Solar Tariffs Seem Certain To Hurt U.S. Installation Market

Contributors
Written by Christie McCarthy
on June 25, 2014 No Comments
Categories : E-Features

The U.S. solar sector, which has seen its share of ups and downs, is bracing for yet another swell – more tariffs levied on Chinese solar panel manufacturers.

The recent June 3 ruling by the U.S. Department of Commerce was made in an effort to close a loophole in the 2012 tariff ruling, which allowed Chinese solar manufacturers to circumvent the tax by sourcing photovoltaic cells from nearby Taiwan and Korea.

Here is the question on everyone's mind: Will this ruling help or hurt solar business?
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For the last several years, the U.S. solar installation market has largely benefited from low PV panel costs, primarily driven by Chinese suppliers. However, the downside of low-cost panels flooding the market is that U.S.-based solar manufacturers have been forced to choose between selling their panels below cost or losing critical market share by selling at uncompetitive premiums.

So what does this mean for the U.S. solar installation market?

‘Prices for solar systems are inching up,’ says Jaymes Callinan, president of commercial solar installation firm Vista Solar. ‘In the few weeks since the tariffs were announced, we've seen prices from module suppliers increase by about six percent.’

Price increases aren't just limited to Chinese solar panel manufacturers. As the fiercely competitive solar panel manufacturing industry moves to source new tariff-compliant suppliers, those very suppliers are rapidly becoming hot commodities. As in all things, when demand is up and supply is low, prices rise. Tariff-free suppliers are renegotiating long-term contracts, cherry-picking partners and inevitably raising prices to match their scarcity.

‘The real question is not how much the cost of panels will rise, but how availability will be affected,’ Callinan says. ‘None of the manufacturers win if they raise their pricing to the point where our customer's paybacks go above the five-year threshold, which is regarded as the sound investment marker for most chief financial officers. It doesn't matter how much margin is being made on solar panels if no one is buying them.’
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Callinan thinks that the immediate concern for the solar sector is whether there will be enough non-tariff solar modules available in the second half of the year to meet the growing demand of the U.S. market.

Further complicating the situation is a second anti-dumping case that is expected to issue more tariff rulings against Chinese module suppliers in July.

‘While we don't anticipate supply issues in 2015, we've seen a major up-tick in interest from clients who are moving to secure panels this year before the second round of tariffs come down in July,’ Callinan says. ‘The fact is, with federal tax credits set to expire in 2016, state rebates disappearing daily and these trade cases increasing the cost of modules, it will be awhile before an investment in solar looks this good again.’

While the tariff rulings and resulting price increases and availability issues appear to be a setback to the industry, if there's anything that the U.S. solar sector has proven over the last decade, it's that it can weather a storm. From rebate drops to fluctuating tax incentives and net-metering battles with the utilities, the solar sector has demonstrated that it's able to weather these storms.

Christie McCarthy is director of marketing for Vista Solar, a developer and installer of commercial PV systems in Santa Clara, Calif. She can be reached by email at christie@vista-solar.com.

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