A game of dueling numbers is playing out over the market impacts of a pending U.S. solar trade case.
An economic analysis released yesterday by law firm Mayer Brown, on behalf of trade case petitioners Suniva and SolarWorld Americas, finds that imposing new tariffs on solar products made outside of America will result in a net increase of at least 114,800 new jobs, and potentially as many as 144,300 new jobs, across all segments of the U.S. solar industry.
“This job growth includes as many as 45,000 U.S. manufacturing jobs in the solar cell and module manufacturing segment and the upstream sectors that cell and module manufacturing supports,” the report states. “It also includes an increase of 98,020 U.S. non-manufacturing jobs, including 65,830 U.S. installer jobs.”
Those results stand in sharp contrast to the numbers put forward in a separate analysis published recently by the Solar Energy Industries Association (SEIA), which determined that Suniva’s requested tariff and minimum pricing requirement would result in the loss of 88,000 solar jobs in 2018. The utility-scale market would see jobs shrink by 60 percent, while residential and commercial employment would fall by 44 percent and 46 percent, respectively.
The U.S. solar industry currently employs around 260,000 workers. Manufacturing represents 38,000 or 15 percent of jobs in the sector, according to the Solar Foundation’s 2016 jobs census.
Rational or preposterous?
U.S. solar manufacturing numbers may be slipping. SolarWorld Americas, which recently raised $6 million to fight the trade case in light of its parent company’s insolvency, employed around 1,200 people at its peak. The Oregon-based manufacturer currently has around 300 U.S. workers, following a severe round of job cuts. In late March, Suniva announced “significant” layoffs in Georgia, where it’s headquartered, and in Michigan, where it operates a facility. The company declared bankruptcy in April.
Suniva brought the Section 201 trade case shortly after filing for bankruptcy protection, seeking duties of 40 cents per watt on imported cells and a floor price of 78 cents per watt on modules. SolarWorld joined the petition in May. And the U.S. International Trade Commission (ITC) took up the case shortly after.
The petitioners blame their financial woes on “a deluge of imports,” which they say has distorted the solar market. Effective remedies under the Section 201 trade investigation can restore the U.S. solar market to an “economically rational state,” according to the Mayer Brown report.
However, SEIA notes that while Suniva and SolarWorld have been confronting serious financial struggles and seeking tariff support, manufacturers in other areas of the U.S. solar sector, such as racking systems, have been adding jobs. “Solar manufacturing already employs more than 38,000 Americans,” the SEIA jobs report states. “The fact that petitioners are laying off employees doesn’t reflect the growth in American manufacturing jobs.”
“The notion that doubling the price of solar panels would somehow increase demand and create jobs is preposterous,” Abigail Ross Hopper, president and CEO of SEIA, said in an emailed statement. Careful analysis by SEIA and others bears this out, she said.
“Additionally, SEIA has spoken with dozens of manufacturers in the supply chain who ardently oppose this petition because the projected decline in demand will force them to lay off workers,” said Ross Hopper. “SEIA’s members know what impact this will have on their ability to produce jobs; companies working in the solar industry today have been clear that Suniva’s sought-after remedy will be devastating to the American solar industry.”
How new tariffs could boost job growth
To conclude there would be a net increase of at least 114,800 jobs under a new tariff scenario, Mayer Brown relied on a publicly available model developed by the Department of Commerce and data from GTM Research — although the law firm took issue with the latter.
The report cites a recent GTM Research analysis that found the trade dispute could halt roughly half of projected U.S. solar installations through 2022, assuming a 40 cent per watt tariff for cells and a floor price of 78 cents per watt on modules. Between 2018 and 2022, GTM Research calculated total U.S. solar installations would fall from 72.5 gigawatts cumulatively to just 36.4 gigawatts under a 78 cents per watt minimum module price scenario. If the floor price were set higher, the market impact would be even greater, the analysis found.
According to the Mayer Brown report, the GTM analysis suffers from “significant flaws,” because it “fails to account for the impact of any new U.S. manufacturing growth and likely significantly understates the rate of growth in installed capacity that would occur if an effective remedy is imposed.”
Assuming that GTM’s analysis is correct, the authors say the proposed trade remedy would still result in significant job growth outside of manufacturing over the next five years. Between 2011 and 2015, the U.S added 25 gigawatts of new installed capacity, according to GTM data. And over the same period, the industry added 102,002 non-manufacturing jobs — 67,500 of which were installer jobs. Applying a similar trend analysis to GTM’s projected 36 gigawatts of new installed capacity over the five year period from 2018 to 2022, results in an increase of 98,020 new non-manufacturing jobs over 2015 levels — nearly 66,000 of which are estimated to be installer jobs.
So even in a scenario where solar installation numbers fall, the industry could still add a meaningful number of jobs, Mayer Brown argues.
“Demand for solar in the United States is growing quickly and will continue to grow for the next five years under anyone’s estimates,” said Timothy Brightbill, partner in law firm Wiley Rein’s international trade practice representing SolarWorld.
