President Trump’s decision to impose tariffs on solar component imports is a shortsighted and counterproductive move, but it’s also consistent with his administration’s attempts to undermine clean energy across the board. The tariffs will raise the cost of solar power, resulting in a slowdown in growth for one of the fastest-growing employment sectors of America’s economy.
The controversial decision announced Monday involves imported solar equipment used to make solar panels, both for rooftop installations and in large utility-scale solar farms. The tariffs were widely opposed by the solar industry and lawmakers on both sides of the aisle.
The Solar Industry Has Been an Incredible Success Story
The solar industry continues to defy expectations and break its own records. Over the past decade, solar installations have grown at an incredible rate of 68 percent annually, and the cost of generating power from new solar projects has fallen by more than 85 percent since 2009.
Austin Energy continues its run of record-breaking solar projects, signing a contract for a new large-scale solar generation project (a power purchase agreement, or PPA) that analysts estimate has a price of between $23 and $27 per megawatt-hour (MWh). In Colorado, Xcel recently received bids from developers to install solar projects at a median bid price of $29.50 per MWh. At prices that low, new solar projects are significantly cheaper than a new gas plant, and they avoid the exposure to volatile natural gas markets. Those prices can even be lower than the cost of just operating an existing coal plant.
In New Mexico, the Otero County Electric Cooperative signed a PPA for a 3 megawatt (MW) solar project at a price of $45 per megawatt-hour, a record-low price for small-scale solar projects. The CEO of the co-op, Mario Romero, declared that the project “allows us to deliver renewable energy to our members while also saving them money.” The financial savings of projects like these don’t include the substantial climate, health, and environmental benefits from reducing coal and gas generation.
The Lawrence Berkeley National Laboratory recently performed an analysis of the public health and climate impacts of wind and solar generation. The researchers found that in 2015 alone, solar generation resulted in $1.6 billion in avoided climate and public health damages, amounting to about $41 of benefits for every MWh of solar generation. That’s significant.
On top of the climate and health benefits, the solar industry has also been an incredible job creator. The sector accounted for one out of every 50 new jobs added to the economy in 2016, and now employs over 260,000 U.S. workers. The Bureau of Labor Statistics recently projected that the job of solar installer would be the fastest-growing occupation in our economy over the next decade. Unfortunately, Trump’s decision to impose tariffs on the industry puts that growth at risk.
Why is President Trump Imposing Tariffs?
In May 2017, two foreign-owned solar manufacturing companies, Suniva and SolarWorld, filed a trade complaint under an obscure provision in U.S. trade law. In a hearing before the International Trade Commission in August, the two now-bankrupt companies argued that imports drove their U.S. locations out of business. They requested a tariff on imported solar cells and modules while the rest of the solar industry was nearly unanimous in fighting back against the tariffs, declaring that they would hurt the competitiveness of solar energy compared to other energy sources and would result in significant job losses throughout the industry.
The International Trade Commission ultimately sided with the two foreign-owned manufacturing companies, and the Trump administration has decided to impose tariffs of 30 percent, which will phase down over the next four years. The first 2.5 gigawatts (GW) of imports are excluded from the tariffs; for context, the U.S. installed 14.8 GW of solar in 2016, and imports currently make up about 80 percent of the market. While the tariff levels are fortunately not as harsh as the petitioners initially requested, the decision places an unnecessary and harmful hurdle in front of the solar industry.
Greentech Media has projected that higher prices as a result of the tariffs will result in an 11 percent decline, or 7.6 GW, in solar installations over the next five years, which corresponds to the equivalent of powering 1.2 million homes. Industry experts are skeptical that that the tariffs will result in any significant uptick in domestic solar panel manufacturing, and the Solar Energy Industries Association expects that the tariffs will lead to the loss of 23,000 jobs throughout the solar supply chain, including many in manufacturing of other solar equipment.
States and cities should redouble their commitments to procuring solar energy through renewable portfolio standards (which require that a certain amount of electricity be generated from renewable resources) and other policies, and in light of the tariffs, policymakers should also revisit the incentives that are being offered to customers in residential and commercial solar programs. State incentive programs, such as New York’s NY-Sun program which provides funding aimed at achieving specific solar targets, should be updated in order to ensure that the programs’ ambition levels are maintained. Homeowners and businesses can vote with their wallets by choosing to install solar power in spite of the Trump administration’s attempts to undermine it.
The Trump administration and Congress have a role to play in advancing solar energy, too. The stated rationale for the tariffs was to support U.S. solar manufacturing, which is an admirable goal even though the tariffs are misguided and a step in the wrong direction. The administration needs to put its money where its mouth is and increase funding support for the Department of Energy’s Solar Energy Technologies Office. That office also recently announced it is launching a prize-based competition to “reenergize innovation in U.S. (solar) manufacturing,” which is a positive development and should be fully funded by Congress.
The solar industry has demonstrated a remarkable ability to innovate, cutting costs and growing more rapidly than even the most bullish analysts expected. Trump’s tariffs undermine that progress, but policymakers at every level can and should take steps to offset the impacts of this ill-advised decision and keep up the solar industry’s record-breaking momentum.