national levels of government. For example, the government of China agreed to implement market-oriented economic reforms and to abide by WTO rules and principles, including to “allow prices for traded goods and services in every sector to be determined by market forces,” to “eliminate all subsid{ies}” contingent on export performance or the use of domestic goods, and to “not influence, directly or indirectly, commercial decisions on the part of state-owned or state-invested enterprises.”12

In direct contradiction of these commitments – and unforeseen by the U.S. negotiators at the time that the United States acceded to GATT 1947, at the time that the United States acceded to the WTO, or at the time that the United States agreed to China’s accession to the
WTO – the government of China implemented a series of industrial policies, five-year plans, and other government support programs favoring renewable energy product manufacturing, including CSPV products. The government of China’s industrial policies, plans, and support programs took advantage of the existence of programs implemented by the U.S. government to encourage renewable energy consumption that, consistent with U.S. WTO obligations, did not favor U.S. manufacturers but instead were directed at owners of renewable energy systems. These industrial policies, plans, and government support took a variety of forms and led to vast overcapacity in China and subsequently in other countries as Chinese producers built facilities elsewhere, which in turn ultimately resulted in the increased imports of CSPV products causing serious injury to the domestic industry in the United States.

Our two cents per kWh

We are left wondering why the administration wanted this supplement, what was their reaction was to it (high fives? More concern about an appeal?) and what this could mean for a WTO if it comes to that. If you’d like our informed, non non-world trade case opinion, the explanation in the document doesn’t seem to prove the logic underneath their decision, possibly leaving it open to the WTO striking it down on appeal. But we also thought there was no way they could find serious injury. So, there’s that.

We just wanted to note the existence of this supplemental document and remind you that something wild still this way comes. Feel at least a little rest assured that some thought is going into this tariff decision (Trump is, like, super smart and a very stable genius after all).

— Solar Builder magazine

Solar industry tells Trump to reject tariffs in ‘America First Plan’

trump solar energy plans

Today, the Solar Energy Industries Association (SEIA) sent its plan to the White House for boosting both U.S. manufacturing and the U.S. solar industry. As you might guess by the name, the America First Plan for Solar Energy, this is definitely the solar industry’s attempt to frame its message in a way that will most appeal to the Trump Administration.

The #1 message delivered in the America First Plan is to reject tariffs, with all other plans being secondary. SEIA lays out how, by just rejecting tariffs, Trump’s decision would grow jobs, support the military, ensure U.S. energy dominance and not provide a bail out to foreign companies. There are even quotes from Sean Hannity sprinkled in.

The politics at play in the pitch seem pretty obvious and likely necessary (Will Trump want a “save U.S. manufacturing” or a “protects national security” headline?) but it shouldn’t distract from the cogent recommendation the group sent to the ITC, which is the meat underneath the America First messaging. Those additional recommendations are listed in Step 6 of this plan:

SEIA recommends that President Trump create an import license fee system to imported crystalline silicon PV (CSPV) solar panels using Section 1102 of the Trade Act in combination with Section 201 of the 1974 law.

License revenues collected by the U.S. government are then distributed to the domestic industry to incentivize manufacturing growth. At a fee of a half cent per watt, this would raise roughly $192 million over three years for U.S. manufacturers. A 1¢ per watt fee would raise $384 million

This is money that would be taken from foreign manufacturers and delivered directly to American manufacturers.

 

— Solar Builder magazine

Solar trade case update: Timeline may be pushed back, says SEIA

section 201 solar trade case

The only thing that has been certain this entire Section 201 trade case process has been the timeline of when decisions would be made. Well, that might have changed too. SEIA CEO Abigail Ross Hopper sent an email late yesterday saying that the U.S. Trade Representative sent a letter to the International Trade Commission asking for a supplemental report on imports. Not a gamechanger, but we may need to wait longer on a decision as a result. From Hopper’s email:

According to our legal team’s analysis, this call for a report may alter the overall timeline of the case proceedings. The ITC will have 30 days to complete the report, with a deadline to deliver by December 27, 2017. The statute dictates that the President must issue his decision 30 days after receiving such a report, meaning that the final determination may not take place until January 26, 2018. Note that the President can still take final action on this case at any time – this development only extends his time to act as late as January 26.

