Solar Tariffs: Throttling America's Biggest Job Creation Machine
The U.S. Department of Commerce just announced that it will add high tariffs for solar modules imported from China. The Canadian government is also investigating the adoption of similar measures, following recent complaints filed by Ontario-based solar manufacturers. With the solar industry in hypergrowth, it’s not a surprise that these governments are interested in boosting new jobs, protecting their economies, and fostering the solar sector. The problem is that tariffs are a short-sighted approach that actually attack the future of North American solar on its home soil, and likely destroy more jobs than they create.
Our Competitive Advantage Is Value-added Services, Not Manufacturing
Manufacturing is a low-margin business compared to the higher margin solar sectors like installation, engineering, and operation. These value-added services comprise one of the fastest growing job markets in the U.S. Although tariffs are typically meant to protect domestic workers, that's exactly who they will be hurting.
Currently, solar developers and installers — like Vivint, SolarCity, Sungevity, and UGE — are leading the world in renewable energy business model innovation. These companies have rapidly expanded in North America and have also exported these new business models to regions all around the world. This is a clear area where the U.S. has a competitive advantage. Each of these fast-growing businesses employs hundreds to thousands of workers, and these are service jobs that cannot be outsourced. (Meanwhile, SolarWorld, the German solar panel manufacturer who has led the charge in the U.S. against imported panels, just announced a massive expansion of manufacturing this will only add at most 200 jobs).
By comparison, U.S. solar manufacturing (and Canadian, for that matter) is a small industry. China has developed unparalleled expertise in this area, with Yingli and Trina solar modules the top two suppliers in the world, each holding more than 5 percent of total market share. Though that may be a threat to U.S. manufacturers, it can actually be a big benefit to the global economy in terms of providing the most cost effective solar panels, and by extension more affordable energy. The U.S. Commerce Department needs to take a look at the industry holistically, rather than focusing on such a thin slice of the solar economy. Tariffs are actually shrinking existing competitive advantages in solar, and harming the potential for local solar adoption, under the auspices of trying to protect this very small manufacturing sector.
Expensive US Electricity Will Force Businesses Elsewhere
Cheaper technology has spurred the dramatic rise in solar adoption that we’ve seen over the last few years. Deutsche Bank just issued a report anticipating that solar will reach grid parity in all 50 states by 2016, and these trends have been expected to continue. But this depends on technology costs staying competitive.
High tariffs significantly raise the material costs for U.S. solar developers and installers, driving project costs 5 to 25 percent higher than in a country without the tariffs. That same 5 to 25 percent cost addition means developers like UGE can offer electricity rates to companies outside the country that are 5 to 25 percent less than what is offered within the U.S. In our global economy, that means businesses will move their operations elsewhere. New facilities will open in locations where energy is cheaper, and with them, the U.S. will lose out on new construction jobs, manufacturing jobs, and other economic benefits like tax revenue.
U.S. Consumers—And Our Climate—Lose
Beyond the benefits to the U.S. solar industry, low module costs have impacted all energy consumers. For the first time, it has been possible to transition to renewable energy not only for the environmental benefits, but because it’s more cost effective. This has huge implications for mitigating climate change, improving our energy security, and stabilizing the cost of energy resources.
The U.S. and China just made a landmark agreement to reduce carbon emissions, and we are already seeing progress worldwide. Tariffs have the potential to derail this significantly. They hurt consumers who will either have to pay more to switch to solar energy or won’t make the transition at all, and the additional costs, in the form of those tariffs, go straight into government coffers. That will ultimately be the biggest cost of this policy if it stays in effect — it will stall the tremendous progress that the solar industry has been making to transform how the U.S. and the world gets energy.
Nick Blitterswyk is the CEO and founder of UGE International, a leading developer of distributed renewable energy solutions for business and government, with projects in over 90 countries, including several for Fortune 1,000 companies.
Carbon dioxide removal revenues worth £2bn a year by 2030
Carbon dioxide removal revenues could reach £2bn a year by 2030 in the UK with costs per megatonne totalling up to £400 million, according to the National Infrastructure Commission.
Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades - although costs are uncertain given removal technologies are in their infancy - and revenues could match that of the UK’s water sector by 2050. The Commission’s analysis suggests engineered removals technologies need to have capacity to remove five to ten megatonnes of carbon dioxide no later than 2030, and between 40 and 100 megatonnes by 2050.
