Sharp drop in 2017 solar module prices imperiled by Suniva trade case ruling

Energize Weekly, September 27, 2017

Driven by falling solar module prices, the cost of utility-scale photovoltaic installations have dropped 30 percent this year, but a federal trade ruling issued Sept. 22 could jack those prices up again.

The quarterly solar benchmark study by the federal National Renewable Energy Laboratory (NREL) found the cost of utility-scale photovoltaic (PV) solar arrays declined sharply in 2017, as solar module prices fell to a spot market price of 35 cents a watt.

The decline in module prices came in part from improvements in the manufacture of cells and in part, from weak global demand and high inventories in the second half of 2016.

The NREL study said a 6 percent appreciation of the U.S. dollar to the Chinese Yuan between the beginning of 2016 and the start of 2017 also contributed to the lower price.

The average cost of a fixed-tilt PV system installed fell to $1.03 a watt and a system with tracking to $1.11 a watt. Residential- and commercial-scale solar system prices lagged behind with a 6 percent and 15 percent price reductions, respectively.

A ruling by the International Trade Commission (ITC) on Sept. 22, however, may reverse the price declines. The ITC found that imported solar modules have adversely impacted domestic manufactures and set the stage for possible import tariffs.

The commission said silicon PV cells “are being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the domestic industry producing an article like or directly competitive with the imported article.”

Suniva Inc., a Norcross, Ga.-based solar panel maker, filed the complaint with the ITC after it filed for bankruptcy in April. It was joined by Oregon-based SolarWorld. The company is a subsidiary of the German solar cell manufacturer SolarWorld AG, which filed for bankruptcy in Germany in May.

The companies are seeking a 40-cent-a-watt tariff and a floor price of 78 cents a watt for all imported solar modules.

“We brought this action because the U.S. solar manufacturing industry finds itself at the precipice of extinction at the hands of foreign market overcapacity,” Suniva said in a statement. “The ITC has agreed, and now it will be in President Trump’s hands to decide whether America will have this capability to manufacture this energy source.”

The ITC is scheduled to make a recommendation to President Donald Trump by Nov. 13.

Suniva filed its complaint under a little-used article of the trade law, Section 201, that does not require proof of dumping—which is selling below cost—or violating trade rules, but rather just that imports are hurting U.S. manufacturers. The law gives the president the power to unilaterally impose broad tariffs—and not against just one trading partner, against global production.

In 2011, SolarWorld brought a dumping case against China and won tariffs against Chinese imports. Manufacturing shifted to other Asian countries, according to Ben Gallagher, a solar analyst with GTM Research, a cleantech marketing and consulting firm. “The duties didn’t give SolarWorld the result they wanted,” he said.

Three-quarters of U.S. solar cell imports now come from Malaysia, South Korea, Thailand and Vietnam, according to the ITC.

The Suniva-SolarWorld petition was broadly opposed by the solar industry with 27 solar equipment manufacturers filing requests for the ITC to throw out the case. Sixteen senators and 53 members of the U.S. House of Representatives also sent a letter to the commission asking it to reject the petition.

Nevertheless, the commission voted 4-0 in the two bankrupt solar panel makers’ favor.

For the moment, the ITC ruling has created uncertainty and dueling scenarios about what a tariff or floor price would do the U.S. solar industry.

The Solar Energy Industries Association (SEIA), an industry trade group that opposed the Suniva petition, has estimated that tariffs on the scale proposed would lead to the loss of 88,000 jobs, about a third of all the jobs in the sector.

“An improper remedy will devastate the burgeoning American solar economy and ultimately harm America’s manufacturers and 36,000 people currently engaged in solar manufacturing that don’t make cells and panels,” Abigail Ross Hopper, SEIA’s CEO and president, said in a statement.

Suniva and SolarWorld countered with their own economic analysis, done by the law firm Mayer Brown, that projected tariff protection would lead to a net increase of at least 114,800 jobs across all segments of the domestic solar industry. The analysis used data from the U.S. Department of Commerce and GTM Research.

GTM Research, however, forecast that a 40-cent tariff plus a 78-cent floor price would buck module prices back to 2012 levels and lead to more than a 50 percent drop in new solar installations, to just 25 gigawatts, between 2018 and 2022.

At $1.18 cents a watt, the cost of a module would be more than the total installed cost in 2017 for a utility-scale system based on the NREL data.

Suniva and SolarWorld challenged the GTM analysis saying that they were not asking for a tariff on top of the floor price.

Even at 78 cents a watt, GTM Research projects a decline in solar-installed capacity between 2018 and 2022 to 36.4 gigawatts. Utility-scale solar is most threatened, according to the analysis.

The NREL quarterly benchmark study said that while the spot market price of silicon solar modules was 35 cents in March 2017, the all-in cost to developers of utility-scale projects was closer to 65 cents.

A secondary consequence of raising the cost of modules could be an increase in the federal tax breaks for solar installations. Solar arrays are eligible for a 30 percent investment tax credit. The more costly the project, the bigger the tax credit.

If the forecast for solar installations for 2018 were to hold steady at 10.3 gigawatts that would mean solar developers would get an additional $1.22 billion in tax credit, Jeffrey Osborne, an analyst with Cowen & Co., told Bloomberg News.

In still another wrinkle, the ITC cited the countries from which imports are harming the domestic market, including Mexico and South Korea, and countries from which imports were not hurting the market. Among those are Australia and Singapore.

“Singapore has ~850 MW of cell manufacturing capacity owned by REC solar,” Shayle Kann, head of research for GTM Research, wrote on Twitter. “A bunch of other countries also excluded. Australia, Jordan, Colombia, Peru, Panama and five in Central America. These countries also don’t have much cell manufacturing today. But some may be more attractive than the U.S. for foreign suppliers. So if you thought the Section 201 would cause a big boom in U.S. solar manufacturing, today’s ruling didn’t actually help your case much.”

The ITC will hold a hearing on remedies on Oct. 3.

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