Economy

Yes, new tariff backfires on US jobs. But it’s not end of world for solar power.

Putting it in perspective

The Trump-imposed tariff on imported solar panels isn't as harsh as the industry had feared. The bigger challenge, some say, is possible cuts in government-funded energy research.

Solar installers from Baker Electric place solar panels on the roof of a residential home in Scripps Ranch, San Diego, in 2016.
Mike Blake/Reuters/File
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For all its tough trade rhetoric in the past year, especially against China, the Trump administration’s first enforcement actions of 2018 will have a measured and temporary impact.

In the most closely watched case, involving solar panels, new tariffs announced Monday will slow adoption of the technology in the near term – and create a new set of winners and losers. Many fans of solar power are understandably voicing loud concerns. But industry analysts don’t expect the tariffs to cause long-term damage to the fast-growing industry of wiring up the United States with solar power.

Homeowner installation costs will go up about 4 percent, says ClearView Energy Partners, a Washington-based research firm. For utility-scale installations, costs will go up about 10 percent, it says. 

“At the end of the day, it won’t have any major implications for the industry from a manufacturing perspective,” says Angelo Zino a senior industry analyst with ‎CFRA Research. “Things could have been a lot worse.”

In short, the tariff won’t kill solar power, but also won’t create momentum for new investment that could push the industry forward.

“The tariffs are going to expire in four years. That doesn’t give somebody much incentive to build a factory” in the US, says Varun Sivaram, author of “Taming the Sun,” a soon-to-be-released book on solar power.

Nor does it give companies reason to invest in the next-generation solar technologies that Mr. Sivaram sees as both economically promising and an answer to environmental concerns about global warming.  

What the tariff does mean is fewer jobs installing solar panels, for now. For months, America’s solar installation industry had made dire warnings about what the Trump administration might do. The International Trade Commission had called for 35 percent tariffs on imported solar panels. The two US-based manufacturers that had pushed for protection wanted even higher penalties. In the end, President Trump opted for a 30 percent penalty, not unlike what the Obama administration had imposed before.

The difference is that the new tariff applies worldwide, as opposed to just specific Asian countries, so solar-panel makers in Europe as well as in China saw their share prices fall in trading Tuesday.

In a separate action, Mr. Trump imposed a steeper 50 percent tariff on imported washing machines, but its effect is much more narrow, helping US-based Whirlpool Corp. fend off low-price competition from South Korean manufacturers Samsung Electronics and LG Electronics.

Whirlpool chairman Jeff Fettig said Monday that the trade action "enabled new manufacturing jobs here in America and will usher in a new era of innovation for consumers everywhere.” The company said it would add 200 new full-time positions at its Clyde, Ohio, manufacturing plant, adding in a statement that "the new hires are just the beginning of increased investments in innovation, manufacturing and additional manufacturing jobs for Whirlpool and its vendors."

Jobs were at the core of the solar-panel case. Thanks to low-cost panels from China, the solar industry has been soaring. Employment nearly tripled between 2010 and 2016 to 260,000 as solar installations picked up in the United States. The Solar Energy Industries Association opposed the tariff because solar-panel manufacturing is such a small part of the industry, amounting to about 2,000 jobs. With the new tariff, the SEIA estimates the industry will lose some 23,000 jobs this year as increased panel costs force utilities and other customers to scale back billions of dollars in investment.

Still, the industry avoided a more severe scenario.

“While we believe the decision will be significantly harmful to our industry and the economy, we appreciate that the president and the administration listened to our arguments,” Abigail Ross Hopper, SEIA’s president and chief executive, said in a statement. “Our industry will emerge from this. The case for solar energy is just too strong to be held down for long.”

Even one winner in the case, while complimenting Mr. Trump, raised a note of doubt whether the tariff would be enough. “We are still reviewing these remedies, and are hopeful they will be enough to address the import surge and to rebuild solar manufacturing in the United States,” said Juergen Stein, chief executive and president of SolarWorld Americas, in a statement.

The tariff may convince some overseas solar manufacturers to locate factories in the US. Already, a Chinese manufacturer may be behind a request for $54 million in state and city incentives to build a solar-panel factory in Jacksonville, Fla., according to the Jacksonville Daily Record.

The other big winner is Arizona-based First Solar, which makes an advanced thin-film solar panel that isn’t subject to the tariff, says Mr. Zino of ‎CFRA. Thin-film technology, while not yet cost-competitive with silicon-based panels, is slowly getting more attention from the industry, particularly in specialized installations. The company’s stock jumped Tuesday morning on news of the tariffs.

But to grow US solar manufacturing, Trump will need far more than a tariff, say experts, who point to research and development support and an advanced manufacturing strategy as key components for a turnaround.

Sivaram, a technology expert at the Council on Foreign Relations, says that despite China's rise to dominance in solar panels, other nations still have an opportunity to invest.

“There are super promising technologies,” he says.

Why not just let China take the lead, and continue to offer increasingly low-cost solar power to the world? “The problem is solar power currently provides about 2 percent of world electricity,” and isn’t near a glide path toward the much larger scale that’s possible, Sivaram says.

That faster glide path is needed, scientists say, to reduce the human-created emissions behind climate change.  

Government support has a big role to play in solar technology, experts say, because for the private sector the big potential rewards are matched by big up-front risks. Yet, even as Trump imposes the solar tariff, his administration is aiming to slash R&D funding for new energy technology.

That may be the bigger concern than any tariff fallout, for the future US role in solar power.

Yet the tariff moves this week could have another important ripple effect, if they prompt retaliatory moves by China, as well as legal challenges to the tariffs through the World Trade Organization.

The question of a possible trade war – or, alternately, successfully nudging China toward global norms in its trade practices – is one that goes beyond solar power or washing machines. It’s a challenge that experts including Sivaram say will be best met by collective global efforts, rather than by unilateral US moves.

Staff writer Mark Trumbull contributed to this story from Washington

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