Opinion

The Issue of Solar Tariffs Is Complex; Oversimplifying It Is Dangerous

There has been a spike in calls for President-elect Joe Biden to lift the existing Section 201 tariffs on solar modules by executive order. The narrative implies that jobs, the clean energy transition and fight against climate change are at stake. 

These voices suggest that it is acceptable to risk allowing the failure of domestic solar manufacturing by repealing tariffs that prevent China from flooding the United States with irrationally cheap solar panels produced by state-subsidized companies. They apparently have a plan for domestic manufacturing while overlooking the parallels with Europe, which relinquished its solar manufacturing a decade ago and struggles to wean itself away from its dependence on China’s state-subsidized solar industry. 

The danger with this oversimplified rhetoric is that it ignores, perhaps deliberately, the complexities of safeguard tariffs, free and fair trade, and the importance of domestic innovation and manufacturing. These six questions reflect the nuances.  

Will Biden repeal the tariffs? It’s hard to say, but we must not disregard his understanding of China’s predatory behavior and his plan to take a strategic view. It’s important to remember the Democrats’ history of supporting a level playing field for domestic solar manufacturing. And it isn’t insignificant that Biden and climate czar John Kerry want America to lead clean energy technology, innovation and manufacturing. 

Are tariffs ideal? No. In an ideal world, tariffs wouldn’t be necessary, with every solar manufacturer competing on the merits of its product and innovation. But that would be a world in which China plays by the rules of free and fair trade. A fact that often gets lost in the conversation is that the tariffs directly result from China’s unwillingness to respect the rules

Have tariffs been beneficial? Absolutely. The United States added almost 4 GW of solar manufacturing capacity in the past 18 months, essentially doubling capacity to about 8 GW, equivalent to building approximately 32 coal power plants or eight nuclear reactors each year. My company continues to expand and will have almost 2.5 GW of capacity in Ohio by the end of 2021, with the potential for more, which largely hinges on the Biden administration’s policies. 

Have tariffs slowed solar growth? No, and in fact, the numbers show new records. The Energy Information Administration forecasts that an aggregate of 13.7 GW of utility-scale solar capacity will be added by the end of 2020, a new annual record that is all the more extraordinary because the United States has bucked a pandemic-driven slowdown that has impacted virtually every other solar market worldwide.

Have tariffs taken away jobs? The Solar Jobs Census shows that the number of installation jobs, which account for about half of all U.S. solar jobs, grew from 129,423 in 2017 to 155,157 in 2019, increasing by 18 percent. The 2020 numbers aren’t in yet, but the combined effects of record utility-scale growth and the pandemic’s impact on residential solar will lead to job data that may or may not be consistent with previous growth.  

Have tariffs made solar electricity more expensive? It’s important to note that it is now cheaper to build solar power plants, with fixed electricity costs over the 35-40-year life of a plant, than it is to add any other type of generation in many parts of the United States.

That said, the argument that tariffs make solar electricity more expensive is inherently flawed for three reasons. First, you cannot compare solar panel prices in the United States to a market that allows China to dump cheap products unchallenged. Second, solar panels account for less than 20 percent of the levelized cost of electricity of an average utility-scale solar project, a fairly insignificant number in the broader scheme of things. And finally, you cannot ignore the other variables that play into the price of solar electricity, such as labor, finance, land and permitting. 

What’s more, there needs to be a balance between cost and securing our national interests. Drawing a parallel with federal regulation of foreign investment in the electricity sector, one could argue that removing the Committee on Foreign Investment in the United States would allow access to cheap financing from China, reducing electricity prices. Yet that’s not something we allow because of its security implications. So why should we allow ourselves to become entirely dependent on an adversarial nation for the solar technology that generates that electricity?   

In summary, the issue of safeguard tariffs on cells and panels is substantially more complex than “solar good, tariffs bad.” While solar must play a frontline role in the fight against climate change, it simply cannot come at any cost. And while companies like mine cannot hold China to account, the U.S. government can, and should.   

Mark Widmar is the CEO of First Solar Inc., the only American company among the world’s largest solar manufacturers

 

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