Lights out for the US solar industry?
How will President Trump’s tariffs on solar equipment imports affect the industry. Saltanat Berdikeeva gives us the inside line.
In a move that threatens to kneecap the fastest growing energy sector in the US, the administration of President Donald Trump imposed a 30% tariff on imports of solar equipment and washing machines on 22 January 2018, with the aim of stimulating domestic manufacturing.
President Trump approved the tariffs for four years that will start at 30% the first year and decline 5% every year until 2021. The US solar industry relies 80% on imports of solar panels and their components that turn sunlight into electric power. Imports of cheap solar cells and modules, mainly from China, South Korea, Germany, and Mexico, as well as state and federal financial incentives have created favorable conditions for the growth of the solar industry in the US. Solar jobs in the US are mostly concentrated in installations, not manufacturing. The making of solar panels is a minor portion of the American solar sector, which is unlikely to be competitive with global producers in a foreseeable future.
An industry worth $28bn and employing nearly 260,000 workers in 2017, the solar energy sector surpassed the fossil fuel-based power generation twofold in terms of jobs. According to the US Department of Energy’s data for 2017, the US solar industry accounted for the largest share of employment, i.e. 43%, in electric power generation, largely due to growing solar installations. By contrast, employment in fossil fuel generation was 22% of total employment in electric power generation in 2017. Solar jobs have risen 20% annually over the past few years.
According to the Solar Energy Industries Association (SEIA), a national solar trade association in the US, the tariffs will hit the solar industry hard. SEIA expects that over 23,000 solar jobs will be lost in 2018 as a result of lost installation and investment plans. Even if solar manufacturing creates the anticipated 6,400 positions with the help of the tariffs, job losses in other parts of the sector, particularly those working in installations of solar panels, will vastly exceed the relatively small gains in manufacturing jobs. Solar installations already started slowing down. Industry observers believe the decline will be particularly noticeable after 2018, as installers use up stockpiled inventory and demand tapers off as costs go up to potential customers.
Changes in the solar sector have not only to do with tariffs, but also with shifting consumer incentive programmes in some of the mature markets in the US. Leading the country in solar installations, states such as Massachusetts, California and Nevada have provided strong financial incentives to residential and commercial customers to go solar. But for the first time in recent years, the industry lost about 10,000 jobs in 2017, primarily because incentives in Massachusetts and California have become less profitable and solar installations began to slow down. Despite these job losses, the growth trend in 29 states and the District of Columbia appears to be strong, particularly in New York, New Jersey, Utah, Pennsylvania, Tennessee, Minnesota and Arizona. This indicates that the solar industry is not declining in absolute terms.
If history is any guide, President Barack Obama also slapped tariffs higher (35%) than President Trump’s on imports of Chinese solar products. The tariffs of 2012 and 2014 did not lead to the surge in American production of solar cells and modules, but only stalled the growth of the solar market. Unlike the current tariffs, the Obama administration’s tariffs did not affect imports from other countries. In response to Obama’s tariffs on Chinese solar equipment, China responded with a ban on imports of American polysilicon. Signaling a possible retaliatory action this time, China is considering imposing tariffs on imports of American sorghum, a move that would hurt farmers who voted for President Trump. China, South Korea and Taiwan are now contesting the US tariffs at the World Trade Organization (WTO), claiming that the US violated certain WTO rules.
In the near term, President Trump’s tariffs are likely to slow down the growth in the US solar sector, but they will not kill it. Indeed, there are reasons for optimism that the American solar industry will not only survive but will thrive again. What is likely to push the industry forward are renewable energy goals and regulations at local and state levels, which have so far been vital for the expansion of solar, wind, and other renewable energy sources in the US. Currently, 29 states have mandates requiring that utilities procure a certain percentage of their power generation from renewable energy, including solar energy. At the federal level, the solar Investment Tax Credit (ITC) will also help keep the momentum going for the industry. The ITC allows residential and commercial solar system owners to deduct 30% of the cost of installing solar from federal taxes. The ITC will decrease from 30% to 26% in 2020 and 22% in 2021. As global prices for solar equipment and labour costs are expected to fall further, the ITC may not be necessary after 2021.
Furthermore, senators from President Trump’s own conservative Republican Party expressed support for the solar industry and stood against the tariffs, which portend a favourable policy from both sides of the aisle toward solar down the road. More than that, traditionally pro-free trade Republicans do not like protectionism. Some Republican leaders in rising solar markets are concerned that falling electricity prices and solar jobs would be in jeopardy. A recent unanimous rejection by the Federal Energy Regulatory Commission (FERC) of the White House’s plan to force utilities to buy more coal and nuclear power demonstrates that even President Trump’s appointees at FERC understand the value of cheaper and cleaner energy sources, including solar. FERC’s decision is a clear signal that renewable energy is no longer a politically divisive matter, but it is increasingly an economically valuable and reliable sector for Republican government officials. In the end, these political forces may help undo the protectionist policies.
