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.