President Donald Trump signed off on new tariffs for imported solar cells and modules on Tuesday at a ceremony held in the Oval Office.
"We’ll be making solar products now much more so in the United States," Trump said. "Our companies have been decimated, and those companies are going to be coming back strong."
The global safeguard measures announced this week will give a boost to U.S. solar module makers, which benefit from Trump's decision to allow 2.5 gigawatts of imported solar cells to come in tariff-free for each year of the four-year trade remedy. But analysts say the relatively modest short-term tariffs are unlikely to trigger a true renaissance in domestic solar cell and module manufacturing.
At the same time, American solar companies that rely on imported solar products are now in a difficult position. The 30 percent year-one solar tariff on imported modules will mean slower sales and potential job cuts. The tariff declines by 5 percentage points each year for four years, but will continue to slow down the U.S. solar market through 2022.
According to GTM Research, the U.S. utility-scale solar market will see installations decline by nearly 5 gigawatts over the next five years as a result of the tariffs. Utility-scale developers like Cypress Creek, which has been growing quickly in emerging solar markets in the Southeast, are likely to take a hit. U.S. solar developer and manufacturer SunPower is expected to be the most significantly affected. SunPower, which makes its high-efficiency solar modules in Mexico and Malaysia -- both of which are subject to the new import tariffs -- saw its stock price fall by 6.5 percent on Tuesday.
But for select companies, there may be a way to avoid the trade case burden.
An opportunity to push for tariff exclusions
The White House issued its official proclamation yesterday afternoon with additional information on the scope of the new solar import tariffs, including reference to an upcoming opportunity for stakeholders to file for exclusions through the Office of the U.S. Trade Representative (USTR).
"Within 30 days after the date of this proclamation, the USTR shall publish in the Federal Register procedures for requests for exclusion of a particular product from the safeguard measure established in this proclamation," according to the document. "If the USTR determines, after consultation with the Secretaries of Commerce and Energy, that a particular product should be excluded, the USTR is authorized, upon publishing a notice of such determination in the Federal Register, to modify the [Harmonized Tariff Schedule] provisions created by Annex I to this proclamation to exclude such particular product from the safeguard measure."
GTM was unable to obtain copies of the annexes referenced in the proclamation by the time of publication. However, the annexes will be publicly available once published in the Federal Registrar, and we will continue our coverage as additional information becomes available.
For SunPower in particular, the possibility of exclusions represents an enormous opportunity.
SunPower CEO Tom Werner said he was disappointed that Monday's trade announcement did not address product exemptions, as SunPower requested. But he insisted the company will "continue to press for an exclusion for our unique interdigitated back contact (IBC) solar cells."
“SunPower’s IBC technology is unique in offering the industry’s highest-efficiency and best long-term performance," Werner said, in a statement. "Neither the petitioners in the Section 201 case nor their foreign competitors are capable of manufacturing a comparable product. Because it is a premium product, commanding a premium price, it cannot have contributed to the harm to domestic producers that the administration found in this case."
Solar-powered backpacks and lanterns that use CSPV technology are likely to be excluded from the tariffs with no objections, as they're not considered competitive in any way with the domestic solar manufacturers that brought the Section 201 case. Makers of imported 72-cell solar modules for utility-scale solar projects may also try to have their products excluded from the tariffs, but will likely have a harder time.
The argument for a free pass is that trade case petitioners Suniva and SolarWorld Americas could not produce 72-cell modules in the quantities demanded by the marketplace. Furthermore, these modules are unique in that more watts are installed per panel when compared to the standard 60-cell modules. So there's an argument to be made that the technology enables applications or reaches end markets that Suniva and SolarWorld couldn't serve, and it would be a detriment to consumers to penalize companies serving those applications when there is no American-made alternative.
But these arguments are tenuous because 72-cell modules still use CSPV technology. And, theoretically, there is nothing stopping installers from using 60-cell modules instead -- except costs.
Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, said she expects exclusions will apply to "different products, different kinds of technologies and perhaps even different end uses like 60- versus 72-cell modules." But, she added, "I don’t have a crystal ball to know where the USTR is going to land on which products should be excluded and which shouldn’t."
"My expectation is that it will be a substantive and thoughtful analysis of whether or not the products will be excluded, run by the USTR in consultation with [the Departments of] Commerce and...Energy, and a lot of folks familiar with solar and different [solar product] applications and market differentiation," she added. "I think it will be a process certainly worth engaging in."
Countries that are affected, plus some additional flexibility
While opening a door for possible exceptions, the proclamation document outlines which solar technologies are currently subject to Section 201 remedies.
One section notes that safeguard measures apply to solar cells, whether or not assembled into modules, as well as parts of solar cells, DC generators with solar cells attached, and inverters or batteries with CSPV cells attached. Additional information will be included in the annexes.
The proclamation also clarifies which countries are affected by the safeguard measures. NAFTA partners Canada and Mexico are both subject to the tariffs. Though not named in the proclamation, every other major solar manufacturing country is also covered by the global safeguard measures, including free-trade partner South Korea.
Consistent with U.S. World Trade Organization obligations, the Trump administration is excluding all Generalized System of Preferences beneficiary countries that account for less than 3 percent of total exports from the solar safeguard measures (see the full list here). However, exemptions do not apply to Thailand and the Philippines, since they accounted for more than 3 percent of total imports. The proclamation also states that other countries may be subject to tariffs at later dates if imports from them begin to surge.
The White House document gives President Trump the flexibility to make other adjustments to the remedy if it appears additional action is needed to shore up the domestic industry. At the same time, the president may determine within 30 days of issuing the proclamation that, as a result of consultations between the U.S. and other WTO members, "it is necessary to reduce, modify, or terminate the safeguard measure." In that case, the change would made within 40 days.
According to SEIA, the safeguard measures are also subject to a midterm review roughly halfway through the four-year tariff period.
In the meantime, separate solar trade talks will soon get underway, as per the USTR's statement earlier this week. Those discussions are intended to address duties from the 2012 solar trade case, which triggered retaliatory measures from China against the U.S. polysilicon sector. If the Trump administration can broker a deal, it could reduce the overall tariff impact on imported products while giving American polysilicon companies entry into China.
While President Trump has talked tough on trade, his Section 201 decision includes measures that could soften the blow of import tariffs for several companies. And for those companies, the trade saga isn't over yet.
This story was updated to reflect that both Suniva and SolarWorld Americas have produced 72-cell modules. An earlier version of this story incorrectly stated that Suniva does not offer a 72-cell product. The case for exempting 72-cell modules from tariffs hinges on the argument that the petitioners could not make the modules in the quantities demanded by the marketplace, not that they could not make 72-cell modules at all.