Copyright © 2022 Albuquerque Journal
A torrential tax storm could soon drench the U.S. solar industry, following a federal decision to consider slapping new tariffs on solar-panel imports from some Asian countries.
The U.S. Commerce Department announced March 28 that it’s investigating solar manufacturing operations in Malaysia, Thailand, Vietnam and Cambodia to determine if companies there are circumventing import tariffs by incorporating Chinese equipment and components in their products that would otherwise face U.S. trade restrictions imposed on China. A complaint in February by Auxin Solar Inc., a California company that makes solar modules, triggered the investigation.
According to Auxin, Southeast Asian producers are operating as assembly fronts for China to skirt U.S. tariffs, creating unfair competition for domestic U.S. manufacturers. And, if confirmed by the Commerce Department, it could lead to countervailing duties ranging from 50% to 250% on imported equipment, with potentially retroactive charges dating back to November 2021.
Fallout has begun
New Mexico and national solar industry leaders say that could devastate domestic solar operations at every level, immensely increasing the costs for parts and components across the board.
In fact, the fallout already has begun, with postponement or outright cancellation of many large-scale solar projects everywhere. That’s because developers now can’t determine final project costs for customers until the Commerce Department completes its investigation next year.
Albuquerque-based Affordable Solar, New Mexico’s largest installation company, says it’s facing a potential shutdown in utility-scale projects – which account for up to 70% of company revenue – until the investigation concludes.
“From my perspective, this is probably the single-largest threat to the industry in the 12 years that I’ve been involved,” Affordable CEO Ryan Centerwall told the Journal. “The impact on our utility-scale business operations is dramatic. One hundred percent of those projects are now delayed and a number of them permanently canceled.”
Companies across the nation are facing a similar situation, according to the Solar Energy Industries Association in Washington, D.C. An SEIA survey of 200 solar companies in early April found that 75% of respondents reported that panel deliveries already had been canceled or delayed since the investigation began, and 80% said their current-year solar project pipeline is at risk because of the investigation.
‘Devastating impact’
SEIA President and CEO Abigail Ross Hopper said the Commerce Department based its investigation on the “self-interests of one company.”
“This misstep will have a devastating impact on the U.S. solar market at a time when solar prices are climbing, and project delays and cancellations are adding up,” Ross Hopper said in a statement.
According to energy consultant Wood Mackenzie, if tariffs are imposed, solar installations built annually nationwide could plummet by about 16 gigawatts, or the equivalent of two-thirds of all the solar energy installed in the U.S. last year. Some 70,000 U.S. solar jobs could disappear, Wood Mackenzie said.
The tariffs will only benefit a small number of companies like Auxin, since U.S. production accounts for less than one-fifth of all solar cells and modules used by the domestic solar industry, which relies on inexpensive imports to lower the cost of solar systems.
Most U.S. manufacturers produce parts and equipment, such as racking structures and electrical components, not cells and modules. Those producers would likely be hurt by tariffs as prices for solar cells and modules increase and demand slumps for systems and components.
Hitting NM companies
Albuquerque-based Array Technologies, for example, which makes solar-tracking systems, could soon suffer. That company, which now trades on the Nasdaq Global Market, told investors on an April 5 earnings conference call that it hasn’t yet factored impacts from the trade dispute into its annual financial forecast.
But as large, utility-scale solar projects are postponed or canceled, it could well face declining orders for its trackers, said Ryan Centerwall of Affordable Solar.
“It’s hard to imagine people ordering solar trackers without panels to put them on,” Centerwall said. “This trade dispute unfortunately threatens all areas of the solar industry.”
Albuquerque-based Unirac Inc. – which makes mounting platforms for solar systems at the Springer Industrial Park near Downtown – expects solar-related equipment prices to escalate significantly as developers scramble to find alternative, lower-priced modules produced in countries outside Asia. That will aggravate already-tight supply chains, said Unirac CEO Peter Lorenz.
“Solar companies will raise prices,” Lorenz told the Journal. “None of my customers will be happy about us raising prices more, but it’s hard to avoid with today’s inflation and the supply-chain problems we already face with the pandemic. We just increased our prices two weeks ago.”
‘Uncertainty’ reigns
Uncertainty is the biggest problem now, Lorenz added.
“That will continue for at least 365 days until the Commerce Department investigation concludes,” Lorenz said. “That kind of uncertainty is never good for business.”
Likewise, the New Mexico Solar Group installation firm says it’s facing direct impacts.
“It’s affecting our supply and causing panel prices to increase,” Solar Group President and CEO Nick Kadlec told the Journal. “We recently ordered a new type of panel, and just last week the supplier told us the price is going up by 6 cents a watt, which is roughly a 10% hike. This is a big deal and it’s affecting everyone.”
Sen. Martin Heinrich, D-NM, is working with other U.S. senators to lobby the Commerce Department for a rapid resolution to the trade dispute. Heinrich expects to meet with local solar companies on Tuesday to discuss the situation.
“(It’s) already disrupting New Mexico’s solar industry,” Heinrich told the Journal in an email. “… These proposed tariffs risk harming hundreds of locally-owned companies, jeopardizing tens of thousands of jobs, and stifling billions of dollars in investment in communities in New Mexico and across the country.”