 

— Solar Builder magazine

Solar trade case update: Overview of ITC remedies and reactions from solar executives

solar ITC remedies

The International Trade Commission made its remedy recommendations in the Suniva/SolarWorld Section 201 trade petition case known to the world last week, which included a mix of tariffs and quotas, but nothing near the levels the petitioners were seeking. Those recommendations will be sent to Donald Trump by Nov. 13, and then he will have 60 days to make the final determination.

We continue to believe this is a futile exercise, considering the former host of the Apprentice gets to decide whatever he wants, but for the less cynical, these recommendations are surely instructive and could very likely anchor pieces of the final outcome. Below is the CliffsNotes version of each commissioner’s recommendation and reaction from a few solar executives.

ITC recommendations: Rhonda Schmidtlein

Tariffs? Yes – an ad valorem tariff (a percentage of the cost of the cell or module at the border).

Quota limitation? No, just quotas on tariff levels.

ITS solar tariffs

Anything else notable? She would not include imports from Australia, Colombia, Israel, Jordan, Panama, Peru and Singapore in the final list.

David Johanson, Irving Williamson

Tariffs? Yes – an ad valorem tariff (a percentage of the cost of the cell or module at the border). Cells at 30 percent after 1 GW, phased down 5 percent in subsequent years. Modules at 30 percent (no quota), phased down 5 percent in subsequent years.

Quota limitation? No, just quotas on cell tariff levels.

Anything else notable? Johanson and Williamson would not apply these tariffs to Australia, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Nicaragua, Panama, Peru and Singapore.

They also recommend the consideration of product exclusions, requested by respondents.

Solving C&I Solar: How boutique financing is growing this underserved solar segment

Meredith Broadbent

Tariffs? No.

Quota limitation? Yes. A four-year quantitative restriction on imports starting at 8.9 GW in year one, increasing by 1.4 GW each year after. She chose 8.9 GW based on market share of imports in 2016.

Anything else notable? She recommended the SEIA licensing concept: Selling import licenses at public auction at a minimum of 1 cent per watt, which she estimates could bring in $89 million of revenue in year one. That revenue would then be used to re-develop the domestic industry (rehiring, R&D, etc.)

Broadbent provided the most rationale for her decision within the initial release, noting she believed a tariff would be too harmful to the overall industry, and that the petitioners did not present a plan for becoming competitive after trade-restrictive tariffs were imposed.

Funniest note in the recommendations? “Full details on their recommendations will be included in the report to the President.” (Yea, I’m sure he’ll be all over the chance to read even more about this. He just loves using in-depth info to make informed decisions.)

Executives react

“Even at levels below what the petitioners wanted, we still think the tariffs proposed would hurt our industry and will continue to advocate voraciously for the import fee proposal. But it’s a great starting point for negotiations with the Administration,” stated Abigail Ross Hopper, CEO of SEIA.

“Today’s three different recommendations demonstrate Suniva’s request was not permissible under law,” said Ed Fenster, chairman of the U.S. solar firm Sunrun, in a statement. “We believe the Administration will go the next step, look past the narrow legal lens of this process and see what is plainly visible: the best move for America’s workers is to reject entirely this bailout of two bankrupt companies.”

“The ITC’s suggestions for ‘remedies’ represents an unfortunate and grossly unnecessary potential intrusion of the federal government into a market that is already working,” stated Sunnova Energy Corporation’s Chief Executive Officer William J. (John) Berger. “Artificially inflating prices at the behest of a few poorly-run, foreign-owned companies not only harms U.S. consumers but it abuses a process that was meant to protect U.S. companies from truly unfair trade practices.”

Tony Clifford, chief development officer of Standard Solar, in this Op-ed: They have the potential to do damage to the U.S. solar industry. But they are in no way threatening to its existence, which could not be said about the remedies for which Suniva/SolarWorld asked. They are a basis from which, as the Solar Energy Industries Association (SEIA) suggested, a mutually acceptable compromise can come.”

