What do the US DoE Grid Resiliency Pricing Rule and Australia’s proposed National Energy Guarantee have in common? – both decisions represent attempts to balance the grid while appearing to favor fossil fuels for electricity generation above solar and wind.

The federal governments of both Australia and the US are defining energy security and reliability as possible only with fossil fuels and nuclear energy as the base upon which other energy options (renewables) can be built. This argument assumes that renewable energy technologies are inherently unreliable and ignores storage, system configurations that use different RE technologies, energy efficiency and conservation as the energy paradigm of the future. Doing so ignores international agreement that the climate warming must be held to 2 degrees centigrade or lower.

Australia’s proposed National Energy Guarantee does not include a renewable energy target, carbon pricing or other clean energy mechanism.  It does have an emissions guarantee but favors coal, natural gas and oil via its reliability guarantee.  Emissions and reliability guarantees can be traded between utilities and even traded internationally.  In fact, the emissions guarantee may be satisfied through international marketing. The guarantee levels have not been set and will vary state-by-state depending on the level of wind and solar in each state. The state of Western Australia is not part of the plan. As to Australia’s future deployment of wind and solar, the country’s Energy Minister Josh Frydenberg has apparently indicated that the country’s RE target appears to be 95% met via projects in development and already installed. Recently Minister Frydenberg indicated that new coal plants need to be considered and indicated that the government could intervene to ensure a stable energy supply.

NEG Commentary:  Concerning Australia’s National Energy Guarantee, is the government intervening as Minister Frydenberg suggested was possible? Details about the NEG are in such short supply that an assessment of its impact is in the realm of speculation. Though an anti-RE stance can be inferred, in particular from Energy Minister Frydenberg’s comments, it cannot be confirmed even though the bare outline of the NEG indicates a preference for fossil fuel generated electricity. Two well-known entities have taken starkly different views on the NEG.  Despite a lack of detail Bloomberg termed it “innovative” and called it a “blueprint” for other countries. An idea can be innovative, though the devil is in the details, blueprints, however, require detail.  Meanwhile, Deutsche Bank downgraded the value of Tilt Renewables, an Australian wind and solar development firm, assessing that its 1.7-GWp pipeline had little chance of being developed.

When two companies, one known for punditry and one a financial institution make radically different judgments on a subject, follow the money.

History

 In 2012 SolarWorld, facing significant price and margin pressure from cells/modules imported from China, filed trade petitions in Europe and the US under section 337 of the 1930 Trade Act. As a refresher on the Trade Act of 1930; this was the infamous Smoot-Hawley Act which began as a protection for farmers but after much debate fed by many special interests it was eventually attached to a wide variety of imports (~900).  Other countries retaliated with their own tariffs.  The US trade deficit ballooned.  Smoot-Hawley did not push the world into the Great Depression but it certainly was a card in the Depression playing deck.

In 1934, as part of the New Deal, President Franklin Roosevelt pushed the Reciprocal Trade Agreements Act through and the short reign of protectionism in the US ended.

Back to 2012, following an investigation, tariffs on cells and modules imported from China were put in place. Despite high anxiety in the US and Europe over potential price increases, and a highly divided solar industry prices did not increase significantly. In many cases, for larger buyers, the tariffs were absorbed.

In 2014 SolarWorld amended its original petition to include cells imported from Taiwan. Significant tariffs were put in place.  Despite renewed high anxiety in the US over potential price increases, prices did not increase significantly. In many cases, for larger buyers, the tariffs were absorbed.

In late 2016 China slowed it exploding market sending global PV capacity immediately into an oversupply situation. Overnight prices crashed and margins collapsed. To support current production manufacturers began selling future production to large buyers at extremely low prices.  Price decreases were in some cases available to buyers of smaller quantities.

Prices, in some cases, dipped below $0.30/Wp, lower than the price of a cell and below the cost of wafer-to-cell-to module production.  Manufacturers, trapped in a spiral of buyer expectations and low margins, doubled down by selling future production to large quantity buyers in the $0.30/Wp to $0.40/Wp range.