Why a Section 201 trade case is to powerful
To estimate the number of manufacturing jobs, the Mayer Brown report assumes that the tariffs will restore U.S. production capacity to nearly 970 megawatts of cells and 875 megawatts of modules. The analysis also assumes total cell production costs of between 22 cents and 33 cents per watt and module production costs of between 22 cents and 24 cents per watt, citing government and industry data. Using the U.S. Department of Commerce’s “Regional Input-Output Modeling” system, the models show that a trade “remedy” would result in an increase of 12,429 to 16,141 manufacturing jobs, in short order.
Furthermore, “it is highly likely that imposition of an effective remedy and stabilization of price levels in the U.S. would result in substantial new investment in U. S. solar cell and module manufacturing capacity,” the jobs report states.
Assuming that a new tariff and minimum price boost domestic cell production capacity to 3 gigawatts and U.S. module capacity to 2.6 gigawatts, American cell and module manufacturing employment would increase by between 37,515 and 45,491 restored and new jobs. Economic output and wages paid in the cell and module manufacturing sectors would increase by between $2.5 and $3.3 billion each.
An increase in direct solar manufacturing jobs also benefits other sectors, including aluminum extrusions, silicon crystals and electronic components, the report states. This means the cell and module manufacturing sector having a high multiplier effect, or a high impact on the broader U.S. economy.
“Solar manufacturing jobs generate many additional upstream and downstream jobs — unlike installer jobs, which are at the end of the value spectrum,” said Brightbill.
“In order to have a strong solar industry we need to have a strong solar manufacturing industry,” he continued. “Solar is a constantly evolving fiercely competitive landscape and innovations happen on the shop floor every day. Innovations are part of the manufacturing process, so if you don’t have the manufacturing process then all of the know-how, all of the R&D and all of the investment will go overseas. That’s why we feel so strongly that we need to maintain — and grow — manufacturing here in the U.S., especially when demand is as strong as it is.”
To see those benefits, Brightbill said it’s paramount that any trade remedy be comprehensive and apply also to America’s free trade partners, such as Mexico. “I think the worst thing that could happen would be to omit or leave out certain countries from relief,” he said. “That’s why Section 201 is so powerful, because it covers all countries and import sources.”
“Part of our plan is that relief will cause companies to build their next manufacturing plant here, rather than in Malaysia or Mexico. And that, of course, is directly in line with this administration’s goal of increasing U.S. manufacturing and U.S. jobs,” said Brightbill.
Meanwhile, others in the solar industry flat out reject Suniva and SolarWorld’s assessment.
Did petitioners bring business troubles on themselves?
The Suniva/SolarWorld paper “contains no economic analysis and posits a theory that turns supply and demand basics on its head by claiming that raising the price of a product somehow creates more demand for that product,” said Paul Nathanson, spokesman for the Energy Trade Action Coalition (ETAC), a new group launched to coordinate opposition to the trade case.
“Of course, the opposite is true,” Nathanson continued. Imposing the tariff and floor price proposed under Section 201 would “double the price of solar panels would reduce demand, devastate the solar industry and result in the loss of thousands of manufacturing jobs,” he said. This is confirmed by SEIA’s assessment and GTM’s solar forecast, as well as trade case analyses conducted by third parties.
A Goldman Sachs research note, for instance, stats that granting the Suniva and SolarWorld petition would increase all-in costs for utility-scale projects by an estimated 30 percent, and would increase prices for residential projects by 15 percent. “We expect solar installations would fall precipitously in the U.S. on the back of lower returns in a higher-priced module” the firm wrote. In its assessment, Bloomberg New Energy Finance said the Suniva accusations are “riddled with holes and hypocrisies.”
Conservative political groups The Heritage Foundation, the R Street Institute and the American Legislative Exchange Council have also criticized of the trade petition as a “a step backward” and “the worst kind of protectionism.” The three groups recently joined SEIA and others as members of ETAC.
Mounting dissent from across the political spectrum could help convince Republican President Donald Trump to reject new trade barriers, should a tariff proposal end up on his desk in the coming months. But the petition may not make it that far. If the ITC decides Suniva and SolarWorld have failed to show that a rising level of imports have caused them serious injury, the case will come to a close.
In written arguments submitted to the ITC yesterday — ahead of the commission’s “injury hearing” on August 15 — SEIA expounded on its criticism, claiming neither Suniva nor SolarWorld could produce enough 72-cell modules required to meet demand in the fast-growing utility-scale solar market. Increasing crystalline silicon photovoltaics imports were then pulled into the U.S. utility market — rather than flooding it — to meet that need, according to SEIA.
Domestic producers also missed many opportunities for residential business, the trade group said. “SolarWorld and Suniva failed to fully qualify their product with major purchasers,” according to the written argument. Furthermore, “both experienced complaints from a litany of dissatisfied customers over late shipments, damaged products and general product unreliability,” SEIA said.
The ITC will weigh the validity of these and other arguments in the coming weeks.