President Donald Trump just dealt his biggest blow to the renewable energy industry to date.
On Monday, Mr Trump approved duties of as much as 30 per cent on solar equipment made outside the US, a move that threatens to handicap a $28 billion industry that relies on imported parts for 80 per cent of its supply. Just the mere threat of tariffs has shaken solar developers in recent months, with some hoarding panels and others stalling projects in anticipation of higher costs. The Solar Energy Industries Association has projected 23,000 job losses this year in a sector that employed 260,000.
The tariffs are just the latest action Trump has taken that undermine the economics of renewable energy. The administration has already decided to pull the US out of the international Paris climate agreement, rolled back Obama-era regulations on power plant-emissions and passed sweeping tax reforms that constrained financing for solar and wind. The import taxes, however, will prove to be the most targeted strike on the industry yet and may have larger consequences for the energy world.
“We are inclined to view it as posing greater trade risk for all types of energy, particularly if other nations establish new trade barriers against US products,” Washington-based research company ClearView Energy Partners said in a report on Monday.
US panel maker First Solar jumped 9 per cent to $75.20 in after-hours trading in New York. The Arizona-based manufacturer stands to gain as costs for competing, cheaper foreign panels rise.
Mr Trump approved four years of tariffs that start at 30 per cent in the first year and gradually drop to 15 per cent. The first 2.5 gigawatts of imported solar cells are exempt for each year, the president said in a statement.
The duties are lower than the 35 per cent rate the US International Trade Commission recommended in October after finding that imported panels were harming American manufacturers. The idea behind the tariffs is to raise the costs of cheap imports, particularly from Asia, and level the playing field for those who manufacture the parts domestically.
Despite higher anticipated costs for American solar installers, SunPower, Vivint Solar and Sunrun all jumped in after-hours trading. “A 30 per cent tariff in Year One is bad,” said Gordon Johnson, a New York-based analyst at the Vertical Group, but “it’s less than what the consensus was”.
Jigar Shah, co-founder of investor Generate Capital and an outspoken advocate for the solar industry, went as far as to describe the decision as “good news”. The tariffs are “exactly what the US solar industry asked for behind closed doors” to prevent a negative impact on companies, he said.
The duties won’t be entirely devastating for the US solar industry, said Hugh Bromley, a New York-based analyst at Bloomberg New Energy Finance. He estimated they will increase costs for large solar farms by less than 10 per cent. The expense of a residential system, he said, will rise by about 3 per cent.
The decision will “destruct some demand for new projects in the next two years”, Mr Bromley said. “But they will likely prove insufficient in magnitude and duration to attract many new factories.”
For Mr Trump, the tariffs represent a step toward making good on a campaign promise to get tough on the country that produces the most panels – China. Mr Trump’s trade issues took a backseat last year while the White House focused on tax reform, but it’s now coming back into the fore. The solar dispute is among several potential trade decisions by the president that also involve washing machines, consumer electronics and steel.