In April 2017 US-based (and 63% Chinese Owned) monocrystalline cell manufacturer Suniva filed for bankruptcy and shut down its cell and module facilities in the US. Simultaneously it filed a new petition under Section 201 of the Trade act of 1974 asking for a 0.78/Wp minimum price on all crystalline module imports and an additional $0.40/Wp tariff on imported crystalline cells.

The Trade Act of 1974, in theory, was designed to expand US manufacturing participation in global markets and reduce trade barriers. It also – and this is important – gave the President broad fast-track authority.  Under it the US president can give temporary relief to an industry.  Gerald Ford, who became the 38th president after the resignation of Richard Nixon, was president at the time.  The Trade Act of 1974 was deemed necessary because it gave the president a stronger negotiating position during the Tokyo multilateral trade negotiations. It was set to expire in 1980 and has been extended several times. President Bush used Section 201 in 2002 to increase tariffs on some steel imports to the US.

Back to the uncomfortable present

 In sum, reports were released by both sides offering catastrophic assessments of what would happen depending on the perspective of the party commissioning the report, the ruling was in favor of the petitioners, remedy testimony was heard in early October and now everyone waits for November 13 when the US ITC will deliver its recommendations.

During the remedy hearing neither Suniva nor SolarWorld delivered compelling arguments as to how they would recover with tariffs in place and nor could they deny that market participants would be hurt. This is because, and it is particularly true for smaller participants, there will be damage to smaller installers who cannot afford a bump up in module prices no matter how slight while module assemblers will pay more for cells and either absorb the cost in their margins or increase prices thus (again) harming smaller installers.

Meanwhile, First Solar recently sent a letter to the US ITC stating it sided with the petitioners.  As First Solar’s letter came after the ruling in favor of the petitioners and following its conspicuous silence at the remedy hearing the motives for an after-the-fact statement from a CdTe manufacturer not subject to tariffs are at the very least worth a few questions. Here are two: Why now and not before the first hearing?  Or, since First Solar stands to benefit, why not remain silent?

Prices for cells and modules have been very low for a decade and the margin expectations for the industry have fallen in tandem with prices.  At this juncture no one knows what the true cost of manufacturing is as it is obscured by subsidies and by financial releases where outsourcing (buying of cells and modules from other sources and rebranding and reporting as internal production) renders the simplistic assessment of price from public statements moot.

Manufacturers outside of China have been forced to operate at like low margins without the benefit of support similar to those enjoyed by manufacturers in China.

All manufacturers and industry participants have benefited in various ways from the larger market available because of the artificially low prices and tight margins.  It may be too late to course correct the margin situation and this makes it extremely difficult for startup manufacturing to thrive outside of China as well as Malaysia, Vietnam and Thailand.

Energy is a tough business filled with tough and often fascinating competitors. From its inception the deployment side of the solar industry has had the same wildcatter soul as oil and natural gas.  The difference between a sun wildcatter and oil/natural gas wildcatters is that the sun is always there to one degree or another. There are places with filtered sun, short periods of sun and some regions where for part of time there is no sun. Nonetheless, the sun does not have to be found or drilled for – its energy can be accessed and in conjunction with storage technologies provide a reliable and non-polluting source of energy as well as true energy independence.

The current trade petition filed by Suniva, joined by SolarWorld and belatedly supported by First Solar has divided the US solar industry into angry for/against camps.  The most significant damage done by the petition may be to industry relationships. Until the US ITC makes its recommendations damage to US module assemblers, installers and developers can only be guessed at and with the final decision up to President Trump, the outcome is a close-to-complete mystery.

All the turmoil in the US would be understandable if the US share of global shipments had been increasing since the last tariffs were imposed. However, the US share of global shipments has been steadily decreasing for two decades.  A better time to intervene with supportive subsidies and incentives for manufacturers would have been in 2001 when the US still had a ~28% share of global shipments.  Nothing was done until the US share of PV shipments was 2% of the global total. In 2017 the US is on track to drop below 1%.

The US Solar Vortex

 During his testimony on October 12 to defend the DoE’s new orders to FERC and from there to ISOs and RTOs (independent system operators and regional system operators) Secretary Perry seemed unclear on some facts including what the acronym RTO stands for and that energy markets are all subsidized and that his new order is yet another subsidy for fossil fuels.  He also indicated that he favors an end to the ITC and the PTC (investment and production tax credits).

