As a broad cross-section of the U.S. solar sector condemned new tariffs on imported solar cells and modules this week, President Trump insisted they would spur new American jobs.
“Our action today helps to create jobs in America for Americans,” he said at a televised signing ceremony in the Oval Office on Tuesday. “We’ll be making solar products now much more so in the United States. Our companies have been decimated, and those companies are going to be coming back strong.”
Numerous trade experts, policymakers and industry analysts believe that’s just not true. The Solar Energy Industries Association (SEIA) calculates the trade remedies will trigger 23,000 job losses this year alone across the broader solar industry, which currently employs some 260,000 workers. The Wall Street Journal editorial board wrote this week that “Mr. Trump’s tariffs are an economic blunderbuss that will hit America’s friends abroad and Mr. Trump’s forgotten men and women at home.”
But some recent announcements indicate that the president’s comments might not be entirely off-base.
DOE introduces the "American Made Solar Prize"
For one thing, the Department of Energy’s Solar Energy Technologies Office (SETO) announced a $3 million prize competition on Wednesday to “re-energize innovation” in U.S. solar manufacturing. The American Made Solar Prize is designed to “incentivize the nation’s entrepreneurs to develop new processes and products that will reassert American leadership in the solar marketplace,” according to a press release.
The program will leverage the testing and development capabilities of DOE’s 17 national labs, and facilitate connections with both corporate and venture capital sources to help lower the barriers American innovators face in reaching manufacturing scale.
“The United States possesses the talent, expertise, and vision to surpass the rest of the world in solar technologies and forge a new solar energy landscape around the globe,” said Energy Secretary Rick Perry, in a statement. “The American Made Solar Prize will galvanize our country’s entrepreneurs, allow them to utilize technologies and innovations developed through DOE’s early-stage research and development, and, ultimately, bring new American-made products to market.”
A statement posted earlier on the American-Made Solar Prize website noted that the DOE is “currently not opening a challenge and may or may not issue a challenge as described,” causing some skepticism around whether or not the program would actually move forward. GTM inquired with the DOE and confirmed the program is underway. The website statement has since been changed to note that "NREL and DOE are finalizing the prize rules and intend to publish the prize rules within the next few weeks. When the prize rules are published, the application process will open."
As the administration seeks to support the country’s long-term manufacturing capabilities, Trump’s newly released solar tariffs could also give a boost to manufacturing output -- and jobs -- in the nearer term.
Module makers ramp up U.S. manufacturing
The day Trump signed the proclamation on new solar tariffs, Texas-based solar module manufacturer Mission Solar Energy announced that it’s ramping up production to meet 2018 demand. The company -- which had to lay off workers in early 2017 -- is also hiring 50 new employees to shift production line operations to a 24/7 schedule, stating that this is just “the first phase in the plan for production increase.”
On January 11, California-based Solaria Corporation announced it had raised $23 million in growth funding from a syndicate of leading strategic and financial investors to expand its manufacturing capacity in the U.S. and eventually, around the world. The funding wasn’t explicitly tied to the tariff announcement, but the advantage of selling tariff-free panels couldn’t have hurt Solaria’s business case.
Domestic solar module makers in particular have been bolstered by the president’s decision to allow for 2.5 gigawatts of tariff-free solar cells to be imported each year, for the four-year duration of the trade remedy. A group of 10 American crystalline-silicon solar PV (CSPV) module manufacturers, including Mission Solar and Solaria, as well as Tesla, urged the president to implement a trade remedy that would allow for enough tariff-free solar cells to support and grow the domestic solar module manufacturing industry -- and they effectively got their wish.
A Tesla spokesperson told GTM this week that the company is “committed to expanding its domestic manufacturing” at the Gigafactory 2 in Buffalo, New York. To flesh out their growth plans, Tesla and other module makers will be watching closely to see how the 2.5 gigawatts of tariff-free cells will be allocated.
Trump administration trade leaders could decide to give each cell-producing country a portion of the 2.5-gigawatt quota, or they could approve a first-come, first-served model where companies rush to get cells in under the threshold. The specifics on cells and other matters will be addressed in the coming days.
“Although we are still waiting for the details of the president’s decision regarding solar tariffs in order to analyze the implications more fully, we will stay optimistic about the outcome given that the decision includes continued access to a certain number of duty-free cells,” said Jae Yang, president of Mission Solar Energy.
SolarWorld's hiring process "ongoing"
There are a total of 14 crystalline-silicon cell and/or module manufacturers in the U.S. by GTM’s count: CBS Solar, Colored Solar, Csun USA, Lumos, Mission Solar, Prism Solar Technologies, Seraphim USA Manufacturing, SunSpark Technologies, Tesla, Solaria, Itek Energy and SolarTech Universal -- plus Section 201 trade case petitioners Suniva and SolarWorld Americas.
Theoretically, all of these companies will benefit from tariffs on imported solar products, but it’s not clear that all of these companies have active factories in the U.S. with the ability to reach any kind of scale.
Despite launching the trade case, Suniva is unlikely to reboot operations after declaring bankruptcy last year. Suniva and SolarWorld released an economic analysis last year that claimed imposing new tariffs on foreign solar products would result in up to 144,300 new American jobs across all segments of the U.S. solar industry over the next five years, including 45,000 new manufacturing jobs. But that number seems impossibly high, particularly given the relatively modest tariff levels announced this week.
