The challenge of uncertainty: Strata Solar on the Section 201 case

Editor’s note: This interview is the first in a series of interviews which pv magazine will be running in advance of a decision on trade action under the Section 201 process.

 

pv magazine: In broad strokes, what is Strata’s perspective on the Section 201 case?

Brian O’Hara: At a very high level, we see this as a case of two foreign-owned, foreign-backed companies attempting to manipulate U.S. trade law to get a bailout for their bad investments, at the cost of American manufacturing jobs.

In its broadest strokes that’s how we look at this. Obviously it’s a big challenge for our industry and it is creating a lot of uncertainty, but I think that’s how we see the driver of this case.

 

pv magazine: What impacts, if any, are you seeing on your business as a result of this investigation?

O’Hara: As you’ve probably heard from a lot of other companies, the uncertainty that this creates in the market around what tariffs may or may not be has created a lot of difficulty in the module supply market. Modules are not only more difficult to come by but they are also higher priced. We’ve seen prices go up 30%+ since the announcement of this trade case based solely on the speculation of tariffs.

 

pv magazine: Can you elaborate more? Are you seeing a resistance to signing contracts, and what effect is that having on your business?

O’Hara: It’s difficult to commit to a price if you don’t already have the modules procured. Any new projects that are being discussed today, there has to be some sort of carve-out, or caveat for what a potential tariff might be.

Until there is more certainty about what that is, it’s going to be very difficult for companies to commit to some sort of power pricing unless you already have the modules in hand.

 

pv magazine: Many in the solar industry are talking about a limited supply of PV modules going into 2018. What is the status of Strata’s module supply for your upcoming projects, and your strategies around procurement?

O’Hara: We are seeing the same thing. In terms of the projects that we have certainty on being able to build on 2018, we’re in pretty good shape from a module perspective, but where it gets really difficult is where there are opportunities that we have been working on where you could potentially grow that volume in 2018.

It is very difficult if not impossible to commit to that sort of volume if you can’t get modules. So I think we’re in good shape in terms of a base of work that we know that we have to do… even if the modules were available, there is a risk in acquiring them at an elevated price. If we come back and don’t see significant tariffs, that means that you could get the modules for less some time in the future.

There’s a risk in overcommitting, and a risk in under-committing

 

pv magazine: Indeed. What is your company’s strategy overall for dealing with the effects of this case?

O’Hara: I don’t now if this was necessarily driven by the Section 201 case, but a good part of our strategy has always been to have a very solid procurement department, and have very good high level relationships with key suppliers.

And that extends all the way up to the head of our company who has really great relationships with a number of key module suppliers. So that is something that we have always focused on, and it works out well for us in difficult times like this.

And I expect that it’s a strategy that we are going to continue to utilize going forward, for more reasons than just protection against things like this. So I think that’s one aspect of an overall strategy. The other aspects are sort of balancing that risk of over-procurement versus risk of under-procurement.

 

pv magazine: Assuming that the Trump Administration imposes tariffs and/or other trade remedies, what effects do you expect on Strata’s business and on the market in North Carolina and other states where you are active?

O’Hara: It depends entirely on what those remedies are. And that uncertainty is one of what one of the big challenges is. If there are tariffs on the order of what SolarWorld and Suniva requested in their original filing, I think you’d see the North Carolina market essentially grind to a halt.

I’d like to say that it’s unlikely that we will see tariffs that extreme. So it is somewhere along that spectrum. If there are tariffs that are more limited in scope, or lower in value, I think that affords some ability for the market to adapt. It’s really difficult to say if you don’t know what the magnitude and scope of those tariffs might be.

 

pv magazine: Anything else that we haven’t covered that you think our readers should know about this case and Strata’s approach.

O’Hara: Our view is that if one is interested in protecting and growing American manufacturing jobs, then placing tariffs that strangle one of the fastest-growing industries in the country is not the way to do that. If you care about American manufacturing jobs, you should be looking to grow the domestic solar industry rather than shrink it by imposing tariffs.