In the US the renewable energy community is currently perched on a slippery slope with a president who has stated he does not favor incentives for solar and wind, has rolled back the CPP (Clean Power Plan) via executive order, with the head of the EPA diligently working to undo all regulations and with the DoE pushing to provide incentives to fossil fuels via an order that will encourage the use of coal/natural gas and nuclear by offering preferable pricing and requiring that these sources be purchased.

While most changes affect utility scale and large-scale commercial, state-by-state changes to net metering threaten to slow DG deployment.

Yet, at this crucial moment in US solar industry history when all participants need to stand together they are once again lined up against each other arguing internally over a trade petition that should never have been filed by at least one company that will not benefit from the tariffs, another that had its own reasons for joining the petition and one that jumped on the trade petition train after it had safely pulled into the station.

 

 

There are few original ideas for new technologies, products and/or services.  Most of what is termed new is a mutation of an idea, which itself is a mutation of an idea all the way back to the original discovery or light bulb moment.  Basically, there is not much that is new, or, put another way, that deserves to be called new. For example, every time a company releases a new smart phone design it is releasing an update of an update on top of an update with the original being a marriage between a computer and telephone (the quaint these days landline).

In the solar industry modules with more cells (72+) are not new, shingles and tiles are not new, smart modules are not new.  All are form factor advancements (or not) based on ideas that are decades old and that trace back to the discovery of the photovoltaic effect by physicist Alexander Edmond Becquerel in 1839.

Technologies/products/services rise from the community of ideas all starting somewhere and building on each other.  Everything else is marketing.

Even Everett M Rogers Diffusion of Innovations model, on which many a marketing plan is based, has its roots in the research of Iowa State University sociologists Bryce Ryan and Neal Gross who in 1943 studied the adoption of hybrid seed corn by Iowa farmers.  Marketing managers everywhere owe a debt of thanks to Dr. Ryan and Dr. Gross and everyone owes a debt of thanks to Adam Smith, who owes a debt of thanks to many others.

The adoption curve offers a base for understanding how individuals within a market may – and only may – behave.  The marketplace is a complex arena filled with competing interests and motivations and overrun with noise – announcements, articles that are really marketing instruments and other attempts to grab and influence consumer attention end up confusing the landscape. Think of it as a daycare center with 20 four-year-old children vying for attention and then multiply this by 1000.

In terms of the solar industry, many people do not own their own roof so cannot be an innovator, early adopter, early or late majority or a laggard until a business model or societal change comes along to allow them to participate. The community solar business model has people who do not own their own roof and who are early adopters in their hearts to, well, adopt.

New sells even when it is not new

The solar industry is not really inundated by new ideas and it is overrun with announcements about things that are not particularly new and by hyped trends that are more trope than trend.

Solar is also a highly innovative industry where ideas ebb and flow, and science and engineering articulates, improves, designs and where the community of ideas thrives.

For example, PERC PV cell technology (passivated emitter rear contact) is not a new idea.  PERC was developed two decades ago and is now crawling through its adoption cycle whatever that cycle may be. In terms of PERC, end users and other module buyers are not on its adoption curve – cell and module manufacturers are on the PERC adoption curve and this adoption curve relates more directly to the work of Ryan and Gross at Iowa State University than it does to Rogers’ Diffusion of Innovation model though, they are related. This is because the Diffusion of Innovation model is most relevant to consumers (end users) and the work of Ryan and Gross is most relevant to producers.

Back to Adoption

Consumers of electricity do not fall easily into the Diffusion of Innovation model. This is because solar is a need and consumers (in most cases) rent their electricity from a utility.

Consumers of solar generated electricity also do not fall easily into the Diffusion of Innovation model. Reasons for this are: for the residential model, the end user needs an appropriate roof or adjacent land, needs to own the roof or adjacent land, and there must be no other roadblocks to adoption. For example, a communal roof (condo complexes) is a barrier to adoption.

