How Will Solar Panel Tariffs Affect Real People and Their Businesses?

In less than 50 days, President Trump will decide whether to put a tariff on solar panels, and if so, at what level. The ITC commissioners recommended a tariff that goes up to 35% but the President can ultimately decide on any tariff level. If this tariff goes through, it could be the biggest threat and shakeup the solar industry has faced to date. As such, utility, commercial, and residential solar will each be affected in unique ways and levels of severity.

We wanted to understand how the tariff might affect individual business owners and companies across the American solar industry. So we reached out to several people around the country to hear their thoughts on the tariff, how it will affect their business, and the actions they are taking to mitigate any effects. Here are some insights and takeaways from our conversations with them:

Map of installers we spoke to

Kent Harle, CEO at Stellar Solar

Residential/Commercial Solar Installer in San Diego, California

A solar veteran, Kent Harle founded Stellar Solar in 2001, so he’s obviously seen a lot of change in the industry since then. Stellar Solar employs around 50 drafters, engineers and installers full-time (with benefits) but this has increased up to 130 employees in some years. He prefers to keep a loyal core of employees vs. having massive fluctuations in headcount. “We’re not a company that likes to hire really fast and fire really fast. When you’re working in people’s homes, it’s important to have really good and trustworthy people. And you need to stability in the market to keep those good people,” Harle said.

His thoughts on the issue of foreign made panels is fairly straightforward. “Really what happened around 2006-2007 is that American-made solar couldn’t keep up with the demand. It was absolutely a throughput problem. Commercial solar started taking off and there just wasn’t enough capacity to fulfill the demand. So that’s when the offshore stuff came up. Offshore panels have been good for the industry as they have driven costs down on everything.”

Stellar Solar is a master dealer for SunPower, and uses their premium panels for most residential installations. This hedges them some from module cost increases from tariffs or price floors in the residential side of the business. But their commercial installations use less-expensive foreign-made panels and will therefore be more affected.

Harle’s concern pertains mostly to the instability the tariff will cause in the industry and local installer community. “It’s never good having drama in the industry. It’s like standing up in a canoe, it’s not the weight, it’s the movement that throws you overboard. When the threat of layoffs happens for people, they start to do desperate things. If someone’s commercial business slows down, they’re going to switch over to residential and cut all kinds of crazy deals, ” he said.

Harle has a hard time sympathizing with petitioners (Suniva and SolarWorld). “SolarWorld is a German company that’s been in and out of bankruptcy since 2010. Suniva is owned by someone offshore also. Even if we did all domestic manufacturing, they might create 500-1000 jobs but they’re going to take away 20,000-30,000 installation jobs. Once we stop installing, there’s going to be no demand for their product and they’re going to lay off their manufacturing employees anyway,” Harle pointed out.

“I really hope Trump thinks through this. This tariffs case is a job killer, plain and simple. I hope he gets the right information and makes the right decision. We’ll just have to wait and see.”

Ronnie Mandler, CEO at Best Energy Power

Commercial Solar Installer in New York

Ronnie Mandler has been in renewable energy since 2003 and has been in commercial solar since 2011. Today, his company Best Energy Power (BEP) proudly claims to have installed 22% of commercial installations in New York City’s 5 boroughs.

Much of the focus of this trade/tariff case is on Chinese-made panels. BEP doesn’t use Chinese panels, for a variety of reasons. Mandler said “, I use non-Chinese panels not because Chinese panels are bad but because of warranties. If you get a 25-year warranty, you want to make sure that if you have a problem in 15 years, that you can exercise the warranty with someone that has presence in the USA to be able to use that. That’s why I’ve used Sharp, Hyundai, LG, and now we just changed to Panasonic. You also need to make sure it’s a diverse company and that they also do non-solar stuff. If we’re going to have another 2008 financial meltdown, a company doing only solar panels may not survive the storm.”

Mandler sees the Suniva case as being ‘fake’ and isn’t sure which way Trump will go on it. He has already purchased enough modules to get BEP through 2018 fine. “I bought all the panels so I’m secured. But there’s life after that and it will be an issue. Potential customers will have second thoughts because of the price or because of the longer return on investment,” he said. He’s more concerned about the long-term effects of the tariffs and potential environmental effects of a smaller solar industry. “We did green actions in the past and for the first time this year, they discovered the hole in the ozone layer got smaller. This means we’ve been doing something good for the world, for mother nature, for our future. A small part of this good will be from solar so let’s continue,” he explained.

Jack Ailey, CEO/Founder at Ailey Solar

Residential Solar Installer in Chicago, Illinois

Jack Ailey’s solar installation company, Ailey Solar, does residential solar installations in the Chicago and the Northern Illinois area. The Illinois Power Agency has recently changed their policies/incentives around solar so the area is expected to have a regional solar boom. Ailey’s perspective on the tariffs issue is nuanced, given his previous profession.

