The International Trade Commission Unanimously Finds Severe Injury to U.S. Solar Manufacturers

The threat of U.S. solar tariffs is looming on the global solar industry, and President Trump will decide whether to impose these tariffs by January 2018 at the latest. The case started when Suniva filed a petition with the International Trade Commission (ITC) in April, requesting duties of 40 cents per watt on imported cells and a floor price of 78 cents per watt on modules. Suniva filed Chapter 11 bankruptcy in early 2017, and blamed China for flooding the U.S. market with below cost modules. Suniva then filed a section 201 petition under the 1974 Trade Act, and SolarWorld joined as a co-petitioner in the case.

On September 22, The ITC voted 4-0 to find cause for severe injury to Suniva and SolarWorld. The ITC will hold another hearing on October 3 to decide on a remedy; the ITC will make the recommendation by November 13, and President Trump will have 60 days to act.[1] Under the 1974 Trade Act, the president is allowed to implement tariffs, minimum prices, or quotas on solar products anywhere in the world if he decides it is necessary.[2]

U.S. Solar companies have long been complaining that Chinese companies use government subsidies and illegal dumping to increase their market share. In 2012, the United States government imposed an average of 40 percent duties on Chinese solar companies. In 2014, it imposed about 20 percent duties on solar manufacturers in Taiwan.[3] Suniva’s petition stated that these tariffs are not working because Chinese and Taiwanese manufacturers are just moving their production to other countries instead. In order to solve this problem, the petition asked the government to establish a minimum price on panels produced anywhere outside of the United States. Suniva’s petition requests a minimum price of 78 cents, which is more than double the average of 35 cents a watt that was in effect before a recent price run-up.[4]

The United States invented photovoltaic technology and held over a quarter of the global market share in 2001; however, its market share is now less than 2 percent.[5] About 95 percent of cells and panels sold domestically in 2016 were produced abroad, and most of these came from China and other Asian countries.[6] However, these low-cost cells and panels from Asia have driven down costs by 70 percent, allowing more Americans the opportunity to use solar energy.[7] Last year, solar installations in the United States hit a record high. Jobs are also increasing, as the industry in the U.S. now includes over 260,000 people, and most people employed by the industry install residential solar panels and build utility-scale solar plants.[8]

The case has already had an impact on this previously booming American solar industry. Solar module manufacturers have been increasing shipments of supplies like glass, aluminum, and wafers to the U.S. before mid-November. Manufacturers are increasing supplies now because, if a tariff is imposed, shipments that arrive after the decision will be penalized. However, because of this increase of shipments in the middle of the year, a shortage of supplies has already started.[9] This panic buying has also caused an increase in spot prices of solar panels up to 20 percent because installers are also trying to stock pile supplies before the tariff decision is made.[10]

Additionally, funding for large U.S. solar deals decreased to $1.4 billion in the second quarter, compared to $3.2 billion in the first quarter of the year.[11] According to research from Mercom Capital Group, this is primarily because of concerns about the trade case.[12] U.S. energy customers have also decided to delay potential solar projects in light of increasing prices and potential tariffs. If Suniva’s requested duties are imposed, two-thirds of installations expected to happen over the next five years could be erased.[13] The most at risk part of the industry is utility-scale solar. GTM Research found that the requested penalties could cause the U.S. to lose more than 47 gigawatts of solar installations; for comparison, that is more than what the U.S. market has installed to date.[14]

Another potential effect of the requested tariffs is retaliation by China. The Chinese government responded to the 2012 duties by imposing tariffs on U.S.-made polysilicon, which is a raw material used in solar cells.[15]

Although Trump himself has not commented on the solar trade case, President Trump did campaign on a promise to protect steelmakers by penalizing unfair imports. Even before the ITC voted to find severe injury, John Gurley, a trade lawyer and partner at Arent Fox LLP, said the chance of President Trump imposing tariffs was over 50 percent.[16] After the ITC vote, the White House issued a statement saying that Trump would make a decision that “reflects the best interest of the United States” and that “solar manufacturing sector contributes to our energy security and economic prosperity.”[17]

President Trump will have to decide between keeping Asian solar manufacturers from flooding the U.S. market with underpriced goods, and effectively raising prices in the U.S. solar industry, turning away investors and consumers who will no longer be able to afford the technology. The next few months could bring a huge change to the U.S. solar industry, and at this point, all we can do is wait.

 

[1] Lacey Johnson & Julia Pyper, Solar Tariff Case Advances as ITC Finds ‘Injury’, GreenTech Media (Sept. 22, 2017), https://www.greentechmedia.com/articles/read/solar-trade-case-advances-as-itc-finds-injury#gs.g6a7fxI.

[2] Stephen Lacey, A Guide to the Latest Solar Trade Dispute: How Suniva’s Petition Could Impact the US Solar Industry, GreenTech Media (Apr. 26, 2017), https://www.greentechmedia.com/articles/read/a-guide-to-the-latest-solar-trade-case#gs.IybEGUQ.

[3] Nichola Groom, Prospect of Trump tariff casts pall over U.S. solar industry, Reuters (July 25, 2017), https://www.reuters.com/article/us-usa-trade-solar-insight/prospect-of-trump-tariff-casts-pall-over-u-s-solar-industry-idUSKBN1AA0BI.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Barry Cinnamon, The Threat of Tariffs Is Already Reshaping the US Solar Market, GreenTech Media (Aug. 18, 2017), https://www.greentechmedia.com/articles/read/the-threat-of-us-tariffs-is-already-impacting-the-solar-market#gs.ouJflaU.

[10] Groom, supra note 3.

[11] Id.

[12] Id.

[13] Cory Honeyman, Suniva and SolarWorld Trade Dispute Could Halt Two-Thirds of US Solar Installations Through 2022, GreenTech Media (June 26, 2017), https://www.greentechmedia.com/articles/read/suniva-dispute-could-halt-two-thirds-of-us-solar-installations#gs.cN16Ka0.

[14] Id.

[15] Groom, supra note 3.

[16] Lacey, supra note 2.

[17] Eric Wolff, Trade decision could devastate U.S. solar market, Politico (Sept. 22, 2017), http://www.politico.com/story/2017/09/22/solar-tariff-trump-china-trade-243021.

Ashley O'Brien is a second year law student at The University of Texas School of Law. She graduated from Baylor University in 2013. She will be working in Austin this summer, splitting her time between Andrews Kurth and Pillsbury Winthrop Shaw Pittman.