Affordability is a barrier to adoption.  The residential solar lease ameliorated (to an extent) the affordability barrier but did so only if the homeowner qualified for the lease.  The residential solar lease is also, in general, more expensive long term than system ownership.

The point is that while a person might want to be an innovator or early adopter of a solar PV system, it may not be possible for them to adopt.  That is, someone can be an innovator and an early adopter in his/her heart and at the same time be unable to act on their early-adopter nature.

Into the Fray a Trend Lifecycle Model

Models provide useful guides for entering highly complex markets and rigid adherence to any model will often prove frustrating.  That is … models behave only as well as the inputs to them and users need to be willing to adjust.

Trends – any trend – begin with an idea, either an original idea or a mutation of another idea.  Original ideas are, as previously noted, extremely rare, are unique and should be nurtured and treasured if only for all the mutant ideas the original will spawn.

The following is a Trend Lifecycle Model, useful for anyone looking to enter the complex, confounding, thrilling, sometimes agonizing solar industry.

  1. Idea, original or a mutation of another idea
    1. Someone, somewhere has a notion and takes the time to think the idea through and develop a commercial concept
  2. Pioneering the market
    1. An attempt to find interest (money, sales) is bravely (and this is truly brave) made as the new company ventures into an area that is either completely different or just different enough
  3. Social Media climbing
    1. The idea catches social media interest primarily through smart marketing and often through the unfortunate use of announcements. It is worth noting here that some announcements are just to create awareness and are not really announcing anything
  4. Word of mouth frenzy
    1. Twitter, Instagram, et al catch on and the idea officially begins to trend. This often happens whether or not the idea (now a trend) is actually viable – if nothing else at least some excitement trends
  5. Copycats enter
    1. Rapidly or not so rapidly depending on whether the trend is hardware or software and where it is in its development timeline and how easy it is to copy – copycats enter. At this point Twitter, Instagram, all online magazines and conferences are inundated
  6. Blanketing the market
    1. The market noise level is deafening
    2. At this point much depends on product differentiation and who reaches the market first
    3. Conferences catch on to the trend and shift content to it
  7. Market attention deficit
    1. Too many products/services of the same type are launching announcements also of the same type and hype accelerates
    2. The market is highly confused and its attention wanders
    3. Market boredom sets in
    4. Twitter, Instagram, et all see a decline of interest in the trend
  8. Revenue potholes
    1. Price becomes the tipping point and depending on the product, competitors begin undercutting each other
    2. Margins fall and yet all entrants claim success
  9. Trend fadeout
    1. The market yawns and turns elsewhere
    2. Twitter, Instagram, et al, abandon the trend – more or less, essentially Twitter, Instagram, et al bookmark the trend and will return to it to either announce its return to viability or ask why it was ever a thing at all
  10. Survival of the best funded or most well-thought out or the future direction or most stubborn or all of the above
    1. Products/technologies/services that serve a need and/or push progress forward survive as long as the company has the money to do so

Concerning number ten, the solar PV industry is not necessarily the best funded but its funding never seems to completely dry up, it is a long lived highly technical industry filled with innovations and innovators all building on each other, it is the future direction and it is also most stubborn.  Solar is not a trend and it will survive.

 

 

Every year on August 13 I say goodbye to my brother again. He was killed on this day in 2004 a little after midnight as he rode his Harley on the SoCal freeways. He was on his first vacation following his wife’s death from cancer two years previously. He was coming home from visiting a friend, rode up an incline and around a dark curve right into the back of an abandoned SUV.

It probably took him a few minutes to die. I imagine him lying in the gravel on the side of the road thinking about his daughter, or, maybe not. I imagine him in great pain, but maybe not. The point is that imagining his last moments is all I have left of him – it was suddenly, all I had left of him.

My life is filled with abrupt goodbyes. The call from the county coroner after my mother was murdered; the call from my cousin when my uncle Bob, my father’s identical twin, was killed after driving onto the railroad tracks and the call from my stepmother that my father was in a coma from which he would never wake up.

But the call from my eighteen year old niece on August 13, 2004 at 2AM after she arrived home from her first job at a pizza parlor to find the coroner on her porch was the worst call of them all.

