The solar industry is booming in the U.S., growing from almost nothing a decade ago to 15 GW -- or enough to power 2.5 million homes -- installed in 2016 alone. Solar energy now accounts for about 2% of the electricity produced in the U.S., and as costs come down and beat fossil fuels head-to-head, the industry should continue to grow.
But there's one major risk that could derail solar energy in 2017. A little-known company called Suniva made a petition under Section 201 of the 1974 Trade Act that could derail solar energy in the U.S. for a decade. And Donald Trump could be the one deciding the industry's fate.
What is Suniva's case?
When Suniva went bankrupt earlier this year, it made a petition under Section 201 of the 1974 Trade Act that said it was injured by low-cost solar cell and module imports, which also hurt the entire U.S. solar manufacturing industry. The company asked for a price floor of $0.40 for solar cells coming into the country and $0.78 for solar modules. For perspective, this is about double what cells and modules sell for today.
If duties are approved by the U.S. International Trade Commission, they then go to the president's desk. Donald Trump could have the fate of the solar industry in his hands.
The devastation caused by solar tariffs
It's not difficult to see how tariffs could hurt the solar industry. Solar is already very price-sensitive, and raising costs by $0.40 for modules would make many projects uneconomical. GTM Research recently released a report called "U.S. Solar Outlook Under Section 201," and its projections for installations drops 57% in 2018 to just 4.8 GW, and over the next five years, 47.8 GW less solar would be installed than under the current industry prices.
The scale of installation reductions is enormous. SunPower (NASDAQ:SPWR) and First Solar (NASDAQ:FSLR), the two biggest U.S.-based solar manufacturers, project producing 1.3 GW-1.6 GW and 2.4 GW-2.6 GW, respectively, in 2017. At their midpoint, production of 3.95 GW per year would be less than half of the lost solar installations in the U.S. under Section 201.
All solar stocks would take a hit
Most U.S.-traded solar manufacturers are actually Chinese manufacturers and would take a hit if the trade case goes through. Canadian Solar (NASDAQ:CSIQ) and JinkoSolar (NYSE:JKS) are two of the biggest manufacturers in the world, and with most of their production in China, they could be shut out of the U.S. market.
First Solar has some production in the U.S. (about 400 MW), but SunPower has very little. And unless either built new capacity in the U.S., they could lose their biggest country of demand. And depending on how trade rules are written, their product produced in Asia may be subject to import tariffs as well.
Solar stocks have been surging lately as demand has outpaced projections and project values have gone up. But the Suniva trade case could upend the industry in a moment