Keeping the Lights On: solar manufacturers and installers face an uncertain market

Keeping the Lights On: solar manufacturers and installers face an uncertain market Caleb Diehl

In the wake of a landmark trade case, the solar industry faces an uncertain future.


On a sunny afternoon in a Beaverton suburb, longhaired solar installers from Portland-based Elemental Energy heft panels from a crate stamped “Made in Korea.” Along with the 290-watt Hyundai model, Elemental sources panels from Malaysia, Canada and, of course, China, whose government-subsidized solar manufacturing sector cranks out notoriously cheap products.

Beneath coils of red and green cables in the workers’ van hangs a “Sun at Work” sticker with a link to Solarworld.com. SolarWorld Americas Inc., a Hillsboro-headquartered solar manufacturer and one of the largest in the U.S., also supplies panels to Elemental.

SolarWorld only recently reentered the panel-manufacturing game, propelled by a landmark trade-case win this September. SolarWorld and Suniva, two of the nation’s largest solar manufacturers, argued that cheap imported panels, mainly from China, had caused serious harm to U.S. manufacturers. The International Trade Commission ruled unanimously in their favor. Trade officials reccomended restrictions to President Trump on Tuesday, including tariffs of up to 35% on imported panels. 

IMG 0536An Elemental Energy installer hauls a panel to the roof

In the aftermath of SolarWorld’s victory, the embattled Pacific Northwest solar-manufacturing sector could make a resurgence. Ten percent of SolarWorld’s laid-off workers have returned, and the company has added 200 brand-new jobs.

But a win for manufacturers like SolarWorld could spell harm for installers and other downstream jobs, unless trade remedies are crafted wisely. Even then, the curtain might have already fallen on the state’s solar-manufacturing cluster.

The problems started a decade ago. Between 2008 and 2013, China dropped the global market price for solar panels by 80%. Imported solar components from China and other countries quintupled from 2012 to 2016, flooding the U.S. market as Chinese solar manufacturers increased production by 700%.

Chinese subsidies fueled the boom: The government used tax credits to lure solar manufacturers to its shores, then provided companies with cheap, skilled labor. Chinese officials also created space for large semi-automated factories and added renewable energy to one of the seven categories of businesses that receive special government attention.

“The market price is really being controlled by a Chinese political decision,” says Karl Unterschuetz, business development director at Itek Energy, a Bellingham, Washington-based manufacturer. “It becomes difficult to compete when there’s a huge volume of material. Prices start going down and down and down.”

Two trade cases in 2012 and 2014 imposed antisubsidy and antidumping restrictions on China, but manufacturers in that country pivoted, moving operations to smaller Southeast Asian nations to circumvent the new rules.

IMG 0535The Elemental Energy van

At its peak, Oregon’s solar manufacturing cluster consisted of SolarWorld, Sanyo Solar (now Panasonic), and around a dozen suppliers that, in total, employed somewhere around 2,000 Oregonians. These manufacturers received tens of millions of dollars in incentives and tax breaks.*

“We did quite a bit to prop the industry up,” says Colin Sears, a business recruitment officer at Business Oregon.

Still, it wasn’t enough.

Between 2012 and 2016, nearly 30 U.S. manufacturers shuttered factories. Panasonic announced this September that it would close an Oregon solar-power plant, costing 92 jobs. The last solar panel and module manufacturers left standing in the Pacific Northwest were SolarWorld, Itek Energy and PureSolar.

“A surge of imports has all but decimated the domestic solar cell and panel manufacturing industry,” said SolarWorld CEO and president Juergen Stein in an email.

As manufacturers languished, solar installers saw explosive growth. The flood of cheap solar panels from China and other countries, combined with state and federal tax credits, made solar installations affordable — and practically a no brainer.


“We did quite a bit to prop the industry up" —Colin Sears, a business recruitment officer at Business Oregon


Back in Beaverton, as Elemental Energy workers harnessed themselves to the roof, preparing to install the west-facing array, owner John Grieser pulled up the cost of the installation on his smartphone.

The roughly $16,000 project, after a discount from the Beaverton-sponsored Solarize initiative and local and state tax credits, cost the homeowner just around $2,000 — money that will be recouped in energy savings. (The city will install a net meter that compensates the homeowner for excess power he sends back into the grid.)

Elemental has just about doubled its revenue each year since opening in 2010. The installer opened a Bend office and now completes installations throughout Oregon, and as far afield as Hawaii and Cambodia.

The company’s experience is representative of the industry. Oregon shot past 10,000 residential solar installations in 2015. Since then that number has continued to climb. From 2016 to 2017, the Oregon Department of Energy issued 2,000 tax credits to Oregon residents for solar installations.

IMG 0531An installer from Elemental Energy harnesses up

While residents have benefitted from the low cost of solar in the past few years, large commercial utility projects have seen even bigger gains. Notable utility-scale projects in Oregon completed in the last fiscal year included a $10.7 million installation in Klamath County, a $2.3 million project in Klamath Falls and a $19.4 million project in Lakeview. Those three projects alone generated a combined 15.6 gigawatt-hours of electricity per year. The largest commercial installation in Oregon is the Outback Solar project near Lakeview.

“Just in the last two years, we’ve seen utility scale solar taking off in Oregon,” Grieser says. The price for commercial scale solar clocks in below $3 per watt, according to the Department of Energy. “The gains in cost reduction the industry has experienced have far exceeded any of the most wishful projections.”