And I expected it. You cannot live a life like mine filled with so many dramatic exits without waiting for the next one.

My brother visited my ex-husband and me at our South Lake Tahoe cabin that year – a little over a month before he died. He was late because he was enjoying the ride on his Harley. When he arrived I yelled at him for being late and worrying me and he replied that I needed to be prepared because he would probably die on a bike. The next day he asked me to make sure my niece was okay if something happened to him. He made me promise.

The week he died he dropped in from Southern California – he’d started out that day on a ride and just kept going all the way to the Bay Area. I yelled at him for not calling first – hey, that’s what sisters do. Then I hugged him and told him that he had to be careful because if he died I would be all alone. He reminded me that I had Sam, his daughter. Then he left.

My brother was my person, my touchstone, half my memory and the only one who shared with me the wasteland of our often violent and disruptive upbringing. Our father beat our mother almost every day and my brother protected her as soon as he could toddle. Our mother was schizophrenic and often off of her meds. The point is, we had each other and only each other and we were connected beyond our DNA. After we grew up there were long periods when we did not speak or were separated by miles and even outlook. These separations did not matter. He was my brother, my other half, my memory, my connection to a childhood that we survived together and that no one else knew the truth of – and I was his.

Every August 13 I remember that his first word was my name – and we were not even living in the same house at the time, our mother was on one of her enforced absences, by which I mean she was committed.

I remember seeing him walking across the parking lot from the hospital window as our father lay in a coma and thinking that now, no matter what, I would be okay.

I remember holding his hand as our father slipped away and he stayed strong as I broke down. I know now that our father’s death and the death of his wife were the two times my niece saw him cry.

My brother joined the Marines when he was eighteen.  I was married at the time to my ex-husband and living in San Jose while he was stationed in Southern California. When he had leave he would bring his friends from boot camp to my house to visit.

I remember waking up and going out to get the newspaper in the morning, in my bathrobe with no makeup and my hair a mess, to find 20 Marines sleeping in our front yard having arrived after midnight and my brother deciding that he didn’t want to wake me up.

I remember my brother calling after his daughter was born – he’d picked out her name years before her birth, because he always wanted to be the father of a daughter.

I remember the last time my niece, my brother and I were together. It was after the 4th of July the year he died. They came to visit and we spent a day driving through the Santa Cruz Mountains, going to the beach, visiting spots from our childhood. My niece and I teased my brother mercilessly and he wore the smile I still see in my dreams, just a soft upturning of one corner of his mouth. It could be a smirk, it could be humor, it could be anything – that smile was always on his face.

And then I got a call.

The last time I heard my brother’s voice was when I canceled his T-Mobile cell phone plan. The T-Mobile employee was kind enough to let me listen to the message again, and again, and again – taking up too much time I am certain – until finally I officially cancelled my brother’s account and lost his voice forever.

Every August 13 I remember and I say goodbye again, and again, and again.

Goodbye Tommy, again.

 

 

Let’s all do the Solar Hokey Pokey as a way to stay sane in the convoluted, often obstreperous US solar market. In June, Nevada followed its relatively good deed concerning net metering with a head-scratcher of a decision when its governor vetoed bills that would have extended its RPS and instituted a state-wide community solar program. Florida, state of few incentives and much potential, just like an underperforming high school senior, stepped up to encourage a market for renewable deployment on commercial buildings.

In 2015 Nevada passed legislation eliminating retail rates for net metered solar PV installations adding fees and making the changes retroactive. In 2016 the legislation was altered to grandfather in systems installed before the 2015 change. In June 2017 Nevada Assembly Bill 405 raised net metering compensation to 95% of retail rates, locked in the new rates for 20 years and included other protections such as protection for system owners/lessees from fees and changes in rate classification simply on the basis of PV system ownership/leasing. Installers are also required to provide a ten year system warranty. Net metering in Nevada will decrease by 7% in 80-MWp tiers until it reaches 75% of retail electricity rates.

And then … on June 16 Arizona Governor Sandoval vetoed two solar related bills extending the State’s RPS and establishing a statewide community solar program calling the moves “premature.” AB206 would have extended the states RPS to 25% by 2025 and 40% by 2030. SB392 would have established a statewide community solar program that offered subscribers utility credits.

