Saving Solar Manufacturing is a Waste of Energy

The future of energy production is upon us. Renewable energy sources, such as wind, hydro, and solar, are playing an ever-increasing role in world energy markets. European grid operators are now routinely incorporating 40-50% renewable electricity into their transmission networks while maintaining grid stability. The UK has recently had its first day without coal power since the start of the Industrial Revolution. Even in Texas, the cradle of American oil production, wind and solar are providing nearly all the required energy for some towns and cities today. Municipalities across America are now making commitments to transition towards 100 percent renewables in the coming decades. 

In light of this remarkable trend towards renewable energy sources, it is unsurprising that the solar industry now supports 260,000 jobs, which translates to a year-on-year percent increase of 43% since 2011. As solar installers have benefited from the lower costs of imported components and passed these savings on to their customers, the industry's job growth has largely been driven by the resulting increasing demand. This is what makes the new tariff on solar panels stunting to continued growth in US solar markets.

Since 2010, the cost to install solar panels has dropped by 70 percent, opening up ever-new markets. Solar markets in states like California, North Carolina, and Arizona are well solidified, benefiting from an already well-entrenched supply chain. It is in states like Wisconsin, which have just begun developing their solar markets, where will we see a stagnation or even a drop in solar investment.

Ultimately, the consumers will foot the bill of this 30 percent tariff, which may be counter productive to efforts to promote adoption of the technology. Specifically, the tariff can delay solar adoption altogether in many of those states and localities that were on the cusp of investing in the energy source. This will have to effect of hurting solar panel installers, with the Solar Energy Industries Association projecting 23,000 job losses this year alone.

Though this protectionist policy, implemented under section 201, will most likely be challenged in the World Trade Organization (WTO), economic consequences could arise nonetheless. Retaliatory tariffs may be enacted by solar panel exporting countries, such as China. In the past, reciprocal tariffs have been directed at industries that US exporters have a competitive advantage in, exposing the country to the possibility of an incipient trade war.

As with any policy, there are winners and losers from the tariff. In this case, the winners are US panel manufacturers, though it's not clear if it will be enough to save the likes of Solar World and Suniva; companies that are, ironically, foreign owned. The scope of losers is much larger, however, as the installers, consumers, renewables, and the environment all suffering from this.

The US is leaving money on the table by paying more for expensive domestic manufacturing of (rather basic) components that could be sourced more cheaply abroad. It is not clear if that panel manufacturing industry has any future in the US unless you uphold the tariffs indefinitely. As it stands, there is a yearly decrease of 5% for the four years of the tariff, effectively limiting the influence of the tariff. In aggregate, the expected payoffs of this policy will, most likely, have a net-negative effect on solar energy markets.