“I did actually work as a steelworker for 24 years so I’m quite familiar with issues of unfair trade. I’m willing to acknowledge that there might be some unfair trade going on here. On the other hand, it’s going to hurt our business if these tariffs go through at anything more than a token. Most customers are looking for the most cost effective panel they can get since these systems are already quite expensive. They are looking to make sure they can get their money back. And I don’t think there’s any question that the tariff will cause a net loss of jobs. There’s a lot more jobs on the installation side than manufacturing, ” he said.

For now, a lot is up in the air on planning for the future for BEP. A lot could change based on the tariff and how the Illinois Power Agency changes their incentives (or not) around the tariff.

Samuel Florence, CEO/Founder Alternatex

Residential/Commercial solar Installer and energy efficiency contractor in Dallas, Texas

Samuel Florence started his company Alternatex in early 2015 because he saw a gap in the market around solar and energy efficiency. Most shops were run by ‘guys in wife beaters going out to customers houses in clunker cars’. To stand out, he had his crews wear uniforms and drive marked trucks. He also got BPI (Building Performance Institute) certified.

Alternatex offers both solar installations and energy efficiency improvement projects (e.g. duct sealing, extra insulation) for people’s homes. “I continue to see, more and more, how important efficiency is. Our clients will call us back and say ‘yep, our electric bill is way down and all that. But our house is just so much more comfortable, we had no idea.’”

Even though the tariff hasn’t come into effect, Florence’s company is already seeing its impact on the industry. 72-cell panels are getting hard to come by as manufacturers are pulling back on production because utility scale deals might fall through. Prices have come up 60-70% because of this shortage. “Between Hurricane Harvey, the price increase, and the coming tariff, we’ve already seen a slowdown and had to lay off 20 people in late September.”

Florence is pragmatic on the tariffs issue. He pointed out “, I don’t have any problem putting industry back in America and getting the Chinese stuff out of the market. But the reason this tariff came about is all wrong and I think it’s all BS. If you’re going to do a tariff, it needs to be progressive. If you try to flip it all over to American-made panels, the American manufacturers aren’t going to begin to be able to keep up. This will spike prices and put the industry on a standstill. If you’re going to do this tariff, do it progressively: 10 cents a year over 3 years or something like that. Do something slow to give American production time to ramp up. Last time we did minimum wage increase, it was incremental over 3 years.”

Bret Sowers, VP of Development and Strategy at Southern Current

Utility/Commercial/Residential Solar Installer in Charleston, South Carolina

Southern Current is a Charleston-based solar installer with approximately 60 full-time employees. Their residential and commercial installations have been based in the Carolinas while their utility projects have been all over the SouthEast. They have a pipeline of over 1 GW of utility-scale projects in motion and have installed 10 MW of commercial and 1.5 MW of residential solar in 2017. They tripled their headcount in the last 2 years and were able to expand beyond the Carolinas.

Sowers sees the tariff as being the largest threat the solar industry has faced. It will affect all three areas of their business differently. “In residential solar, the tariff will be felt by the customer. It may only increase the total system cost $2000-$3000. But 2-3k added on top of an average 30k system price may mean the difference between that customer a. Having an savings b. Being able to get it financed. That would disqualify them from getting solar for their house. This wouldn’t be based on something they did wrong or the company did wrong, but by the fact that we have an artificially raised price of panels.”

The tariff’s effects on commercial and utility will be a lot more severe. The installer will eat the costs and the numbers simply will be very difficult to pencil out. Sowers noted that the tariff will affect the ability for utilities to choose solar farms over fossil fuels for power generation. He explained “, In North Carolina, for example, the utility-scale solar market is driven on an avoided-cost model. This is the ability for a developer to sell energy back to the utility at the utility’s avoided-cost rate. We were buying modules for utility-scale solar at 40 cents (per watt) and sometimes as low as 34 cents. And that’s what allows the numbers to work. In South Carolina, the avoided cost rate for one of the utilities is $34/MWh. The foreign manufacturers were the only ones who could supply the quantity of modules we needed for these projects. If you raise the price up to the 78 cents (per watt) that Suniva is requesting, it would no longer be viable to sign an avoided-cost contract with the utility. They’re not going to purchase that solar power. They’ll say ‘we’re just going to build that combustion turbine because it’s cheaper’. And those utility-scale solar projects will die.”

Sowers has been in the solar industry for a little over 8 years and has seen some changes, ebbs, and flows in the industry. “The expiration of the investment tax credit was a threat. The expiration of state incentives was another. This tariff threat is the largest threat that our industry has seen to date. This came on so fast that it doesn’t give the industry enough time to react. Companies are truly afraid of having to let people go and of having to letting financiers know that certain projects aren’t going forward. This threat will lead to a loss of jobs and a lot of companies having to go out of business.”

It’s still to-be-determined what the tariff will be. But it’s already killing jobs, hindering companies’ ability to plan for the future, and affecting American homeowners’ ability to save on their bills.