Meanwhile, back on planet progress and also on June 16, Florida Governor Rick Scott signed SB90 into law. SB90 allows an amendment passed in 2016 to take effect in 2018. It will make solar and other RE generating technologies installed on commercial buildings exempt from property tax for 20 years, again, beginning in 2018. It will also ensure that 80% of the value of the equipment is exempt from property taxes. In sum this means that property taxes will not increase for investors in renewable technologies installed on commercial buildings. The bill also includes protections for consumers.

Comment: Let’s all do the solar hokey pokey. Legislative progress is always one step forward and one step back for the solar industry and this is true globally, not just for the US.

You put some progress in

You take some progress out

You insert at tariff, minimum price, fee or other restriction

And you shake it all about

You do the solar hokey pokey

And you turn an emerging industry inside out

That’s what it’s all about

Lesson: Repeat the above refrain several times and then trudge on through the convoluted legislative landscape towards progress.

With apologies to Shakespeare, a readjustment of Sonnet 116, stanzas 1 through 8:

Let me not to the marriage of technology and market

Admit impediments. Innovation is not innovation

Which falters when market barriers it finds,

Or bends with conventional energy competition to remove.

O no, it is a dedicated mark

That looks on market misunderstandings and is never shaken;

Research, development and innovation are the stars to every wand’ring fad,

Whose worth’s unappreciated, although its necessity be accepted.

Technology development, that is R&D of new photovoltaic and other solar technologies, is the slow moving driver of the global photovoltaic industry without which there would be no champion cell efficiencies to announce, no government incentives to drive demand, no business models to take advantage of the incentives and no accelerated growth to appreciate.

Without innovation, dedication and a lot (a lot) of money there would be no photovoltaic cell technologies and without market buy-in no matter how achieved there would be no solar industry. In a market teeming with investors, venture capitalists, corporations, scientists, engineers and normal people just trying to understand what it means to them, misunderstandings about the timeline necessary to bring a photovoltaic technology to commercial production has doomed many a technology before it had a chance to innovate.

Crystalline cell technology is an example of a successful technology innovation. The original German Feed in Tariff is an example of a government incentive innovation. The point is that innovations must address something and then change something.

In the solar industry, the timeline from lab scale research through pilot scale production to commercialization is decades. Research and development into SunPower’s crystalline IBC (Interdigitated Back Contact) crystalline cell began in the 1970s at Stanford University. In 1975 research was published on IBC cells. In 1987 Ron Sinton, Sinton Instruments and winner of the 2014 Cherry Award, and the team at Stanford developed a 3 mm x 5 mm IBC cell with 28.3% conversion efficiency; this cell, which could not be soldered and was not stable, was a research step on the long innovative timeline from idea through commercialization.

Manufacturers are currently either announcing plans to add capacity to produce PERC (Passivated Emitter and Rear Cell) crystalline cells and modules or are actively adding capacity. Research into this technology began in the 1980s with the first paper published in 1989.

The point of this history is that technology development is a slow and rigorous process. At the end of this process market acceptance is not assured.

From idea through R&D, pilot scale, commercial production and finally finding a market, it’s about the money before it’s about anything else. Millions of dollars have been poured into the solar industry often without a successful outcome. Money is necessary and the dance to get that money leads directly to the kind of announcements that confuse observers and investors of the solar industry. Announcements have led to an under appreciation of the true innovative nature of commercial solar technologies and of the necessity to continue feeding the research machine that eventually grinds out a technology that has the potential to innovate.

The solar industry is populated by successful innovators and innovations from scientists working decades to develop solar cells, engineers designing modules, governments developing incentives to drive demand and business people creating models that enable adoption – solar in the universal sense, is an example of a successful and hard won innovation. All of this effort should never be taken for granted.

There is nothing new about protectionism just as there is nothing new about aggressive pricing for market share, dumping of overproduction at low prices and the cascade of unintended consequences of government intervention on markets.

A free market is precisely what the word free implies that is, market prices and the choice of goods are set by the interactions of market participants. Under this definition, there are few, if any, free markets in the world.

