Roaring US solar market hit by higher import costs
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U.S. solar developers are bracing for higher costs as fresh tariffs are announced - how will it impact growth? Read our analysis below.
Also this week, tech giants are dominating solar, installation figures show, and the Biden administration surpasses $100 billion in clean energy grants as a Trump shakeup looms.
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Roaring US solar market hit by higher import costs
Trump tariffs and antidumping duties are set to slow U.S. solar power growth and American manufacturing gaps will remain.
The thriving U.S. solar sector is bracing itself for higher costs following pledges by President-elect Donald Trump to hike tariffs and new antidumping duties imposed by the U.S. Commerce Department on imports from Southeast Asia, where most U.S. solar developers have sourced their modules.
On November 25, Trump said he would impose "an additional 10% tariff, above any additional tariffs" on imports from China, as well as a 25% tariff on imports from Canada and Mexico. Prior to his election win on November 5, Trump pledged to introduce a blanket tariff of 60% on all imports from China and 20% on imports from other countries.
On November 29, U.S. trade officials set preliminary tariffs on solar cells from the four main export countries in Southeast Asia following complaints by American manufacturers that suppliers were flooding the market with unfairly cheap products.
The Commerce Department set preliminary anti-dumping rates of 53.3% to 271.28% for imports from Vietnam, 125.37% for Cambodia, 77.85% to 154.68% for Thailand and 21.31% to?81.24% for Malaysia, while major manufacturers have their own company-specific rates.
China dominates global solar supply and U.S. tariffs on Chinese companies prompted many suppliers to shift operations to the four Southeast Asian countries. The Commerce Department had already recommended the imposition of countervailing duties following complaints filed by the American Alliance for Solar Manufacturing Trade Committee (Alliance) earlier this year. The department is expected to set the final anti-dumping tariffs in April 2025.
Higher import prices from Trump tariffs and circumvention and antidumping duties will dent growth in U.S. utility-scale solar installations, industry experts told Reuters Events. U.S. solar installations hiked in 2023, spurred on by?tax incentives?in the Biden administration's 2022 Inflation Reduction Act, and were expected to remain strong for several years.
? ? ? ? ? ? ? ? ? ? ? ? US solar installation forecast by market segment (September 2024)
The new import tariffs and duties could increase the cost of utility-scale solar projects by around 30% ($300/kW), according to estimates from FTI Consulting.
The higher prices could lower U.S. solar installations to 20 to 25 GW in 2025, compared with 35 to 40 GW under no tariff action, Ken Ditzel, Senior Managing Director, Dispute Advisory Service at FTI Consulting, told Reuters Events.
The impact of new tariffs will depend on how they are structured, but the strategy “is likely to cause delays to projects, particularly those where solar panels have not yet been imported,” Leni John, Senior Vice President Business Operations, Procurement, at developer Strata Clean Energy, said.
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American solar manufacturing capacity has soared from a low base following tax incentives provided in the inflation act. Higher tariffs would encourage further U.S. factory expansion but supply gaps will remain, experts warn.
"While the U.S. supply chain continues to build it is not yet in a place to meet the demand for solar to support the increases in power the U.S. needs," a spokesperson for utility and clean power developer Engie said.
Manufacturing boost
By October, U.S. solar module production capacity had risen more than fivefold to 45 GW, analysts at S&P Global said, due to new tax credits for manufacturing facilities introduced in the inflation act. There are currently more than 95 utility-scale solar-related manufacturing facilities in the U.S. and almost 100 new or expanded facilities announced since 2022, according to the American Clean Power (ACP) association. In September, First Solar opened a 3.5 GW/year panel production plant in Alabama, taking its domestic manufacturing capacity to 11 GW/year.
Trump tariffs combined with duties on Southeast Asia would hike U.S. wafer manufacturing capacity by 5 GW/year by 2027, a 152% increase from a low base, while raising cell manufacturing capacity by 12 GW/year (53%) and module manufacturing by 19.2 GW/year (28%), Wood Mackenzie estimated in October.
? ? ? ? ? ?Forecast impact of protectionism on US solar manufacturing
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Growth in U.S.?wafer production?remains far behind module capacity growth due to higher capital expenditure requirements.
Even with Trump tariffs, many suppliers will still have to import the ingots that are produced from polysilicon and made into wafers, as well as glass, Ditzel noted.
China has ramped up solar manufacturing capacity and flooded the market with exports, driving down global prices and impacting some plans for new U.S. cell and wafer factories. In February, CubicPV cancelled plans to build a 10 GW/year wafer plant after global wafer prices dived.
Continuing U.S. reliance on imports is the result of “more than a decade of unfair trade practices that have wiped out” most Chinese competition worldwide, Tim Brightbill, the lead attorney for the Alliance manufacturing group, told Reuters Events.
Developers adapt
Developers can mitigate the impact of import tariffs by adopting more diversified supply chains and a number of companies have concluded long-term deals with domestic producers. Developer Invenergy has even invested in its own?American module factory?and in 2022 a group of solar developers formed a multi-billion-dollar?consortium?to buy American modules.
A diversified supply chain with multiple suppliers helps to improve cost efficiency and innovation and strengthen reliability of supply, the Engie spokesperson noted.
“We continue to build a diverse global supply chain," the spokesperson said. "We operate in 31 countries, including continued growth in domestic U.S. sourcing that has been underway for some time.”
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Utilities and other large developers are often better equipped to mitigate higher prices as they can leverage existing supply chain relationships, economies of scale and have greater access to capital, Nick Baker, Managing Director, Trade & Customs at FTI Consulting told Reuters Events.
In areas with less favourable solar resources, a sharp rise in costs from Trump tariffs and circumvention duties could lead to a "shift back to wind as the renewable technology of choice until the U.S. solar supply chain matures,” Ditzel warned.
The U.S. solar sector needs a stable regulatory framework to build a secure and resilient supply chain, ACP spokesperson Phil Sgro told Reuters Events.
“Consistent regulations and stable policies are critical to the business community for committing the billions of dollars in capital investment needed to transition to a more secure supply chain," Sgro said.
Reporting by Neil Ford
Editing by Robin Sayles
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