US solar tariffs
Solar panel prices are expected to remain high in the first half of 2018, but may ease after that.
Prices early in the year are being propped up by demand in China where projects must be completed by June 30 to qualify for the 2017 feed-in tariff rates rather than the new, lower 2018 rates.
The United States started collecting a 30% tariff on imported solar cells and panels on February 7. The rate will drop to 25% on February 7, 2019, to 20% a year later and to 15% a year after that. Up to 2,500 megawatts of solar cells can enter the country duty-free each year on a first-past-Customs basis.
The tariffs are imposed on the importer of record.
The government is required to revisit them after two years.
The last time similar safeguard tariffs were imposed was in 2002 against imported steel. The US removed them two years later after the World Trade Organization authorized other countries to take retaliatory action against US exports. The European Union, China, South Korea, Taiwan and Singapore asked the WTO for compensation in separate filings in late January and early February. The WTO proceedings are expected to take 18 months.
Three Canadian companies filed suit in the US Court of International Trade in early February charging that the tariff violates the North American Free Trade Agreement among the United States, Mexico and Canada.
The Trump administration is expected to publish procedures by February 22 for companies to seek exemptions for particular products from the tariff. In 2002, companies seeking product exemptions had to show that there is no other source of supply for the product in the United States, including other products that can be used as substitutes.
The tariff does not apply to thin-film solar modules. Makers of 72-cell solar modules are expected to seek an exemption. The standard module has 60 cells.
Solar panel imports into the US rose 158% during the period from April, when Suniva first asked for tariffs, through November 2017 as companies rushed to get panels past US Customs ahead of any tariff being imposed.
GTM Research estimates that between 2,000 and 3,000 megawatts of uninstalled modules were in the US at year end 2017, but were already dedicated to projects.
The tariff is not expected to have as great an effect in 2018 as in 2019. New solar construction is expected to fall by 7% in 2018 compared to 16% in 2019 because projects being built early in the year already had secured panels before the tariffs were imposed. It is not clear to what extent the 2019 estimate takes into account the deadline at the end of 2019 for developers to have remaining projects under construction to qualify for an investment tax credit at the full 30% rate.
Modules make up 40% to 45% of system costs.
At least two solar panel manufacturers are looking at setting up manufacturing in the United States using cells imported from Asia. Jinko Solar is expected to choose a location, possibly Jacksonville, Florida, by early March. The company earned a third of its revenue in 2016 in the United States. It signed a contract with an unnamed US customer to supply 1,750 megawatts of panels over three years, which should give it some downside protection were it to open a plant.
Taiwanese panel manufacturer Neo Solar Power said it is also considering opening a plant to make panels in the US.
The United States filed its own complaint in the WTO against India, which it says is discriminating against US products by imposing domestic content requirements in power purchase agreements signed before December 2016. The domestic content requirements are part of a national solar energy initiative. The European Union, Canada and Japan are siding with the US in the dispute.
Meanwhile, the Public Service Co. of Colorado, an electric utility, announced that it will let independent generators who bid into a solicitation in August 2017 for up to 1,800 megawatts, update their bids to take into account the new solar tariff and tax law changes. The company received 430 bids to supply 111,963 megawatts. The median solar bid was $29.50 a megawatt hour for solar without storage and $36 a MWh for solar with storage. The median wind bid was $18.10 a MWh and $21 a MWh for wind with storage.
The refreshed bids are due in late February. The winners will be selected in late April.
Prices for contracted wholesale power from wind farms have hit as low $11 a MWh in some places in the Midwest.