Oregon-based SolarWorld Americas said it is committed to ramping up production, however, and will finish hiring 200 workers by the end of the year. The company initiated manufacturing again last fall as the trade case advanced.
“The ramp we announced in September is ongoing, and we expect it to conclude in the second half of this year, depending, of course, on market developments,” Ben Santarris, head of corporate communications for SolarWorld Americas, wrote in an email.
If you build tariffs, will foreign manufacturers come?
New players may also come on the scene. GTM reported last fall that several foreign cell and module manufacturers were considering opening facilities in the U.S. -- depending on the outcome of the Section 201 case.
More recently, Archie Flores, general manager of Longi Solar Technologies U.S., said his company plans to continue serving the U.S. solar market and is exploring options to open some kind of manufacturing plant.
"We have almost a decision tree of how we will act based on what results come out,” Flores said in a December interview. “Any manufacturer right now would have to evaluate options in the U.S. if they want to continue to serve the U.S. market.”
Longi is a leading manufacturer of high-efficiency monocrystalline solar cells and modules, with a strong balance sheet and big expansion plans. It’s also rumored to be among the companies looking to purchase Suniva’s remaining assets. Longi could be in a good position to invest in the U.S. but Flores noted there’s a lot that would need to be hammered out first.
“We are actively doing our homework at the same time we are making sure that we are in a good alliance with the offtakers, to verify if it makes sense for both sides to manufacture in the U.S. and for them to take the product at potentially additional cost,” he said. “Because there will always be a cost difference between making it here versus making them elsewhere.”
“A U.S. factory is a big commitment,” he added. “Longi is committed to the U.S. market. We have aspirations to capture a good market share of the U.S. demand, so we are prepared to bring the solutions to our U.S. customers. […] And if you go back to Longi’s balance sheet strength, we can pull off an investment if we decide to do so.”
Other companies may also decide to do so. There have been several reports that a foreign solar manufacturer approached city officials in Jacksonville, Florida earlier this month about opening its first manufacturing and assembly plant in the U.S., seeking $54 million in tax incentives in exchange for creating 800 jobs. Jacksonville newspaper The Financial News & Daily Record uncovered hints that the company could be Shanghai-based Jinko Solar Holding Corp.; however, the company has yet to confirm.
"I don't see this as a rational decision"
MJ Shiao, head of Americas research for GTM Research, said he’s skeptical that such a factory would make financial sense.
“It’s hard for me to believe that a foreign manufacturing company would set up shop in the U.S.,” he said.
“This Florida facility is reportedly going to cost up to $410 million, and it’s not even going to start manufacturing until sometime in 2019. That gives you roughly two and a half years to recoup the costs, or it requires a long-term roadmap to competitiveness with global pricing, in an era when module margins are thin,” Shiao explained. “I don’t see this as a rational decision on a cost basis, unless it’s a bid to take market share or it's driven by a large strategic customer that's willing to absorb the higher costs.”
Are U.S. solar panel purchasers wiling to make such a commitment? NextEra Energy Partners might be willing.
On an earnings call last fall, James Robo, CEO, president and chairman of NextEra’s parent company Florida Power & Light Company, said he expects major panel producers will find a way to serve U.S. customers despite any new tariffs.
“This is a very competitive market out there for manufacturing panels that the panel manufacturers are not going to abandon,” he said. “They'll figure out a way to compete. And it may take a little bit, but fundamentally, I'm not worried about the long-term implications of whatever happens with the ITC.”
"Tariffs can work; I just don't think in this scenario they are likely to work"
So what does this all mean for the jobs President Trump promised? Not much, if you ask Abigail Ross Hopper, Solar Energy Industries Association president and CEO.
“We are pleased that the administration recognized the importance of the module manufacturing here today and [that we ] have a 2.5-gigawatt exemption" for imported solar cells,” she said. “We represent many of those companies, and we think it will be helpful for them to continue to produce modules here.”
By SEIA’s estimates, current domestic producers can only meet around 20 percent of U.S. solar market demand for 2018 -- and that’s only if they’re able to rapidly max out their capacity. In the meantime, “I don’t know how many new companies will be incented to come,” Ross Hopper said.
It takes months to build and set up a module assembly facility in the U.S. and up to two years to set up a cell manufacturing plant. Given that the tariff will only be in place for four years, and that it declines each year, there simply may not be enough time to open a U.S. facility in a way that makes economic sense. And the possibility that Trump’s tariffs could be challenged and overturned at the World Trade Organization doesn’t help matters.
“I think tariffs can work; I just don’t think in this scenario they are likely to work,” Ross Hopper said. “Obviously, we welcome new manufacturing capacity, but we need to be realistic about what that is likely to look like. These new facilities are largely automated. When you think about the impact on jobs -- which our president cares about -- it’s going to have a minimal impact.”
And that is why so many stakeholders and onlookers in the Section 201 trade case have been so critical of the president’s protectionist trade action. That’s why companies are looking to find ways to avoid the import tariffs or innovate their way out of the economic impact. President Trump’s legacy on job creation -- at least in the energy sector -- likely hinges on their success.
***Join us for the 11th annual Solar Summit 2018 in San Diego, May 1-2. Powered by the unique blend of research and economic analysis from the GTM Research team, this year's agenda will feature themes from beyond traditional project finance to innovations in solar and the transformation of electricity.This story has been updated to clarify a statement on the American-Made Solar Prize website.