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“Limiting or slapping big tariffs on solar imports might marginally benefit U.S.-based solar manufacturers, but would hurt every other part of our homegrown solar industry: solar installers, salespeople, project developers, financiers, and even manufacturers of other solar system components,” stated John Rogers, senior energy analyst at the Union of Concerned Scientists. “If the president proceeds down the path of limiting our access to international solar products, a serious number of the 260,000 U.S. solar workers—and the many prospective solar customers that depend on them—will take the hit. ‘Little gain, lots of pain’ is a poor approach to economic development, and a bad reason to derail how solar power is contributing to the nation’s impressive clean energy growth.

“The 201 trade case brings near-term challenges to the U.S. market, but we believe the industry will adjust and sustain the momentum it has already built through strong technological advancements over the years,” stated Archie Flores, General Manager, LONGi Solar Technology (U.S.) Inc. – a Chinese-based module manufacturer. “We continue to view the U.S. as a valuable market and we will find ways to continue to serve customer demand regardless of any trade dispute. Module cost is just one factor affecting solar growth. The global market is now entering the PV 3.0 era, wherein higher power, improved reliability and increased energy yield allows for better economics in the cents per kilowatt-hour energy level rather than the traditional focus on cents per watt per unit. At LONGi, we remain excited with the road ahead and we have full resolve to make solar a mainstream energy option.”

— Solar Builder magazine

Tariff impact on the U.S. solar market in 7 charts from GTM Research

GTM research solar tariff prediction

The imposition of tariffs on imported solar cells and modules is more a matter of when than if at this point considering the Administration in charge, so GTM Research has been furiously crunching the numbers to understand the fallout across the U.S. solar market based on different tariff scenarios. Here’s a glimpse into that crystalline ball.

Reminder: The ITC will vote on Oct. 31 on a remedy recommendation, submit that recommendation to the White House on Nov. 13, and then Trump will have until January to make a decision. That decision will be imposed 14 days later.

A note from the GTM team: “Our team has been working on this analysis for over a month, so our scenarios (which range from $0.10/W-$0.40/W cell tariffs, in increments of $0.10/W) don’t perfectly match with either Suniva or SolarWorld’s proposed remedies. But SolarWorld’s request aligns closely with our $0.30/W cell tariff, and Suniva’s request is close to our $0.40/W cell tariff scenario.”

Current situation

GTM solar tariff chart_global selling average

Tariff risk has caused module prices to increase, a phenomenon unique to the U.S. While cost reductions in other parts of the system make up some of the difference, the cost to install solar has increased for the first time in ages.

GTM solar tariff chart 2_EPC turnkey pricing

So what comes next?

GTM solar tariff chart 3_tariff free capacity

If tariffs are imposed, GTM estimates that there will be nearly five GW of solar capacity that is not subject to tariffs, either because it is not subject to the scope of the petition (i.e. thin film) or because both the cells and modules are manufactured in the U.S., Korea, Singapore, Canada or Australia, all of which may be exempt. In addition, over 2 GW of modules have already been procured for 2018 projects, which will temporarily dampen the tariffs’ impact on demand.

Those five gigawatts won’t be nearly enough to sustain the market, which is otherwise expected to reach nearly 11 GW in 2017, rising to over 16 GW by 2022.

Tariff impact demand

GTM solar tariff chart 4_PV capacity

GTM estimates that the net impact to its base forecast could range from just 9 percent under a 10₵/W tariff to 48 percent under a 40₵/W tariff. The biggest impacts would be in the utility-scale solar sector, which is most sensitive to price in-creases, while the residential sector would be the most resilient.

GTM solar tariff chart 5_residential solar impact

Every segment, in every state, will be unique. In the residential sector, the biggest volume impacts would be felt in the largest state markets, but nascent states that have just begun to develop vibrant residential solar sectors could disappear almost entirely.

The utility-scale market would be most sensitive because two-thirds of the project pipeline is driven by solar’s razor-thin economic competitiveness with other generation sources.

GTM solar tariff chart 6_utility pipeline

But even the utility solar market could weather a 10₵/W cell tariff with relatively minimal disruption – just over 10% by our estimate.

GTM solar tariff chart 7_utility installs under tariff scenarios

— Solar Builder magazine