Governments intervene to subsidize or incentivize production of goods and the acquisition of goods. In the US, farmers sometimes received subsidies not to produce under the assumption that over production would lead to a price collapse. Electricity rates in US states must be approved by state PUCs. Subsidies provide affordable housing for poorer populations. Pick a market and you can find a government incentive, subsidy or a control of some sort.

So, seriously, there are few, if any, free markets.

The global solar industry relies on mandates, subsidies and incentives for its demand. Though it has enjoyed extraordinarily strong growth overtime this growth has come about because of, again, subsidies. Current low prices for PV modules are possible because of China’s support for its PV manufacturers.

The 2012 US resulted in higher prices for small buyers and, frankly, no price change for larger buyers. In sum, for larger buyers the sellers absorbed the tariff. The primary goal of sellers was sales, margin was secondary. Higher margins were gained from smaller sellers who also absorbed the tariff. Exporters were then not truly punished because the goals of the exporter (seller) were not properly understood.

The lesson is that market regulations, incentives, subsidies, mandates and tariffs come with unintended consequences. When tariffs are enacted the primary entity punished via higher prices is the buyer. The price pain felt by buyers is almost always the unintended consequence of the imposition of tariffs.

Just as markets are not entirely free, markets are also not entirely rational or controllable. Tastes change. Competing products rise. Drought and heavy rains affect agriculture. People go on strike. Recessions effect buying ability. Finally, sometimes people make irrational buying choices. Consider the cell phone which went from the size of a person’s arm to the size of a watch face to practically the size of a laptop computer screen and is now migrating back to not just watch face size, but to being an actual watch.

The point is that controlling buying patterns is close to impossible and punishing sellers for low prices typically punishes the buyers and worse … almost never brings back manufacturing jobs.

A good example of the unintended consequence of government intervention is the Smoot-Hawley Tariff Act of 1930. In the 1920s an excess of agricultural production in Europe led to low price imports of produce into the US. Farmers suffered and Herbert Hoover promised that if he were elected president he would help US farmers. (As an aside … if this seems familiar it should.)

Enter Willis Hawley, Congressman, Oregon, and Reed Smoot, Senator, Utah. Smoot-Hawley began as a protection for farmers but after much debate fed by many special interests it was eventually attached to a wide variety of imports (~900). Other countries retaliated with their own tariffs. The US trade deficit ballooned. Smoot-Hawley did not push the world into the Great Depression but it certainly was a card in the Depression playing deck.

In 1934, as part of the New Deal, President Franklin Roosevelt pushed the Reciprocal Trade Agreements Act through and the short reign of protectionism in the US ended … just in time for the beginning of World War II in 1939.

The Solar Point

Immediately following Suniva’s bankruptcy on April 17, rumors of a new trade dispute began and late in April Suniva, a US-based monocrystalline manufacturer over 60% owned by a Chinese company filed its trade dispute asking for a 40-cent/Wp tariff on all solar cells made outside the US. From Suniva’s point of view, the request makes sense as it is one of two crystalline solar cell manufacturers in the US the other being SolarWorld.

Proponents say that it would protect US solar manufacturing but as there is very little US manufacturing and the reasons for its demise are complex, there is little to protect.

Tariff opponents argue that cheaper prices for cells would help module assemblers and cheaper prices for modules would increase solar deployment.

The fact is that larger entities continued to enjoy low prices and will always enjoy lower prices than smaller demand side participants.

The fact is that bringing back US solar manufacturing is close to impossible at this juncture using tariffs. It would require a lot of time (a lot of time), favorable taxes for producers as well as other manufacturing subsidies and most important, a healthy incentive for buyers to purchase modules made in America with crystalline and thin film cells made in America and … even then … the aluminum, the glass, the backsheet – something in the module will come from some other country.

The fact is that the products bought in the US, including the foods we eat, are often produced using components from other countries.

Finally … well-meaning or crowd-pleasing government intervention in the not-so-free-not-so-rational-extremely-complex global market always brings a host of complications with it and always brings a host of unintended consequences. Just ask Mr. Smoot and Mr. Hawley.