ITC hearing coverage part 2: Don’t harm the U.S. market to save a few companies

There aren’t many surprises in the testimony against the trade remedies being discussed today. The core talking points by SEIA and its allies, which span the U.S. solar and power landscape, are essentially unchanged: that imposing significant tariffs, minimum prices and import restrictions on U.S. solar will significantly damage the market, as well as other U.S. solar manufacturing sectors.

The core of this argument is also unchanged from the injury hearing: that any trade remedies that increase prices will decrease solar deployment, in term causing a much larger number of layoffs than any jobs saved or created in U.S. manufacturing.

This point was made quite forcefully by Craig Cornelius of NRG Energy, who noted that the deployment of a single 100 MW solar project requires employing around 200 construction workers – the maximum amount of SolarWorld’s new hires by next May. Given that NRG has around 20 of such projects underway, the number of construction workers to be affected here is much greater.

George Hershman, the Senior VP and General Manager of Swinerton Renewable Energy, has warned that the cancellation of the projects that he currently has underway will see the loss of over 1200 jobs.

Big time opposition

The companies that Hershman and Cornelius represent are major players, but these are far from the biggest names that are organized against the tariff proposals by Suniva and SolarWorld. Among those testifying against the remedies was none other than NextEra Energy, the largest owner of wind and solar projects in the United States.

DuPont also weighed against the case, as did Sunrun, Sunpower, 8minuteenergy, and other big names from the solar industry, supported by the research firm that produces the definitive data on quarterly U.S. solar deployment: GTM Research.

Both NextEra, Sunrun and GTM Research made the salient point that most demand is now being driven by cost-competitiveness of solar, and that the marginal cost of solar is a critical factor, meaning that even a slight increase in cost could dramatically shrink the solar market.

Manufacturers against tariffs

But just as the shuttering of U.S. cell and module factories is an uncomfortable fact for the opposition, it is uncomfortable for the petitioners that much of the actual manufacturing in the U.S. solar value chain is opposed to the trade remedies that they have proposed.

This includes the racking, tracking and mounting systems segment, which was represented today by PanelClaw CEO Costa Nicolaou and a representative from Schletter, both of which warn that they will have to lay off workers if significant trade action is taken. Additionally, this morning Senator Martin Heinrich of New Mexico warned that Array Technologies’ manufacturing in his state could be affected.

A curtailed market

One thing that has become clear is that the quota system that SolarWorld has proposed is so severe that it could curtail the U.S. solar market in 2018, but even more in 2019. Between domestic capacity of only around 1.7 GW and the 5.7 GW of module imports that SolarWorld would allow (under tariffs), this only allows for 7.4 GW of module supply.

In 2018 this might not be so bad, given that many utility-scale projects planned for the first half of the year already have modules. But in 2019, while still waiting for the new factories that the petitioners have promised to come online, only 8.5 GW of module imports would be allowed. This means a hard stop at just over 11 GW of projects even if Tesla’s gigafactory comes online – with 8.5 of those modules carrying a $0.31 per watt premium.

It does not take a detailed analysis to show that this would limit the solar market, and even this morning SolarWorld Counsel Tim Brightbill stated that “I cannot stand here and say there will be no market impact”.

Pleas for exemptions

In the face of this daunting prospect, a number of petitioners settled on asking for exemptions for certain products. SunPower CEO Tom Werner asked for an exemption for his company’s back-contact solar cells and modules, noting that they are very different than those being manufactured by the petitioners. Indeed, the only other company that is currently making back-contact cells and modules at scale is LG, which recently began production.

Mike Tessero, the president of installer Baker Electric, also appealed to the ITC to exempt n-type cells and modules, noting that no U.S. manufacturer produces this product. This is a point that was also made by the Korean embassy.

Additionally, a number of makers of off-grid and portable solar products also appealed to be left out of trade remedies, noting that no U.S. supplier makes the low-power solar modules that they need for their products.

The wild card

All of the information that has been brought before the U.S. ITC is frankly a lot for commissioners to digest. The commissioners have extensive experience in international trade and trade law, but one salient fact that has come out is that the solar market is simply not a market like lumber or steel. Instead, to understand solar market drivers requires understanding complexities such as competition in both wholesale and retail electricity markets.

Such complexities will likely be lost on the Trump Administration. No matter how passionately or intelligently the petitioners and the opposition testify, and how well they educate the ITC, at the end of the day the Trump Administration rubber-stamping any recommendations is only one option.

The truth is that President Trump could do anything he wants with the injury determination. And that is what terrifies many of us in the room.

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