The U.S. Department of Commerce (DOC) has ruled it will impose new punitive tariffs against Chinese solar product manufacturers, with antidumping duties of up to 260 percent and countervailing duties as high as 23 percent. The ruling represents the DOC’s latest efforts to control the dumping of low-cost solar products into the U.S. market by Chinese manufacturers.
As a result of the tariffs, stateside costs for solar PV installation are expected to rise. Imported Chinese PV cells will increase in cost by approximately 10 percent, giving other countries such as Malaysia and Mexico the opportunity to take up the slack. But according to data from market research company IBISWorld, cost increases will only be short term as the cost of PV panel installation continues to fall.
Estimates from IBISWorld show that average solar installation prices dropped 12 percent per year between 2012 and 2015. Further forecasts say pricing will continue to fall at a rate of 9 percent per year between now and 2018.
Sean Windle, procurement research analyst for IBISWorld, said he does not expect that tariffs will have a negative impact on solar expansion in the U.S. “What they’re effectively going to do is provide a more level playing field for the exporters of these products,” Windle said, adding that the cost of imported solar products will remain far lower than those manufactured in the U.S. Windle said this development should spur American solar manufacturers to focus on other areas. Namely, on the development of high-tech, high end solar equipment.
“It’s a losing battle for U.S. solar manufacturers to try to compete on producing low-cost equipment,” Windle said. “This allows them to play to their strengths; to focus on R&D and on producing more high-tech and energy efficient solar panels. That is ultimately what will set U.S. manufacturers apart from low-cost importers.”
The DOC ruling is the result of an investigation launched in 2012, following complaints from U.S.-based PV cell suppliers that Chinese dumping of low-cost PV cells was hurting the domestic market. Initially, the DOC levied tariffs on all PV cells imported from China. Soon after, Chinese manufacturers took advantage of a loophole that allowed for the duty-free importation of solar components manufactured in Taiwan — a loophole that was closed by the DOC in 2014 and finalized in their recent ruling, which also increased the tariff rates set in 2012.
In the meantime, Chinese solar product manufacturers have been busy offshoring their operations to other countries to get around the tariffs in a move Windle said should cause imports from China to return to pre-tariff prices by 2016. Despite this, he emphasized the real concern facing the U.S. solar market is the expiration of the solar investment tax credit (ITC) in 2017.
“The real driver of solar expansion has been the federal tax credit” Windle said, adding that since it was enacted in 2006, U.S. solar expansion has risen at a compound annual growth rate of 76 percent. As of January 1, 2017, the commercial ITC will be lowered from 30 percent to 10 percent. The residential ITC will drop from 30 percent to zero.
“The expiration of the ITC will have a much greater impact on solar expansion than any tariffs,” Windle said. “That will be the biggest driver that determines what’s going to happen to solar in the next few years.”