Solar Tariffs: Is There a Bright Side?
Local companies remain optimistic and gear up to fight what they say is the real threat.
Solar power generated $154 billion in economic activity in the United States in 2016, employing 370,000 people directly or indirectly nationwide. Thanks to a 68 percent growth over the past decade — driven by tax incentives and prices that have lowered with technological advancements — solar now employs nearly three times the coal industry, and significantly larger than oil and gas.
Currently, nearly 80 percent of solar panels used domestically are imported from countries in Asia and Central America, which makes the tariff President Donald Trump announced on imported solar panels Jan. 22, something many fear will hurt the industry.
The tariff was created in response to petitions from American manufacturers who claimed inexpensive imports were harming their business here at home. In anticipation of the announcement, U.S. solar companies stockpiled foreign-made solar panels: imports from China were up almost 1,200 percent in the fourth quarter of 2017.
“Every year the industry has faced various battles and challenges from a policy standpoint,” says Karla Loeb, of the Solar Energy Industries Association (SEIA). “[This tariff] was primarily focused on China, Vietnam, South Korea and Japan — places that have been the primary source of solar panels for this country.”
Loeb, a New Orleanian, is a veteran in solar and clean energy policy and development. She was recently elected to the board of directors at the Solar Energy Industries Association, an organization that represents the U.S. solar industry on critical policy issues
The first 2.5 gigawatts of imported solar cells will be exempt from the tax; beyond that, imported solar panels will be subject to a 30 percent tariff that will decrease by 5 percent every year before leveling out at 15 percent. It’s unclear how companies or consumers will be able to access the imported panels not subject to the tariff.
U.S. companies installed 12.5 gigawatts worth of solar in the country last year — and though Loeb says that means there’s still “plenty of industry to go around,” the SEIA warns that the tariffs could result in the loss of 23,000 American jobs in 2018 alone.
History shows that tariffs are generally bad for business as increased costs for materials get passed on to consumers, and solar infrastructure already has a reputation for being an expensive investment. Louisiana’s investment tax credit for solar can help offset initial costs, but that’s set to expire in 2022. Even with financing, it can take households up to 20 years for their energy savings to cover their investment. A 30 percent tariff could scare off new customers — but local companies say they have reason to be optimistic.
Solar in the South
Sunpro Solar is a full-service solar provider serving the Gulf Coast region, handling design, installation, maintenance and financing for customers in Louisiana, Texas, Mississippi, Arkansas, New Mexico and Florida.
Founder and CEO, Marc Jones, says that while tariffs may mean a small increase in sales price to consumers, solar remains the cheapest way to buy electricity in Louisiana.
“The discussion of the solar tariff has in fact raised consumer awareness to the benefits of going solar, and we have seen an increase in our sales since the tariffs have gone into effect,” Jones says.
Data from the SEIA show the cost to install solar has dropped by more than 70 percent since 2010; panel prices go down over time, while the cost of labor generally stays the same.
Loeb says just because the tariff has been imposed doesn’t mean panel prices won’t continue to drop.
“The announcement that there was going to be a proceeding about the tariff more than doubled prices overnight,” she says, “but since the tariff has been imposed, prices have dropped dramatically from where they were this fall and will continue to drop.”
Kevin Fitzwilliam, an energy consultant with Joule Energy, agrees that solar panel prices overall are on a downward trend.
“Despite this kind of imposition that’s placed on us through the tariffs, we do still expect the cost of solar to continue to come down over time,” he says, adding that Joule is set to fare well, thanks to help from a national solar cooperative.
“We do have locked-in pricing on a certain amount of panels that will protect us in 2018,” he says, “so as far as Joule goes, we feel like we’re in a strong position to continue to do utility scale work.”
Jeff Cantin is the president of Solar Alternatives, a commercial and residential solar company serving the Gulf South. He says the company gets its panels from different sources, including imports from Mexico and Asia, but also domestically from Mississippi.
“We’ve always supported domestic manufacturers,” Cantin says. “I think it’s important to have American manufacturing be strong, but I think there’s ways to support that without harming the market.”
Cantin agrees that the tariffs may cause a price increase, but mostly for bigger utility-scale projects.
