"We'll be making solar products now much more so in the United States. Our companies have been decimated, and those companies are going to be coming back strong. . . . A lot of workers; a lot of jobs."- President Donald Trump, discussing a new tariff on solar-cell imports in remarks at the White House, Jan. 23, 2018
Trump says a tariff on solar-energy cells and panels will create jobs and revive a U.S. manufacturing sector that has been decimated by imports.
The tariff sparked controversy in the solar industry after Trump imposed it Jan. 23. A couple of remaining U.S. solar-cell manufacturers say it will help them get back on their feet. But the developers that install solar panels and farms - a much larger segment of the industry - say it will hike their costs, kill projects and make it harder to compete with wind and natural gas.
Fueled by low prices and innovations in imported solar cells, the U.S. solar market began to grow at a breakneck pace starting in 2010.
But the tariff is bound to change the dynamics. Will it add "a lot of jobs," as Trump says?
Relying on a little-used section of trade law that lets him "safeguard" U.S. products being hammered by imports, Trump imposed a tariff on solar cells and modules that starts at 30 percent in 2018. The tariff then drops to 25 percent in 2019; 20 percent in 2020; and 15 percent in its final year, 2021. The first 2.5 gigawatts of imported solar cells are exempt from the tariff each year.
The bipartisan U.S. International Trade Commission in September ruled 4 to 0 that imports were causing substantial harm to the American solar cell manufacturing industry. More than 95 percent of the solar panels in the United States are imported, with nearly half coming from just two countries: Malaysia and South Korea.
The tariff rates were set by the Trump administration, not the ITC, and announced by U.S. Trade Representative Robert E. Lighthizer on Jan. 23, along with another tariff on washing machines.
According to the National Solar Jobs Census, a yearly study conducted by the nonprofit Solar Foundation, there were 260,077 industry jobs as of November 2016, a 24.5 percent increase from November 2015. Since 2010, solar industry employment has grown by 178 percent, the group said.
"This 2016 growth has been driven primarily by a massive increase in solar energy installations," the census report says.
Unlike U.S. solar-cell manufacturers - which have struggled to stay afloat - the developers who install solar panels for homes, businesses, municipalities and utilities have been reaping the benefits of a steep, years-long decline in prices for solar cells imported from low-wage countries. These developers say that in a competitive U.S. energy market, the lower price and higher quality of imported solar cells give them an edge against wind and natural gas suppliers.
As a result, the installation and maintenance side of the solar industry has grown by leaps and bounds since 2010, along with businesses that manufacture supporting products, such as the steel racks used to mount solar panels. Those sectors account for the majority of the 260,000 solar jobs. Meanwhile, on the other side of the industry, 30 U.S. solar-cell manufacturers have closed since 2012, laying off hundreds of workers, and the remaining two companies have filed for bankruptcy.
Thomas H. Werner, chief executive of SunPower, testified before the ITC that a tariff would hurt the economy and jeopardize the jobs of more than 10,000 direct and indirect SunPower workers. The company is the second-largest solar energy provider in the United States.
"I can say without hesitation that customers are embracing solar power because of its cost effectiveness and long-term price certainty," Werner said. "Tariffs would adversely impact the U.S. economy, burden domestic manufacturers and suppliers of other key components, raise prices for customers, and eliminate tens of thousands of jobs."
The Solar Energy Industries Association, a national trade group, also opposed a tariff in ITC testimony and estimated that 23,000 jobs would be lost in 2018 because of Trump's move.
The thinking goes like this: Because the tariff will raise the cost of importing solar cells, and few if any U.S. cell-makers can meet the manufacturing volume or technical specs for large-scale projects, solar developers will not be as competitive - and in many cases buyers will choose another energy source. Every lost project means many fewer jobs, since solar panel arrays are fragile and complex and require many different kinds of workers to install.
Independent analysts at GTM Research estimated that Trump's tariff would cause an 11 percent decline in the amount of solar power capacity expected to be installed in the United States over five years, from 2018 to 2022. GTM analysts say the tariff will slow but not stop the growth in the solar industry.
Camron Barati, an analyst at IHS Markit, another research firm, said the decline would be 9 percent to 10 percent over the tariff's four-year lifespan - a drop from 62 gigawatts in new solar capacity to 56 gigawatts from 2018 to 2021.
"Any increase in price in the future will negatively impact how much solar is installed in the United States, as well as the companies and people that rely on access to competitively priced solar equipment for their livelihood," Amy Grace, an analyst at Bloomberg New Energy Finance, testified before the ITC.
Here's how the Solar Energy Industries Association arrived at its 23,000 figure for net job losses in 2018.
