Solar energy firms seem to be in a very dark place presently, and it seems unrelated to this week’s dramatic solar eclipse. At Fisher Investments, we’ve long held government policy on solar seems very misguided, and in another example of overall confused government policy, the US Department of Commerce recently decided to make solar energy even more expensive last week.
The agency, acting on a petition from several US and German-based firms, decided to enact tariffs on Chinese solar panels. The firms claim these panels are artificially cheap—their prices depressed by government subsidies. Thus, the argument goes: American manufacturers are unable to compete, and jobs are lost along the way. Hence the government involvement, which amounts to two separate tariffs—a minor countervailing duty of less than 6% brought in March and last week’s much larger 31% - 250% de facto Chinese panel sales tax.
Tariffs are exactly that—a tax. Which means the users of these now-more-expensive panels face higher costs that they either must eat or pass on to consumers. In our view, wherever possible, businesses will likely do the latter. And that means solar energy may well have gotten more expensive. In some cases, much more expensive.
Considering other government policies—like subsidies given in the form of loan guarantees to producers, installation tax credits and more—operate on the presumption cheaper solar would be better, we’ll admit to being mystified as to why the tariff’s likely outcome is remotely desirable. Fact is, if you want solar to gain share, become self-sufficient sans subsidy and actually work sustainably, what you likely want is cheaper solar power generation. That’ll likely require cheaper panels … like the ones China seemed more than happy to provide. (As our boss Ken Fisher discussed here, some major competitors are busy getting even cheaper all the while.)
Now, some will note the Chinese government providing these cheap panels may have cost American jobs in the process. Which is possible in some respects, but isn’t the full picture. You see, many installers use cheap Chinese panels because they’re … well … cheap! If their costs rise, that means installers—and over 50% of solar jobs are in installation, far more than manufacturing—may hire fewer or actually lay folks off. What’s more, to the extent American businesses might be inclined to use solar panels to power factories, storefronts, etc., more expensive panels hurt them. We strongly doubt many US politicians thought that all the way through when championing this legislation.
And now, it seems China may be (predictably) giving the US a taste of its own medicine. Friday, the nation announced it would investigate US alternative energy subsidies on the grounds some might violate international trade law. For those keeping score at home, that’s exactly how the US tariff saga began.
Here’s the good news: Solar, even after increasing share in recent years, is a minute portion of the American economy. So however the government tinkers—currently, with policy so directionless it seems leaders may actually have been blinded by an eclipse—it isn’t likely to have huge consequences, should matters remain within green energy.