“A surge of imports has all but decimated the domestic solar cell and panel manufacturing industry"
—SolarWorld CEO Juergen Stein


 

Manufacturers are not so exuberant. In Oregon, SolarWorld is pinning its hopes on the president's descision; the next stage is for Trump to decided whether we will impose the trade restrictions recommended by the ITC. Beginning on Nov. 13, he will have 60 days to decide. The company has asked for temporary tariffs of $.25 per watt on cells and $.32 per watt on modules, and quotas of .22 GW for cells and 5.7 GW for modules.

That would raise the price of foreign panels, leveling the playing field for U.S. manufacturers but raising the cost of materials for installers and consumers. “The hard, cold fact about international trade cases is there are always winners and losers,” says Jeffrey H. Dorfman, a professor of economics at the University of Georgia.

The trade commission ruling exposes the divide between installers and manufacturers. Trade associations like the Oregon Solar Energy Industries Association claim protectionist policies could slash 88,000 solar industry jobs.

Dorfman noted in a Forbes op-ed that manufacturers only employ 8,000 people nationwide, compared to the 240,000 people who sell and install the panels. Oregon added nearly 3,000 solar jobs between 2015 and 2016, and the vast majority of these are in installing and other downstream industries.

SolarWorld disputes the OSEIA’s job loss figures. “Some of the same parties made similar scare-tactic claims about earlier trade cases,” said Stein, “claims that were never realized as the solar industry kept on growing and thriving.”

The manufacturer says tariffs would add 35,000 manufacturing jobs, in addition to multiplier effects in related industries. Itek Energy’s Unterschuetz says a healthy manufacturing sector could create jobs in aluminum extruding, research and development, shipping, and glasswork, among other areas.

IMG 0534Workers prepare to bolt the panels to the roof

Installers take another approach. A tariff would raise the price of foreign products to more closely match those of U.S. panels. But Grieser, who believes low-cost solar is the key to solving global environmental challenges, offers another solution: Subsidize U.S. manufacturers — the same strategy China used to make its panels so cheap in the first place.

“Do we want to let things continue as is, which is amazing, incredible reductions in cost and large-scale projects starting to take off around the country?” Grieser asks. “That would mean the demise of SolarWorld, and Suniva and all domestic manufacturing. There’s got to be a way to incentivize domestic solar manufacturers that doesn’t cut the industry off at the knees right as it’s beginning to pick up its pace.”

Other financial solutions that would aid manufacturers include investment in workforce training and technology, integrating manufacturing and installations firms to cut costs, and loan support.

But even if these solutions came to pass — and Grieser admits that in the current political climate, such solutions are probably a pipe dream — manufacturers probably won’t have a resurgence unless they get protection from imports, Dorfman says. Business Oregon’s Sears agrees that manufacturers need at least modest tariffs to survive. “At this point, I don’t think there’s anything else we can do,” he says.

Imports from other countries besides China further complicate the situation. Even if Trump slaps a tariff on Chinese imports, manufacturers there could still sell through third-party distributors in countries like Canada and Singapore. Plenty of other nations also ship cheap panels to the U.S. “It’s hard to know where they’re actually coming from,” says Unterschuetz.

IMG 0529Elemental Energy's 290-watt Hyundai panels

There may be a third path. Encouraging advances in the quality and efficiency of U.S. materials could give domestic manufacturers a competitive edge in the global market without relying on trade protections.

Itek has fortified itself somewhat against Chinese imports by staying small and focusing on high-quality, high-power modules. This October, the company opened a 48,000 square-foot Bellingham factory.

Though the manufacturing outlook is grim without trade protections, “we actually have some opportunity, despite whether the protections go into place,” says Unterschuetz.“We feel like we can carve out a niche.”

Itek produces about 150 megawatts per year, compared to SolarWorld’s 500 megawatts. The Washington company manufactures modules capable of producing 365 to 370W, compared to 325W for the average 72-cell Chinese panel.“ It’s like the difference between buying a Honda and a Mercedes,” Unterschuetz says.

The market for those panels ranges from island residents in the Puget Sound to city governments. Itek has completed commercial-scale projects for the Bainbridge Island City Hall, King County Aquatic Center and the University of Washington Bothell Library.


"It’s a young, maturing industry, so around every corner is a new challenge." —John Griesser, CEO of Elemental Energy


 

Even without the trade case, installers face a few challenges of their own. Their biggest worry is the possible loss of the Oregon Residential Energy Tax Credit, which will expire at the end of 2017.

The impact of the credit on residential solar will be much more pronounced than the effect of tariffs, Geiser says. Residents will still keep their federal energy tax credits, but those pale in comparison to the state’s residential incentive program, which has made Oregon one of the most solar-friendly states in the country. The RETC is one of the largest statewide program that supports residential solar systems.

Dramatic cost reductions in residential and commercial solar projects over the past few years have created a power source good for the environment and cheaper than gas and coal. What’s still unclear, however, is which jobs, industries, states and countries will reap the economic rewards of the clean-energy market.

Grieser is philosophical about the road ahead. “They call the solar industry the solar coaster for a reason,” he says. “It’s up, down, left, right. It’s a young, maturing industry, so around every corner is a new challenge. Dealing with these issues is nothing we’re not used to by now. We’re all pretty weathered.”

Caleb Diehl

Caleb Diehl is a reporter at Oregon Business

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