Lastly, the continuously declining global prices of solar will percolate to the US market, eventually. World prices of not just solar cells and modules, but also those of inverters, trackers, and labour costs are expected to decline more. While the tariffs make the cost of solar equipment costlier in the US for the next few years, the industry will overcome the hurdles as it has in the past.
UK must stop blundering into high carbon choices warns CCC
The UK Government must end a year of climate contradictions and stop blundering on high carbon choices, according to the Climate Change Committee as it released 200 policy recommendations in a progress to Parliament update.
While the rigour of the Climate Change Act helped bring COP26 to the UK, it is not enough for Ministers to point to the Glasgow summit and hope that this will carry the day with the public, the Committee warns. Leadership is required, detail on the steps the UK will take in the coming years, clarity on tax changes and public spending commitments, as well as active engagement with people and businesses across the country.
"It it is hard to discern any comprehensive strategy in the climate plans we have seen in the last 12 months. There are gaps and ambiguities. Climate resilience remains a second-order issue, if it is considered at all. We continue to blunder into high-carbon choices. Our Planning system and other fundamental structures have not been recast to meet our legal and international climate commitments," the update states. "Our message to Government is simple: act quickly – be bold and decisive."
The UK’s record to date is strong in parts, but it has fallen behind on adapting to the changing climate and not yet provided a coherent plan to reduce emissions in the critical decade ahead, according to the Committee.
- Statutory framework for climate The UK has a strong climate framework under the Climate Change Act (2008), with legally-binding emissions targets, a process to integrate climate risks into policy, and a central role for independent evidence-based advice and monitoring. This model has inspired similarclimate legislation across the world.
- Emissions targets The UK has adopted ambitious territorial emissions targets aligned to the Paris Agreement: the Sixth Carbon Budget requires an emissions reduction of 63% from 2019 to 2035, on the way to Net Zero by 2050. These are comprehensive targets covering all greenhouse gases and all sectors, including international aviation and shipping.
- Emissions reduction The UK has a leading record in reducing its own emissions: down by 40% from 1990 to 2019, the largest reduction in the G20, while growing the economy (GDP increased by 78% from 1990 to 2019). The rate of reductions since 2012 (of around 20 MtCO2e annually) is comparable to that needed in the future.
- Climate Risk and Adaptation The UK has undertaken three comprehensive assessments of the climate risks it faces, and the Government has published plans for adapting to those risks. There have been some actions in response, notably in tackling flooding and water scarcity, but overall progress in planning and delivering adaptation is not keeping up with increasing risk. The UK is less prepared for the changing climate now than it was when the previous risk assessment was published five years ago.
- Climate finance The UK has been a strong contributor to international climate finance, having recently doubled its commitment to £11.6 billion in aggregate over 2021/22 to 2025/26. This spend is split between support for cutting emissions and support for adaptation, which is important given significant underfunding of adaptation globally. However, recent cuts to the UK’s overseas aid are undermining these commitments.
In a separate comment, it said the Prime Minister’s Ten-Point Plan was an important statement of ambition, but it has yet to be backed with firm policies.
Baroness Brown, Chair of the Adaptation Committee said: “The UK is leading in diagnosis but lagging in policy and action. This cannot be put off further. We cannot deliver Net Zero without serious action on adaptation. We need action now, followed by a National Adaptation Programme that must be more ambitious; more comprehensive; and better focussed on implementation than its predecessors, to improve national resilience to climate change.”
Priority recommendations for 2021 include setting out capacity and usage requirements for Energy from Waste consistent with plans to improve recycling and waste prevention, and issue guidance to align local authority waste contracts and planning policy to these targets; develop (with DIT) the option of applying either border carbon tariffs or minimum standards to imports of selected embedded-emission-intense industrial and agricultural products and fuels; and implement a public engagement programme about national adaptation objectives, acceptable levels of risk, desired resilience standards, how to address inequalities, and responsibilities across society.
Drax Group CEO Will Gardiner said the report is another reminder that if the UK is to meet its ambitious climate targets there is an urgent need to scale up bioenergy with carbon capture and storage (BECCS).
"As the world’s leading generator and supplier of sustainable bioenergy there is no better place to deliver BECCS at scale than at Drax in the UK. We are ready to invest in and deliver this world-leading green technology, which would support clean growth in the north of England, create tens of thousands of jobs and put the UK at the forefront of combatting climate change."
Drax Group is kickstarting the planning process to build a new underground pumped hydro storage power station – more than doubling the electricity generating capacity at its iconic Cruachan facility in Scotland. The 600MW power station will be located inside Ben Cruachan – Argyll’s highest mountain – and increase the site’s total capacity to 1.04GW (click here).
Lockdown measures led to a record decrease in UK emissions in 2020 of 13% from the previous year. The largest falls were in aviation (-60%), shipping (-24%) and surface transport (-18%). While some of this change could persist (e.g. business travellers accounted for 15-25% of UK air passengers before the pandemic), much is already rebounding with HGV and van travel back to pre-pandemic levels, while car use, which at one point was down by two-thirds, only 20% below pre-pandemic levels.