Trump’s solar tariffs are likely to impose a high cost on the U.S. economy in the short term. In the long run, job creation is likely to be minimal since plants are increasingly moving towards automation.
With U.S. President Donald Trump imposing stiff tariffs on solar panels, U.S. renewable energy companies have had to either cancel or freeze investments to the tune of $2.5 billion in large installation projects putting thousands of jobs at risk, said developers.
The amount is more than double the amount of around $1 billion in new spending plans which was announced by firms building or expanding U.S. solar panel factories who would have gained from the advantage of import tax on import of solar panels.
The impact of the tariffs on the solar energy industry show how protectionist trade measures almost invariably end up hurting one or more domestic industries for every one they shield from foreign competition.
Case in point: the stiff tariffs on aluminum and steel have hurt domestic manufacturers of farm equipment who use steel for making grain bins and tractors, who have now been forced to pass on their higher input costs to farmers.
White House officials did not respond to a request for comment.
Trump’s tariffs on the solar industry have raised concerns that it could act as a drag on one of the country’s fastest growing sector.
According to the Solar Energy Industries Association, solar developers have completed utility-scale installations costing $6.8 billion in 2017. The investments of these assets were driven by tax incentives and falling costs of imported panels, which were sourced mostly from China.
The low cost of the solar panels made solar power as competitive as coal or natural gas.
Further, in terms of employment generation, the U.S. solar industry employs more than 250,000 people, 300% more than the coal industry, with 40% involved in installation and 20% in manufacturing, according to the U.S. Energy Information Administration.
“Solar was really on the cusp of being able to completely take off,” said Zoe Hanes, chief executive of Charlotte, North Carolina solar developer Pine Gate Renewables.
As a result of a hike in solar panels, GTM Research, a clean energy research firm, has had to lower its 2019 and 2020 utility-scale solar installation forecasts in the U.S by 20% and 17%, respectively.
Trump’s imposition of 30% tariffs on solar panels, scheduled to last 4 years and set to reduce by 5% year on year for the period, will raise the initial cost of major installations by 10%, as per solar developers.
According to Cypress Creek Renewables LLC, utility-scale developer, it has been forced to freeze or cancel $1.5 billion in projects, located in Colorado, Carolinas and in Texas, due to an increase in tariffs, said the company’s spokesman Jeff McKay.
The amount of $1.5 billion was for around 150 projects, which were at various stages of completion, which would have employed three thousand or more workers during installation, said McKay.
These projects accounted for a fifth of the company’s overall pipeline.
Such cancellations are not an isolated incident. Southern Current, a developer, has also had to resort to similar decisions on projects worth around $1 billion that are mainly located in South Carolina, said Bret Sowers, VP of development and strategy at Southern Current.
“Either you make the decision to default or you bite the bullet and you make less money,” said Sowers.
Cypress Creek and Southern Current did not disclose which projects they intend to cancel or freeze, since such details would help their peers and make it harder for them to pursue them at a later stage when they become financially more viable.
According to developers, the bulk of the solar installations are located in the American heartland where voters supported Trump in the 2016 presidential election; in 2017, these cities posted the strongest growth in installations.
Case in point: three years ago South Bend, Indiana-based Inovateus Solar LLC, had decided to focus on the the Midwest solar market, in cities such as Michigan and Indiana. But he had to change the location to Massachusetts, where the state’s renewable energy incentives make the projects more viable, said chairman T.J. Kanczuzewski.
Many firms saw the tariffs coming and stockpiled solar panels before the imposition of tariffs. 174 Power Global, the development arm of Korea’s Hanwha stockpiled 190 megawatts of solar panels at the end of 2017 for a Texas project that broke ground in January 2018.
Now, the company will have to pay more for the panels for two projects in Nevada which are set to start operating in 2017 and 2018.
Another developer, Intersect Power, is also struggling in its push to complete projects, since the solar tariffs have forced delays in sourcing solar panels, said CEO Sheldon Kimber.
Long term benefits
Although Trump’s tariff have significantly raised the price of solar panels, in time their prices are likely to reduce once domestic manufacturing scales up to meet demand.
Case in point: panel manufacturers, JinkoSolar and First Solar have already announced plans to spend $800 million on projects to boost panel construction in the country, and thus create 700 new jobs in Florida and Ohio. Last week, South Korea’s Hanwha Q CELLS stated it will also open a solar module factory in Georgia in 2019, without giving employment details.
Despite the increase in investments towards domestic manufacturing of solar panels, job creation is likely to be limited since plants are increasingly moving towards automation, said industry experts.
“The factories are highly automated,” said Martin Pochtaruk, president of Heliene, a Canadian company which is in the process of opening its U.S. facility in Minnesota. “You don’t employ too many humans. There are a lot of robots.”