The trade group said it took a previous study by IHS Markit on the potential effect of several different tariff rates and adjusted its figures to reflect Trump's final numbers. The National Renewable Energy Lab has developed a model for estimating how many jobs would be needed for solar installation projects. The Solar Energy Industries Association ran its numbers through that model to estimate how many jobs would be needed in total after accounting for the lower number of solar installations.
The result was a net loss of 23,000 jobs in 2018. Tens of thousands more jobs would be forfeited over the remaining years of the tariff, the group says.
"For a utility-scale plant, you know that there's a certain amount of construction workers, engineers, salespeople, utility coordinators," said Dan Whitten, SEIA's vice president of communications. "You say, 'Okay, so how many utility-scale projects do we have? We have 10 gigawatts.' You take the number of gigawatts you have and throw it into the . . . model, and that gives you the total number of employees."
Barati, the IHS Markit analyst, said that was a fair way to estimate employment gains or losses stemming from the tariff.
With that in mind, our next question was whether the tariff could start a boom in solar-cell manufacturing. After all, that's the part of the industry Trump is trying to help. And if his plan works, that could offset the losses on the installation and maintenance side of the industry.
We asked for an estimate of the solar-cell manufacturing jobs that might be created because of the tariff, but neither the White House nor the Office of the U.S. Trade Representative gave us one. Administration officials said the tariff hits three targets: It creates an environment for more investments in solar-cell manufacturing; it allows developers to keep growing by exempting the first 2.5 gigawatts of imported solar cells each year; and it encourages solar-cell manufacturers to start making panels, too.
A spokesman for SolarWorld, one of two manufacturers that requested protection from imports at the International Trade Commission, said that after the ITC decided in its favor in September, the company began to hire what will be 200 U.S.-based workers by the end of 2018. Weeks before the tariff was announced, an unidentified foreign company reportedly reached out to city officials in Jacksonville, Florida, with plans to build a solar-module assembly plant that would employ 800 to 1,000 workers.
A representative for Suniva, the company that initiated the ITC case, did not respond to a request for comment.
Adding up what we know so far, 1,000 to 1,200 solar-cell manufacturing jobs might be created, while industry experts warn that tens of thousands of jobs will be lost.
For what it's worth, the SEIA says that, by factoring in both employment gains and losses from Trump's tariff, manufacturing jobs overall in the solar industry would decline by 800 in 2018. That's part of their analysis estimating a 23,000 net job loss in 2018.
"There were 38,000 jobs in solar manufacturing in the U.S. at the end of 2016, and all but 2,000 made something other than cells and panels, the subject of this case," the group said. "Those 36,000 Americans manufactured metal racking systems, high-tech inverters, machines that improved solar panel output by tracking the sun and other electrical products."
It's important to note that even with the tariffs, analysts say low-wage countries such as China, Malaysia and South Korea are likely to keep dominating the global market for solar-cell manufacturing. Several U.S. developers for large-scale solar projects testified before the ITC that in their experience, Suniva and SolarWorld did not meet volume demand, delivery targets or product specifications.
There's one more question: Who really wins with the tariff?
Some experts warn that countries hit hard by the tariff could retaliate with their own measures against U.S. imports, sparking a trade war.
Although both have U.S. operations, Suniva is Chinese-owned and SolarWorld is a German company. Bloomberg News reported that the biggest winners from the tariff could be "a group of investment houses around the globe": Centerbridge Partners, JPMorgan Chase, SQN Capital Management, Marathon Asset Management and Bank of America's Merrill Lynch International. They are all creditors of Suniva or SolarWorld and stand to benefit if either company is sold or liquidated or if the United States manages to settle several global trade disputes in their favor.
The Pinocchio Test
The president has a pattern of focusing on one side of an equation while ignoring the net result. For example, when talking about trade, he frequently highlights trade deficits in goods with countries, while ignoring trade surpluses in services that mitigate, or even eliminate, the overall trade deficit with individual nations.
In this case, Trump says U.S.-based manufacturers will add "a lot of jobs" because of a tariff he imposed on imported solar cells and modules. The homegrown industry for these products has been decimated by competitors in low-wage countries over the past decade, but there's no anecdotal evidence or research that indicates Trump's tariff will bring about an American renewal.
Instead, independent analysts, solar industry leaders and the industry's national trade association say the tariff will price solar installation companies out of the game in places where their projects could be competing with wind or natural gas. The Solar Energy Industries Association estimated that 23,000 net jobs would be lost in the first year of Trump's tariff, and tens of thousands more in the following three years before it expires.
We will be interested to see the tariff's ultimate effect on the U.S. economy. But for now, a weighing of the evidence on both sides of this debate shows that Trump paints a partial picture. Some manufacturing jobs could be created by the tariff, but many more jobs could be wiped out in the fastest-growing sector of the solar industry. For this, we give the president Three Pinocchios.