The Commission states technologies fit into two categories: extracting carbon dioxide directly out of the air; and bioenergy with carbon capture technology – processing biomass to recapture carbon dioxide absorbed as the fuel grew. In both cases, the captured CO2 is then stored permanently out of the atmosphere, typically under the seabed.
The report sets out how the engineered removal and storage of carbon dioxide offers the most realistic way to mitigate the final slice of emissions expected to remain by the 2040s from sources that don’t currently have a decarbonisation solution, like aviation and agriculture.
It stresses that the potential of these technologies is “not an excuse to delay necessary action elsewhere” and cannot replace efforts to reduce emissions from sectors like road transport or power, where removals would be a more expensive alternative.
The critical role these technologies will play in meeting climate targets means government must rapidly kick start the sector so that it becomes viable by the 2030s, according to the report, which was commissioned by government in November 2020.
Early movement by the UK to develop the expertise and capacity in greenhouse gas removal technologies could create a comparative advantage, with the prospect of other countries needing to procure the knowledge and skills the UK develops.
The Commission recommends that government should support the development of this new sector in the short term with policies that drive delivery of these technologies and create demand through obligations on polluting industries, which will over time enable a competitive market to develop. Robust independent regulation must also be put in place from the start to help build public and investor confidence.
While the burden of these costs could be shared by different parts of industries required to pay for removals or in part shared with government, the report acknowledges that, over the longer term, the aim should be to have polluting sectors pay for removals they need to reach carbon targets.
Polluting industries are likely to pass a proportion of the costs onto consumers. While those with bigger household expenditures will pay more than those on lower incomes, the report underlines that government will need to identify ways of protecting vulnerable consumers and to decide where in relevant industry supply chains the costs should fall.
Chair of the National Infrastructure Commission, Sir John Armitt, said taking steps to clean our air is something we’re going to have to get used to, just as we already manage our wastewater and household refuse.
"While engineered removals will not be everyone’s favourite device in the toolkit, they are there for the hardest jobs. And in the overall project of mitigating our impact on the planet for the sake of generations to come, we need every tool we can find," he said.
“But to get close to having the sector operating where and when we need it to, the government needs to get ahead of the game now. The adaptive approach to market building we recommend will create the best environment for emerging technologies to develop quickly and show their worth, avoiding the need for government to pick winners. We know from the dramatic fall in the cost of renewables that this approach works and we must apply the lessons learned to this novel, but necessary, technology.”
The Intergovernmental Panel on Climate Change and International Energy Agency estimate a global capacity for engineered removals of 2,000 to 16,000 megatonnes of carbon dioxide each year by 2050 will be needed in order to meet global reduction targets.
Yesterday Summit Carbon Solutions received "a strategic investment" from John Deere to advance a major CCUS project (click here). The project will accelerate decarbonisation efforts across the agriculture industry by enabling the production of low carbon ethanol, resulting in the production of more sustainable food, feed, and fuel. Summit Carbon Solutions has partnered with 31 biorefineries across the Midwest United States to capture and permanently sequester their CO2 emissions.
Cory Reed, President, Agriculture & Turf Division of John Deere, said: "Carbon neutral ethanol would have a positive impact on the environment and bolster the long-term sustainability of the agriculture industry. The work Summit Carbon Solutions is doing will be critical in delivering on these goals."
McKinsey highlights a number of CCUS methods which can drive CO2 to net zero:
- Today’s leader: Enhanced oil recovery Among CO2 uses by industry, enhanced oil recovery leads the field. It accounts for around 90 percent of all CO2 usage today
- Cementing in CO2 for the ages New processes could lock up CO2 permanently in concrete, “storing” CO2 in buildings, sidewalks, or anywhere else concrete is used
- Carbon neutral fuel for jets Technically, CO2 could be used to create virtually any type of fuel. Through a chemical reaction, CO2 captured from industry can be combined with hydrogen to create synthetic gasoline, jet fuel, and diesel
- Capturing CO2 from ambient air - anywhere Direct air capture (DAC) could push CO2 emissions into negative territory in a big way
- The biomass-energy cycle: CO2 neutral or even negative Bioenergy with carbon capture and storage relies on nature to remove CO2 from the atmosphere for use elsewhere