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Solar Tariff Is A Direct Hit To Fastest-Growing Job In U.S.

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On Monday, the Trump administration introduced a tariff on imported solar panels (and washing machines, though they aren’t getting nearly as much attention) that would seem to be a direct hit to the fastest-growing job opportunity in the U.S.: solar PV installer.

Prior to the tariff announcement, the U.S. Bureau of Labor Statistics had the “Solar Photovoltaic Installers” job set to grow 105%, the highest growth rate of all American jobs over the next decade. With this action, the Solar Energy Industries Association estimates that the U.S. solar industry will lose 23,000 American jobs this year alone.

So why institute a tariff that will put downward pressure on these growing middle-class jobs?

¯_(ツ)_/¯

The U.S. installed about 7,000 MW of solar in 2017, the vast majority (about 80%) of which used imported panels. Trump’s order waives the tariff for the first 2,500 MW of panels, and then the tariff kicks in at 30% on any excess. That’s for the first year only; the tariff then steps down 5% over 4 years to 15%, and then goes away. This is also the same time horizon for which the solar Investment Tax Credit (ITC) disappears.

The tariff only applies to the module, which makes up about 20-30% of the total installed cost of a utility-scale solar system and about 12% of a residential system. According to the two charts below from NREL, modules cost about $0.35/W across all PV sectors, so a 30% tariff would increase the cost of all types of installations by about $0.11/W, ceteris paribus, in the first year.

The National Renewable Energy Lab: https://www.nrel.gov/docs/fy17osti/68925.pdf

The National Renewable Energy Lab: https://www.nrel.gov/docs/fy17osti/68925.pdf

The net effect is that a utility-scale project would cost about 10% more than it does today, and a residential system would cost about 6%-7% more.

These tariffs are not as Draconian as originally petitioned for by Suniva and SolarWorld. That said, GTM Research estimates they could reduce the amount of solar installed in the U.S. from 2018-2022 by about 8%, or about 5,000 MW.

The tariff follows changes to the tax code that also could make it harder for solar to obtain necessary financing. While, in my opinion, it is hard to argue against the lower corporate tax rate, tax code changes also might have the effect of reducing the tax equity available for offset by solar tax credits. And the Base Erosion Anti-Abuse Tax or (BEAT) provision, while not as bad as it could have been, could still limit some investors’ appetite for solar tax credits. In fact, some solar projects have been put on hold pending this ruling.

Oddly, the sort of protectionism on display with the imposition of this tariff is atypical of Republican politics, in which such actions are often considered taxes on consumers.

While this is being done under the guise of supporting U.S. manufacturing jobs, four years is too short of a time horizon to develop any meaningful domestic manufacturing.

From a political perspective, the Trump Administration’s decision to levy a tariff on solar modules is interesting in that, while it is true that solar doesn’t support that many long-term jobs, it does create tons of short-term employment. If Trump wanted to take credit for one of the fastest-growing job markets over the next 3 years, he should take action to accelerate solar, rather than applying the brakes.

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