Solar PV Cell Tariff Study

Solar PV Cell Tariff Study


Many experts have attributed China’s export driven model of industrial and economic development as a reason for the county’s significant economic growth in recent years. This is especially true in the renewable solar industry, where China accounts for 30% of the global solar PV supply and has become a driving force in reducing price for solar energy. However, this will change within the next 5 years. Chinese officials are calling for a deployment of 40GW, more than 8 times their current capacity, by the year 2015. As the efforts to reduce pollution and increase renewable usage resume, the domestic demand for solar PV panels in China will only continue to rise.

The U.S. solar manufacturing industry, however, paints almost the exact opposite picture. Manufacturing accounts for about 25% of all jobs associated with the solar industry. Not surprisingly, this sector has remained stagnate in recent years, due to an increase in overseas imports as well as a lack of infrastructure to keep of with the economies of scale. Of the 11.7 million domestic manufacturing jobs available in the U.S., only 1% are employed in the solar industry. According to the Congressional Research Service, even an increase in U.S. solar manufacturing efforts would not have a significant impact on the overall industry.

In a recent speech given by the President addressing his administrations approach towards climate change, called for his administration to “launch negotiations toward global free trade in environmental goods and services, including clean energy technology.” This endorsement for fair trade practices may sound good in a speech to the public; however, clearly the current administration has viewed free trade through a liberal lens. One could at least claim that they have not aggressively fought this free market in renewables trade. Granted it is a tough fight these days against powers that be.

In an effort to protect against “less than fair” market prices for solar materials the Department of Commerce (DOC) imposed a 30-250% anti-dumping tariff in May of 2012. Since adopted, this has become the driver of solar manufacturing prices and locations. Linkosolar, for example, has since shifted manufacturing efforts from the U.S. to Canada to avoid this tariff. Similarly, Chinese companies have begun manufacturing PV cells in Taiwan and Korea to avoid the added costs of AD/CVD tariffs.

To circumvent AD/CVD tariffs, Chinese manufactures are assembling third-county cells into modules in China, and then importing those modules into the U.S. free from tariffs. The Solar Energy Industries Association (SEIA) claims that because of this fact the solar PV tariff has basically acted as a tax against U.S. consumers, mainly benefitting third-county manufactures. Further making the case that the solar PV tariff should be lifted, the SEIA notes that China has imposed a near 50% tax on U.S. imports of polysilicon as a counter to the U.S. AD/CVD orders. Meanwhile, European suppliers are not subject to any import taxes and South Korean firms only pay 3%. Arguing that this trade war has been detrimental towards American consumer prices, jobs, and foreign relations, the SEIA has proposed an agreement that aims at eliminating tariffs between the two counties.

Outside of the manufacturing sector, there are many other alternatives that the U.S. is currently exploring to help drive down the cost of solar installations. In an article appearing in Forbes magazine, founder of Urban Green Solutions Nick Blitterswyk argues that, “becoming the world’s leading solar manufacturer is not a role the U.S. should seek to fill.” Instead, he claims, “focusing on the actual implementation of solar and renewable technologies, rather than the production of panels, is creating thousands of American jobs.” The Department of Energy (DOE) has recently begun the Sunshot program, which focuses on lowering the “soft costs” associated with adopting solar technology. These efforts include updating customer acquisition techniques by providing better sales representative training, improving finance and contracting options, standardizing permitting processes and reducing maintenance and operations costs associated with ownership.

Other, more unpredictable, alternatives could become viable game-changers in this discussion. For instance, thin film PV (which is exempt from AD/CVD tariffs) could become a more acceptable alternative to silicon cells. In the past this alternative has been seen as far-fetched due to low efficiency ratings; however, a technological breakthrough in this area would certainly change the market demand. Another possible development could involve the production of battery storage options becoming more accessible. One of the largest drawback against using solar power (and most renewables for that matter) is the inability to store power for later use. If this were to develop into a consumer product there would be great interest in expanding the renewable infrastructure. Looking forward, it’s always difficult to predict outcomes when dealing with so many moving pieces. Keeping the current AD/CVD tariff in place beyond 5 years would invariably raise the price of solar PV cells, thus perpetuating the status-quo and continuing consumer demand trends towards fossil fuels. If the tariff were to be lifted, on might expect the opposite effects to take place. U.S. solar manufacturing jobs would continue to move overseas, while an increase in consumer purchases of PV modules would seemingly also lead to more jobs in other sectors of solar development, such as installation, marketing, and project management. Another option for U.S. is to broaden the scope of the current tariffs in place to include more renewable materials or even other countries besides China. This would further the protectionism policies in place, allowing for a more comprehensive expansion of manufacturing jobs in the U.S. Prices of the renewable materials would increase due to this, potentially leading to a smaller output of overall production and installations. This is an important cross-roads for the solar PV industry in both the U.S. and China. Both countries are beginning to demand alternatives to fossil fuels and spurring innovation in the field. Revoking the current AD/CVD tariff would certainly increase the installations and production of solar PV cells, and a free-trade agreement would allow for more substantial trade opportunities. This would be beneficial for both Chinese and American manufactures, considering the counter-tariff on PV silicon imposed by China would also be revoked. Also, increasing incentives for Foreign Direct Investments to be made in this industry would further cooperation in this field and allow for U.S. companies to become more involved in the production processes. The U.S. should continue expanding programs such as Sunshot, which focus more on non-manufacturing parts of the solar industry. If good public policy is humanitarian and provides the greatest benefit for the greatest amount of people, then it’s clear that lifting the AD/CVD order achieve this objective. Consumers and the solar industry as a whole can both prosper with a free-trade market in renewable materials.

Written by Frederick Bates

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