The latest solar tariff case highlights just how much uncertainty can slow growth in the renewable-energy industry
The US already has among the most expensive solar photovoltaic modules in the world, and tariffs are the main reason, Pavel Molchanov, equity analyst at Raymond James, notes in a recent report. Installing utility-scale photovoltaic solar in the US is roughly 57% more expensive compared with Germany and nearly 70% costlier than China, according to data from the International Renewable Energy Agency. While the European Union ended tariffs on Chinese solar panels in 2018, the US still has three tariffs in place that affect solar imports.
The earliest the preliminary ruling could come is late August, and the uncertainty has already stopped the solar industry in its tracks. More than four-fifths of those surveyed by industry trade group Solar Energy Industries Association said they received an indication that their module supply has been delayed or canceled. The industry has yet to work out how the tariff costs—if imposed—will be borne by different parties, so suppliers are reluctant to ship out modules in case buyers try to negotiate prices down once tariffs are imposed, notes Mr. Lezcano. Meanwhile, developers are likely to face delays negotiating power purchase agreements with utilities. SEIA has cut its solar-installation forecasts for 2022 and 2023 by 46%, or 24 gigawatts, more than the industry installed in 2021. That would follow a slower-than-expected growth last year, when new utility-scale solar capacity installations were BloombergNEF forecasts roughly 23% below, mainly due to supply-chain issues. The US solar industry has found ways to grow despite tariffs, especially as prices for panels have fallen quickly, but this time the blow feels heavier given rising prices and supply-chain constraints.
On the surface, the argument that Chinese manufacturers have deliberately moved operations overseas to avoid US tariffs looks like a thin one. As Mr. Molchanov notes, the US simply isn’t that crucial for Chinese companies: The country made up roughly 10% of new solar photovoltaic installations on average in recent years. Investing billions to build manufacturing facilities in those outposts seems a steep cost for dodging US duties. Cheaper labor seems a compelling enough reason.
How will the tariff ruling affect US companies? If an additional tariff is imposed (theoretically, it could be up to 250% and apply retroactively), the biggest hits will be to US companies that develop, own or operate utility-scale solar projects. That includes NextEra Energy,
one of the largest solar developers in the US The company disclosed that as much as 2.8 gigawatts of solar and storage projects could shift from this year to next because of delays. The company’s stock price is down almost 17% since the tariff probe began. Others with exposure to utility-scale solar, including Clearway Energy,
Atlantica Sustainable Infrastructure and Brookfield Renewable Partners,
are all down by 10% to 15%. A much smaller list of US companies stand to gain from a tariff ruling, including First Solar, the only domestic module manufacturer of scale.
It is anyone’s guess which way the Commerce Department will rule. Commerce Secretary Gina Raimondo said at a Senate committee hearing last week that her “hands are very tied” when asked whether the agency could expedite the decision. Mr. Lezcano of BloombergNEF notes that the liberation will be made by a “group of trade lawyers that are working in deep isolation from politics.”
Until this cloud over the industry clears, it is a bit early for bargain hunters to come out of the shadows.
Write to Jinjoo Lee at [email protected]
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