A bankrupt solar manufacturer asked the U.S. government to slap big penalties on imported solar panels, inviting President Trump to make a high-stakes decision that could alter the industry’s fate.
The company, Suniva Inc., is the largest producer of solar cells in the country and declared bankruptcy last week. But instead of going quietly, it has seized the mantle of the domestic solar-manufacturing industry and asked the U.S. International Trade Commission (ITC) to raise a trade wall against the entire world.
Suniva’s posture as a defender of domestic industry against Asian rivals is odd, considering that a Chinese company, Shunfeng International Clean Energy Ltd., took a majority stake in Suniva two years ago.
The move immediately set two elements of the U.S. solar industry against each other — a leading domestic manufacturer that is drowning in a flood of cheap imports versus developers that risk the end of a historic solar boom if those imports become more expensive.
Suniva filed its petition under Section 201 of the Trade Act of 1974, which leaves the final decision in the hands of the president within six months.
This means Trump, who has already made the solar industry uneasy with a rollback of regulations meant to make fossil fuels more affordable, could play a direct role in where the industry heads, and soon.
News of the petition came the same day that reports surfaced that the president is drafting an executive order to renegotiate or withdraw from the North American Free Trade Agreement (NAFTA) — part of Trump’s campaign pledge to erect trade barriers and return factory jobs.
Suniva asked for a blanket of penalties, possibly including against NAFTA partners Mexico and Canada, in order to stamp out what it called a game of "whack-a-mole" against cheap imports originating from Chinese and Taiwanese companies but manufactured in other countries.
The complaint, it said, is a last-resort lifeline for an industry that won’t survive the year. "The fact is the American … cells and modules industry is disintegrating," it said.
Meanwhile, the main solar industry group, the Solar Energy Industries Association (SEIA), stated its opposition.
"We strongly urge the federal government to find a resolution that bolsters the competitiveness of American solar cell and panel manufacturing, which employs approximately 2,000 people in the U.S., without erecting new trade barriers. SEIA opposes any resolution that restricts fairly-traded imports of solar equipment through new tariffs or other barriers that endanger the livelihoods of the 260,000 American solar workers and their families living in every state in the Union," the organization said in a statement.
It is unclear what support Suniva has in its claim among other U.S. solar manufacturers. Two leading players, First Solar Inc. and Tesla Inc., had no comment, while another, SunPower Corp., referred to SEIA’s statement.
The distinction SEIA made — 2,000 solar manufacturing jobs versus 260,000 overall solar jobs — underlines the dilemma facing the solar industry.
Raising trade barriers might save manufacturing while applying the brakes to other parts of the industry that employ far more people, like rooftop-solar installation.
Higher prices for imports could slow the steep increase of solar-panel usage, which is the fastest-growing source of electricity on the grid, and lessen the downward pressure that it’s putting on carbon emissions, which could head off the damaging effects of climate change.
A rare weapon
Section 201 has been invoked only once, in mid-2002 by President George W. Bush to protect the U.S. steel industry, and was lifted 18 months later to avoid $2 billion of retaliatory tariffs by the World Trade Organization.
In March, Section 201 re-emerged in Trump’s Trade Policy Agenda as a measure that "may be appropriate." The administration has mulled tariffs as a means to resuscitate traditional industries, like steel — and now may have an opportunity to use it to influence the fast-growing solar industry.
Suniva petitioned the U.S. government to set a minimum price of 78 cents a watt for photovoltaic (PV) modules and a tariff of 40 cents a watt on cells. (Collections of cells make up modules.) Both would apply only to crystalline silicon PV, which makes up the vast majority of solar installations. The tariff would be eased slightly over three subsequent years.
Proceeds from the tariffs would be given to the industry: 25 percent each to domestic manufacturers of modules and cells, 10 percent to manufacturers further up the supply chain, and 20 percent to a fund that would restart idled U.S. solar plants.
The ITC has a maximum of 150 days to evaluate the complaint and 180 days to recommend action. Then it lies with the president to act as ITC recommends, do something else or do nothing.
Under the rule, Suniva needs to demonstrate that failing to act would mean "serious injury" for the industry. That is a higher bar than "material injury," which was the basis for the last round of solar tariffs in 2012, leveled against China and Taiwan.
Suniva’s recommended penalties would wind back the clock on solar imports, raising the prices of modules to what China offered in 2012, according to GTM Research. The price of a solar system would resemble those of 2015, before solar reached its inflection point and price parity in some areas with electricity generation from natural gas.
‘Massive overhang’
Suniva’s petition, rich in data and prosecutorial in tone, painted a picture of a domestic industry defenseless against imports that have been getting more plentiful and cheaper by the year.
Imports of cells and modules climbed steeply since 2012 and exploded in 2016, the complaint said. This "massive capacity overhang," the complaint said, "prevents a proper functioning of markets and results in imports entering at extremely depressed prices."
Prices of Chinese solar modules fell 38 percent in 2016 alone, according to GTM.
The complaint said that earlier trade punishments — measures taken against China and Taiwan in 2012 — didn’t work in the end because those countries moved production to other countries not targeted under those sanctions, including Vietnam, Thailand and Malaysia.
China imported 7 percent of modules in the first two months of 2017, according to GTM, while imports from other parts of Asia have climbed steeply, including the countries of Southeast Asia (now at 55 percent), along with South Korea (at 21 percent), as of the fourth quarter of last year.
Suniva asked the ITC to investigate Mexico and Canada and impose penalties if they are found to be top five importers.
The 2012 tariffs helped the United States double its domestic solar production, the petition said. But that doubling has been swamped by surging imports, which have tripled since 2012, according to GTM.
Meanwhile, the number of U.S. manufacturers has declined 12 percent annually over the last five years, as has the number of manufacturing workers, which the petition said now stands at just under 4,000.
Since the beginning of 2016, the solar industry’s manufacturers have laid off 900 workers, including at Mission Solar Energy LLC in Texas, First Solar Inc. in Ohio and Panasonic in Oregon and Suniva’s layoffs, according to a GTM report.
Suniva, founded in 2007 by a professor from the Georgia Institute of Technology, laid off 200 employees in March and has been forced into temporary stoppages of its factories in Georgia and Michigan. According to its own data, it produced 44 percent of all U.S. solar cells last year.
