A 30% tariff on certain imported solar products will slow the growing solar energy sector but it won’t halt or compromise the economic viability of large solar field projects like the one set to open Wednesday (Jan. 24) in Clarksville, said Bill Halter, CEO of Scenic Hill Solar and former Arkansas Lt. Governor.
President Donald Trump on Tuesday (Jan. 23) signed an order approving a 30% tariff on imported solar modules. The order was part of “Section 201 Actions” allowed under federal law to protect industries from the illegal dumping of foreign made products.
“Based on the recommendation of the independent, bipartisan U.S. International Trade Commission, I am taking action to impose safeguard tariffs on imported residential washing machines and all solar products,” President Trump said prior to signing the order. “My administration is committed to defending American companies, and they’ve been very badly hurt from harmful import surges that threaten the livelihood of their workers, of jobs, actually, all over this country — many different industries.”
The tariff is set to phase out in four years. The process leading to the order began as part of an April 2017 bankruptcy filing by Atlanta-based Suniva in which it asked federal trade officials to institute a tariff to protect U.S. manufacturers from a flood of solar modules made in Asia.
The Solar Energy Industry Association had lobbied against the tariff, saying it could result in the loss of 23,000 jobs in the industry.
“While tariffs in this case will not create adequate cell or module manufacturing to meet U.S. demand, or keep foreign-owned Suniva and SolarWorld afloat, they will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs,” SEIA President and CEO Abigail Ross Hopper said in a statement after Trump signed the order.
The SEIA reports that 260,000 are employed in the solar energy industry, or about five times more than employed in the coal industry.
Small-scale solar capacity was 16 gigawatts at the end of 2017, according to the U.S. Energy Information Administration. A gigawatt provides enough power for about 700,000 homes. The EIA estimated – prior to the tariff – the small-scale capacity would rise to 19 GW at the end of 2018 and 23 GW at the end of 2019.
Large-scale solar capacity totaled 27 GW at the end of 2017 and is estimated to reach 30 GW by the end of 2018. Forecast large-scale solar generation averages 1.5% of total U.S. electricity generation in 2018. By the end of 2019, large-scale solar capacity is forecast to be 42 GW. In 2019 the average generation share is expected to be 1.7% of total generation.
STILL A ‘HIGH-RETURN INVESTMENT’
Halter told Talk Business & Politics the tariff will hurt the industry, but large-scale projects like the one set to open in Clarksville will remain economically viable.
Clarksville Light & Water Co. (CLW) signed a contract in July 2017 with Scenic Hill Solar to build and operate the plant. Contract terms require Scenic Hill to maintain the facility and sell the energy to CLW for 28 years. The contract also allows CLW to buy the solar plant in eight years.
According to Scenic Hill, the power plant will:
• Produce more than 11 million kWh of electricity in the first year of operation and produce over 305,000,000 kWh of electricity over the 30-year contract;
• Produce enough clean electricity to meet more than 25% of Clarksville’s residential electricity consumption;
• Occupy more than 40 acres bordered by Main Street and Clark Road and be visible from Interstate 40; and
• Reduce carbon emissions by more than 215,000 metric tons which is the equivalent of driving more than 516 million fewer passenger car miles.
Halter acknowledged “the Chinese were absolutely unfairly competing in the market” by dumping product at prices below the cost to produce. He even suggested some form of trade action should have been taken earlier to allow more U.S. companies to survive.
He said in the near term there will be “a significant number of projects that will no longer be viable” because solar modules are a big part of the cost. Large utility-backed projects could be at risk in the near term because of the rise in solar module costs, Halter said. Larger dedicated projects that are well capitalized and are connected to a municipality or sizeable industrial or commercial customers may see reduced margins, but they will make economic sense.
“It’s still the case that this is a very good, high-return investment,” Halter said, who later added that “the price of the underlying technology will continue to go down, that’s just what it does.”
‘MOVES US BACK TWO YEARS’
Douglas Hutchings, CEO of Fayetteville-based Picasolar, opposed the tariff but does not believe it will be a long-term deterrent to solar energy development. Picasolar has developed several solar cell advancements, including the hydrogen super emitter that could improve solar panel efficiency by 15% and reduce manufacturing costs by 25%.
The company is working closely with some of the largest solar panel manufacturers and solar equipment manufacturers in the U.S. and world. Picasolar also is working on a plan for a solar module assembly plant in Arkansas.
“I do not think this decision changes that conversation meaningfully,” Hutchings told Talk Business & Politics about the module assembly effort.
Like Halter, Hutchings said the tariff will delay or end some projects, but technology advancements and reduced costs associated with innovation will eventually overcome the short-term higher costs created by the tariff.
“The tariff basically moves us back two years but other costs have continued to drop. It (the tariff) is not enough to spur much in the way of domestic manufacturing but we may see more module assembly in the U.S.,” Hutchings said.
ARKANSAS SOLAR PROJECTS
In addition to the Clarksville facility, several solar field developments have been announced or opened in Arkansas in recent years. Following are a few examples.
• Entergy Arkansas said in late 2017 it planned to build the Chicot Solar project, a planned 100 megawatt (MW) solar photovoltaic project near Lake Village. If approved and when completed, it will be the largest sun-powered development in Arkansas.
• Entergy announced in May 2017 plans to build a 475-acre solar plant near Stuttgart that will feature more than 350,000 photovoltaic solar panels that convert the sun’s energy into electricity. The solar energy center will have a capacity to generate 81 megawatts of electricity, or enough to power more than 13,000 homes.
• Scenic Hill and L’Oréal USA open in April 2017 a solar facility that will help power the North Little Rock manufacturing plant. The 3,528 solar panels were installed earlier this year and will provide 1.2 MW of renewable energy to the factory that is expected to reduce carbon emissions by 556 metric tons per year.
• Ouachita Electric Cooperative of Camden announced in February 2017 partnership with Today’s Power to build a 1-megawatt solar facility on 10 acres in Holly Springs, Ark. Today’s Power, a subsidiary of Little Rock-based Arkansas Electric Cooperatives, distributes and installs TKS photovoltaic systems.
Paul Gatling, editor of the Northwest Arkansas Business Journal, contributed to this report.