President Trump's most useful ally in his push to restore the dominance of coal, oil and gas in America could ultimately turn out to be a pair of bankrupt solar firms seeking help from the federal government getting back on their feet.
In an unorthodox trade case roiling the solar industry worldwide, the duo of distressed panel makers is aiming to empower Trump with the authority to slap punishing tariffs on foreign competitors — mostly in China and other Asian countries — whose cheap panels have fueled the massive growth in U.S. solar installations.
The fallout from the case that was heard Tuesday by the U.S. International Trade Commission threatens to destabilize the massive network of installers and other nonmanufacturing businesses that make up the bulk of the American solar industry. Nearly 90% of the panels it uses are produced abroad.
Prices of panels would roughly double should the two U.S. manufacturers get the relief they are seeking, several independent analysts warn. Some 88,000 installation and other jobs in the U.S. solar electricity sector — one in every three — would vanish, according to the Solar Energy Industries Assn. California, with its robust solar industry, would lose the most by far.
The consequences for green power in the U.S. would be so serious that even conservative think tanks that have been tangling with the solar industry for years are speaking up on its behalf, warning Trump against imposing the sanctions. They are joined by big electricity companies that have had their own misgivings about the expansion of solar, as well as some of the nation's biggest retailers and dozens of members of Congress.
But solar companies are bracing for the worst. Independent analysts tracking the industry are warning that Trump, who would be the ultimate decision maker on tariffs should the commission rule the bankrupt firms have been unfairly hurt, could easily pull the trigger on heavily taxing imported panels. It would be a rare opportunity for Trump to use his executive authority to punish the imports that a flagging segment of U.S. manufacturing blames for its troubles. The move would drive up the price of solar, enabling fossil fuel companies to recapture lost market share.
At a Washington hearing room packed with solar activists Tuesday, officials from Georgia-based Suniva and Oregon-based SolarWorld, the two bankrupt solar firms seeking relief, riled many of those present by arguing the levies are essential to the survival of solar manufacturing in America. "The U.S. is literally strewn with the carcasses of shuttered solar manufacturing companies," said Suniva attorney Matthew McConkey. He said American companies that design and produce photovoltaic panels are "on the precipice of extinction" in the U.S. amid the crush of cheap imports flooding the market and need the administration to intervene. Prices of foreign solar panels have dropped to as low as 35 cents per watt recently. The complaint seeks to force them up to 78 cents to protect American manufacturers.
Suniva filed its case under a rarely exercised provision of trade law called Section 201, which enables the president to broadly impose tariffs if the commission finds such a drastic move is needed to protect an American industry from a deluge of foreign imports. It hasn't been exercised since 2001, when George W. Bush invoked it in an effort to protect the U.S. steel industry from Mexican and Canadian imports. The move sparked retaliation, and the World Trade Organization ultimately voided the steel levies two years later.
Only a fraction of U.S. solar jobs are in companies like Suniva and SolarWorld. Most are in other sectors of the market that have embraced the plunging cost of imported panels. A spike in those prices threatens to slow growth dramatically.
"It is hard to think of a free trade issue that is more fundamental or more clearly shows the benefits of free trade and the enormous cost to the economy and consumers of heavy tariffs," said Eli Lehrer, president of the R Street Institute, a free market think tank. His group has joined the conservative advocacy groups American Legislative Exchange Council and Heritage Foundation — both longtime irritants of the solar industry — in lobbying to protect it from the kind of levies threatened.
The White House has so far stayed silent about the case as it winds its way through the commission, which will decide by late September whether action is warranted. But Trump has been expressing interest in exercising the power to impose protectionist levies using this obscure provision of trade law since before his election. A trade agenda the administration presented to Congress in March calls it a "vital tool."
Trump has not often been swayed by the kind of bipartisan pressure he now faces to reject such tariffs. He did not heed a similar lobbying campaign to stay in the Paris agreement on global warming. Independent analysts at Bloomberg New Energy Finance and Clearview Energy Partners warned investors to be prepared for a costly unsettling of the solar supply chain. Goldman Sachs alerted investors that it expects "solar installations would fall precipitously in the U.S." if Trump imposes the tariffs Suniva and SolarWorld are demanding.
Whether the tariffs would even help the firms seeking them is a matter of debate. Suniva cast doubt on how much faith the solar company has in the case to save its business when one of its biggest creditors offered to make the whole thing go away for some cash. That creditor, SQN Capital Management, wrote a Chinese solar trade group, offering to pull the plug on the case — which SQN is bankrolling — if the Chinese group would buy $55 million in Suniva equipment SQN got stuck with in the bankruptcy.
SQN is not the only Suniva affiliate to cast a shadow over the trade complaint. The firm that owns 64% of Suniva is actually located in China — one of the main targets of the trade case. That firm, Shunfeng, has declared the case bad for the solar industry.
Many solar executives back in California agree.
"This would significantly shrink the size of the market and directly impact the number of people employed in our value chain," said Tom Werner, chief executive of the large solar firm SunPower. His California-based company employs 1,000 people directly and works with a dealer network that includes 12,000 solar installers. He is bracing for the market to drop by as much as 60% if the levies being sought are imposed. Werner said he would have to cut his costs proportionately.
Also deeply anxious about the case is the Los Angeles chapter of the National Electrical Contracting Assn., which represents firms employing more than 1,000 solar installers in the region. "These are good middle class jobs," the association wrote in a letter opposing the levies. "This proposed tariff would… make America the highest priced solar country and decimate the market."
Yet other veterans of the California solar industry traveled to Washington Tuesday to warn trade commissioners that America is going to altogether cede the business of solar cell innovation to foreign competitors if the few homegrown companies left are not protected.
Among them was Stephen Shea, who had been the vice president of a company called Beamreach Solar, which only recently had invested millions in a factory in Milpitas, Calif., to manufacture new generation solar cells. In January, Beamreach went bankrupt. It couldn't compete with cheap imports.
"I'm convinced that without relief, the few remaining U.S. producers will go the way of Beamreach," Shea said.
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4:50 p.m.: This article was updated with additional details about solar panel prices and markets.