Billions in U.S. solar projects shelved
after Trump panel tariff
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[June 07, 2018]
By Nichola Groom
(Reuters) - President Donald Trump’s tariff
on imported solar panels has led U.S. renewable energy companies to
cancel or freeze investments of more than $2.5 billion in large
installation projects, along with thousands of jobs, the developers told
Reuters.
That's more than double the about $1 billion in new spending plans
announced by firms building or expanding U.S. solar panel factories to
take advantage of the tax on imports.
The tariff’s bifurcated impact on the solar industry underscores how
protectionist trade measures almost invariably hurt one or more domestic
industries for every one they shield from foreign competition. Trump’s
steel and aluminum tariffs, for instance, have hurt manufacturers of
U.S. farm equipment made with steel, such as tractors and grain bins,
along with the farmers buying them at higher prices.
White House officials did not respond to a request for comment.
Trump announced the tariff in January over protests from most of the
solar industry that the move would chill one of America's
fastest-growing sectors.
Solar developers completed utility-scale installations costing a total
of $6.8 billion last year, according to the Solar Energy Industries
Association. Those investments were driven by U.S. tax incentives and
the falling costs of imported panels, mostly from China, which together
made solar power competitive with natural gas and coal.
The U.S. solar industry employs more than 250,000 people - about three
times more than the coal industry - with about 40 percent of those
people in installation and 20 percent in manufacturing, according to the
U.S. Energy Information Administration.
"Solar was really on the cusp of being able to completely take off,"
said Zoe Hanes, chief executive of Charlotte, North Carolina solar
developer Pine Gate Renewables.
GTM Research, a clean energy research firm, recently lowered its 2019
and 2020 utility-scale solar installation forecasts in the United States
by 20 percent and 17 percent, respectively, citing the levies.
Officials at Suniva - a Chinese-owned, U.S.-based solar panel
manufacturer whose bankruptcy prompted the Trump administration to
consider a tariff - did not respond to requests for comment.
Companies with domestic panel factories are divided on the policy. Solar
giant SunPower Corp <SPWR.O> opposes the tariff that will help its U.S.
panel factories because it will also hurt its domestic installation and
development business, along with its overseas manufacturing operations.
"There could be substantially more employment without a tariff," said
Chief Executive Tom Werner.
For a related graphic, click https://tmsnrt.rs/2LjM1RQ
LOST PROFITS, JOBS
The 30 percent tariff is scheduled to last four years, decreasing by 5
percent per year during that time. Solar developers say the levy will
initially raise the cost of major installations by 10 percent.
Leading utility-scale developer Cypress Creek Renewables LLC said it had
been forced to cancel or freeze $1.5 billion in projects - mostly in the
Carolinas, Texas and Colorado - because the tariff raised costs beyond
the level where it could compete, spokesman Jeff McKay said.
That amounted to about 150 projects at various stages of development
that would have employed three thousand or more workers during
installation, he said. The projects accounted for a fifth of the
company's overall pipeline.
Developer Southern Current has made similar decisions on about $1
billion of projects, mainly in South Carolina, said Bret Sowers, the
company’s vice president of development and strategy.
"Either you make the decision to default or you bite the bullet and you
make less money," Sowers said.
Neither Cypress Creek nor Southern Current would disclose exactly which
projects they intend to cancel. They said those details could help their
competitors and make it harder to pursue those projects if they become
financially viable later.
Both are among a group of solar developers that have asked trade
officials to exclude panels used in their utility-scale projects from
the tariffs. The office of the U.S. Trade Representative said it is
still evaluating the requests.
Other companies are having similar problems.
Scott Canada, senior vice president of renewable energy at solar project
builder McCarthy Building Companies, said his company had planned to
employ about 1,200 people on solar projects this year but slashed that
number by half because of the tariff.
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Solar panels covering 900 acres are seen at the Comanche Solar
facility in Pueblo, Colorado, U.S., April 6, 2016. REUTERS/Rick
Wilking/File Photo
Pine Gate, meanwhile, will complete about half of the 400 megawatts of
solar installations it had planned this year and has ditched plans to
hire 30 permanent employees, Hanes said.
The company also withdrew an 80-megawatt project that would have
cost up to $150 million from consideration in a bidding process held
by Southern Co <SO.N> utility Georgia Power. It pulled the proposal
late last year when it learned the Trump administration was
contemplating the tariff.
"It was just not feasible," Hanes said.
STOCKPILING PANELS
For some developers, the tariff has meant abandoning nascent markets
in the American heartland that last year posted the strongest growth
in installations. That growth was concentrated in states where
voters supported Trump in the 2016 presidential election.
South Bend, Indiana-based developer Inovateus Solar LLC, for
example, had decided three years ago to focus on emerging Midwest
solar markets such as Indiana and Michigan. But the tariff sparked a
shift to Massachusetts, where state renewable energy incentives make
it more profitable, chairman T.J. Kanczuzewski said.
Other developers are forging ahead, keen to take advantage of the
remaining years of a 30-percent federal tax credit for solar
installation that is scheduled to start phasing out in 2020.
Some firms saw the tariff coming and stockpiled panels before
Trump’s announcement. 174 Power Global, the development arm of
Korea's Hanwha warehoused 190 megawatts of solar panels at the end
of last year for a Texas project that broke ground in January.
The company is paying more for panels for two Nevada projects that
start operating this year and next, but is moving forward on
construction, according to Larry Greene, who heads the firm's
development in the U.S. West.
Intersect Power, a developer that cut a deal last year with Austin
Energy to provide low-cost power to the Texas capital city, is also
pushing ahead, said CEO Sheldon Kimber. But the tariff is forcing
delays in buying solar panels.
The 150-megawatt project is due to start producing power in 2020.
Waiting until the last minute to purchase modules will allow the
company to take advantage of the tariff’s 5-percent annual
reductions, he said.
'A LOT OF ROBOTS'
Trump’s tariff has boosted the domestic manufacturing sector as
intended, which over time could significantly raise U.S. panel
production and reduce prices.
Panel manufacturers First Solar <FSLR.O> and JinkoSolar <JKS.N>, for
example, have announced plans to spend $800 million on projects to
increase panel construction in the United States since the tariff,
creating about 700 new jobs in Ohio and Florida. Just last week,
Korea’s Hanwha Q CELLS <HQCL.O> joined them, saying it will open a
solar module factory in Georgia next year, though it did not detail
job creation.
SunPower Corp, meanwhile, purchased U.S. manufacturer SolarWorld's
Oregon factory after the tariff was announced, saving that
facility’s 280 jobs. The company said it plans to hire more people
at the plant to expand operations, without specifying how many.
But SunPower has also said it must cut up to 250 jobs in other parts
of its organization because of the tariffs.
Jobs in panel manufacturing are also limited due to increasing
automation, industry experts said.
Heliene - a Canadian company in the process of opening a U.S.
facility capable of producing 150 megawatts worth of panels per year
- said it will employ between 130 and 140 workers in Minnesota.
"The factories are highly automated," said Martin Pochtaruk,
president of Heliene. "You don't employ too many humans. There are a
lot of robots."
(Reporting by Nichola Groom; Editing by Richard Valdmanis and Brian
Thevenot)
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