“For most companies in this area, there aren’t a lot of utility-scale projects, so the residential and commercial scale projects will be affected by the tariff, but it will be a few percent of the overall job cost,” Cantin says. “It won’t be so much that it hurts business permanently.”
The Threat From Within
There is, however, a threat to Louisiana’s solar industry coming from within the state in the form of regulatory action from the Louisiana Public Service Commission.
There are approximately 20,000 homeowner solar systems in Louisiana; 8,000 of those are in New Orleans, and are regulated by the utility commission at the City Council. The 12,000 residential solar systems across the rest of the state are regulated by the Louisiana Public Service Commission (LPSC).
The LPSC runs what’s called a “net metering” system with its solar customers. This means that, for example, if you have rooftop solar panels and you’re not at home during the day, your system is producing more energy than you’re consuming. That excess energy gets pushed onto the grid. Under the current system, that energy has the same value as energy you would purchase — a 1:1 exchange in kilowatt hours from the energy company. This means the extra energy you produced would reduce your household bill over time.
The LPSC, however, has proposed a change to the net metering system. If a kilowatt hour of energy (that your system produces but does not use) goes back on the grid, you can buy the energy you need later at a “voided cost,” not a 1:1 exchange. It’s a proposal that has industry representatives and companies up in arms.
“They’re trying to equate small households to a power plant,” says Karla Loeb. “They’re also undermining household investments in their clean energy assets, and basically changing the rules in the middle of the game. Most of the households in Louisiana made an investment in solar to go forward and reduce their overall bills, and part of that investment was knowing that net metering was in place.”
Fitzwilliam agrees that the changes are unfair.
“We are in favor of homeowners getting what is due to them,” he says, “to be able to continue to enjoy the economic benefits of solar energy under the same guidelines that they signed up for, and to not have the rug pulled out from underneath them.”
Jeff Cantin says the proposal is very restrictive compared to the rest of the country.
“It sets us on pace to shut down most of the solar work going on in the state — that is, all of the solar work except that done by the utilities.”
Jones says the proposed rules would have a negative impact on the solar industry for Louisiana customers.
“Like other states, Louisiana needs rules that promote competition and protect consumers from the monopolies of the utilities in Louisiana,” he says. “These proposed new rules could allow Louisiana utilities to benefit from the energy generated from private homes and businesses and possibly resell it at higher rates.”
Local entrepreneur David Lamouranne is trying to make sure this doesn’t happen. Lamouranne is the founder of American Standard Power, a decentralized energy trading platform that will allow people to buy and sell renewable energy to each other at a fair-market value. The platform also facilitates the fundraising for and ownership of renewable energy producing projects.
“Let’s says you’re generating solar energy with battery storage, what happens when you generate more power than you use?” he says. “The only available option now is net metering, which is complicated and falls short as an incentive to invest in renewable energy production. Thanks to blockchain technology, however, there’s a better, new way.”
Lamouranne says that excess solar energy is credited back to the grid at 1/3 the retail rate when produced in excess monthly. The energy company then turns around and sells that person’s green power for full price, or close to 10 cents a kilowatt hour.
“[Energy companies] are making money off all of us going green,” says Lamouranne.
His plan: use blockchain technology to skip the energy companies.
“When I generate more power than I need, I’ll be able to sell it to my neighbor or an electric vehicle owner directly,” he says. “That person won’t pay 10 cents a kilowatt hour. Instead I’ll charge them 6 or 7 cents per kilowatt hour with a cryptocurrency taken. I’m happy because I’m making more than the wholesale rate the energy company is going to pay me. My neighbor is happy because they’re not paying 10 cents, they’re paying less — everyone’s happy. And the most important thing for the economy here is now I’m able to get a 20-year return investment down substantially because I can actually pay my renewable investments off faster.”
Lamouranne even has a plan for electric vehicle charging stations. Picture this: You have an EV charging station in your driveway.
Someone is driving through your neighborhood and realizes their electric car battery is getting low, so they use an app to locate your charging station. They pull up to your house, scan a QR code, and pay you directly with cryptocurrency to use your solar energy to charge their car in your driveway.
“You’re turning your assets into moneymakers, just like Uber did; they’re turning people’s cars sitting in their driveways into moneymakers,” he says. “I’m turning people’s renewables into moneymakers. Why not?”
Why not, indeed.