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Four Ways California Can Beat Trump’s Solar Tariff

How much damage a 30 percent tariff will inflict depends on who’s talking. The Solar Energy Industries Association says the impact will be devastating. Others speak less pessimistically.




The new tariff will complicate the development of large, industrial “utility-scale” solar plants, a meaningful source of jobs
in a labor-poor industry.

On January 22 President Trump announced that the U.S. would impose a 30 percent tariff on solar technology imported from China and most other countries. The tariff won’t boost domestic solar manufacturing, but it will inflict damage on America’s 374,000-job solar industry, which for the last eight years has thrived on inexpensive imports.

How much damage depends on who’s talking. The Solar Energy Industries Association, or SEIA, says the impact will be devastating. Others say it will only drive the cost of solar installations back to where they were in 2015 ($1.77 to $3.09 per watt, opposed to $1.03 to $2.80 per watt in 2017), when solar installation was doing fine. The Obama administration imposed tariffs on Chinese solar imports specifically in 2012, and on China and Taiwan in 2014. Solar deployment in the U.S. nevertheless doubled between 2014 and 2016.

California state law, which also requires utilities to procure half of their energy from renewable sources by 2030, will also soften the effect of the price hike. Rooftop solar will feel little impact because each system is small enough to absorb a nominal price hike. What the tariff will do, however, is complicate the development of large, industrial “utility-scale” solar plants, a meaningful source of jobs in a labor-poor industry.

“California’s renewable energy mandate has created significant numbers of good, family-sustaining jobs with health care and retirement security,” says Carol Zabin of the University of California, Berkeley’s Center for Labor Research and Education. “It has also provided apprenticeship training and jobs to people of color from some of the poorest regions of our state.”

There are ways to cushion the tariff’s blow, however, ways that are within the powers of local and state governments, or at least can be helped along by local support. Some ideas follow.

Subsidize innovation: Way back in, say, 2009, a rooftop solar array was out of reach for most middle-class homeowners. Large, “utility-scale” plants, built in remote areas to power cities, made little sense for utilities that could buy coal-generated electricity or build new natural gas plants for less. The only way solar was going to make sense was if somebody figured out how to make it more efficient, or cheaper.

The U.S. Energy Department in the Obama administration therefore put its weight behind research. Stimulus funds were made available for grants and guaranteed loans, and the Energy Department’s SunShot Initiative went looking for ways to wring more watts from a photon. There were many auspicious ventures. A California company called Solyndra, for example, had designed cylindrical solar modules that converted more light into electricity using a material called copper indium gallium selenide, or CIGs to convert sunlight to electricity, which proved more efficient than the traditional crystalline silicon.

Solyndra notoriously went bankrupt, defaulting on its loan. At least one of the reasons (there are many), is that the Chinese started rapidly churning out solar panels, with abundant government subsidies. By applying its innovative muscle to manufacturing processes, not advances in technology, China went from producing almost no solar panels in 2001 to, by 2010, producing half the world’s supply. Manufacturers in the U.S. and other countries accused China of flooding the market, but solar prices dropped by as much as 90 percent. That price drop fueled an international energy revolution with ordinary silicon photovoltaic solar cells.

That rapid transition from conventional to renewable energy, still underway, was a boon for the climate. But it wasn’t so good for innovation. Solar still takes up too much space, creating conflicts between environmentalists and conservationists over open space and wildlife. Alternative materials, such as Solyndra’s CIGs and gallium arsenide are still more efficient solar-to-electricity converters than silicon. A team at Stanford University has developed a way to manufacture gallium arsenide more cheaply than ever.

There are indications that federal decision-makers understand the importance of inventing new solar things. The day after the tariff announcement, Energy Secretary Rick Perry announced a $3 million prize for solar innovation, with the intent of reenergizing domestic manufacturing of solar technology.

Build a better battery: Methods of storing solar-generated energy are proliferating, from Tesla’s Powerwall to the molten salt tower at Nevada’s Crescent Dunes concentrating solar thermal plant (it uses mirrors, not photovoltaic cells, to harness the sun’s energy). Right now, California often has so much solar during daylight hours that the system operator sometimes pays other states to take it. Storage means solar could feed a steady stream of electrons into the grid, making it ever more valuable to the people whose job it is to maintain a reliable electricity supply.

Let solar installers off the hook: When a solar developer sells energy to a utility, the two parties agree to a certain price based on the developer’s cost to develop, design, construct and operate the project. Because companies bid these projects to utilities, that price is the lowest feasible cost at one point in time, says Patrick Hodgins of the Renewable Resources Group, a clean-energy developer. “The utility says, ‘We want X quantity of solar, so let us know what you can deliver it for.’ It’s a race to the bottom on procurement.”

Some developers have loaded up on panels in advance of the tariff. But the ones that have not assumed they were getting them at a lower cost than they can buy them for now. The utilities signed those contracts in a pre-tariff environment, “so if someone’s coming to them saying ‘all of my costs have changed,’ the utilities are not likely to give them any concessions, since they planned on paying the price that was bid,” Hodgins says.

Concessions are even less likely since most of California’s utilities are well on their way to surpassing at least near-term state mandates for procuring renewable energy. “If they don’t get relief, many of those projects are going to die,” Hodgins says.

One of the ways to get that relief would be for utilities to waive the penalties they charge to let developers out of contractual obligations. That would enable them to bid their projects to “community choice” aggregators, or CCAs — municipal entities authorized to purchase power on behalf of their communities. CCAs often have specific requirements for carbon emissions that their consumers demand. “They have a need,” Hodgins says. “They’re in the process of figuring out what their loads are going to look like. They’re offering programs to their consumers beyond what’s required by statute.” Some CCAs say they can provide electricity from 100 percent renewable sources — which means they need all the solar they can get.

Partner with China for stateside manufacturing: Because Trump’s tariff steps down by five percent each year for four years and then expires, it won’t automatically spur investment in stateside solar manufacturing. Only specific policies can do that, and the U.S. so far doesn’t have them. But if Trump is serious about ramping up domestic manufacturing of solar panels — and the tariff might work to that effect — he should invest the money in a solar gigafactory, similar to the one Tesla has for batteries.

This idea comes from Jigar Shah, the president and co-founder of an energy company called Generate Capital, but also a well-known thinker on renewable energy matters. Shah writes in Quartz that the tariff will bring in an estimated $1.6 billion every year to America’s coffers. “It would be the incentive the industry needs to refocus on domestic manufacturing instead of taking advantage of cheap overseas panels.”

In a nod to U.S. solar module manufacturers who import the cells for their panels from other countries, the administration has allowed 2.5 gigawatts of solar cells to cross our borders tariff free, which means that assembly in the U.S. is still possible. But factories ought to make the cells, too, and find “world-class plant operators,” Shah writes. And really the only place to find them is China.

Shah isn’t optimistic about Trump’s ability to negotiate a solar factory partnership with China. But if Trump can’t or won’t make a deal, then states, including California, can. Already the Chinese solar manufacturer JinkoSolar is looking for space and tax breaks to build a $54 million headquarters and manufacturing plant in Jacksonville, Florida. California Gov. Jerry Brown has already been clearing a path to climate collaboration with Beijing. California — or at the very least, our low-tax neighbor, Nevada — could be headed for a plant of its own.

Copyright Capital & Main

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