When the Trump Administration announced tariffs on solar cell and module imports in January, it was intended to give manufacturers an incentive to bring manufacturing plants to the U.S. Asia has a vast majority of the world's solar manufacturing capacity, and protectionism was seen as a way to bring some of those jobs here (although lost installation jobs would likely vastly outnumber manufacturing jobs).
Surprisingly, there's already been some movement in expanding manufacturing capacity in the U.S. Is President Trump's strategy working?
China's big investment in the U.S.
PV Magazine reported early Monday that JinkoSolar (NYSE:JKS) has agreed to build a $410 million factory in Jacksonville, Florida with the help of at least $23 million of incentives from the city. JinkoSolar has been eyeing a factory in Florida for a few months, and the tariff announcement was apparently enough to push the deal over the edge.
Details are sparse, but it's safe to assume that JinkoSolar will be producing solar modules at the plant and potentially some solar cells as well. It'll be able to take advantage of some of the 2.5 GW of tariff-free solar imports, although until we know the plant's capacity it will be tough to determine exactly how much of that capacity it intends to use. And the company said it would hire about 800 workers to run the facility.
JinkoSolar also happened to announce a 1.75 GW supply agreement of solar modules over approximately three years with a "U.S. counterparty". Having locked up demand, it may be comfortable building the supply to serve the market.
There are other manufacturers eyeing the market as well. Three Taiwanese cell manufacturers formed a company called United Renewable Energy, and also intend to build a module assembly facility with up to 1,000 MW of capacity. Again, details are sparse, but there's more than one company looking to build solar module capacity in the U.S.
What JinkoSolar's investment is and what it isn't
JinkoSolar hasn't announced many details, but there are some things we can infer from the announcement. One is that JinkoSolar intends to be a market leader in the U.S. and take a first mover position in the module manufacturing market. With 2.5 GW of solar cell imports exempt from tariffs, there's only so much capacity manufacturers could build to take advantage of the tariff-free capacity, so being a first mover will be an advantage.
But we also know that JinkoSolar is far from up and running. A full-scale solar plant with cell and module manufacturing could take 1-2 years to build, and even a module assembly facility will take around a year to reach production. By then, tariffs will be down from 30% over the next year to 25%, and will decline another 5% the next two years as well.
Not everyone is so excited about investing in the U.S.
As some Asian suppliers advance their U.S. manufacturing plans, U.S. based SunPower (NASDAQ:SPWR) has toned them down. The company halted a $20 million expansion that would increase its U.S. manufacturing capacity until it knows whether its cells will be exempt from solar tariffs. If they're not, the company's cells may be expensive enough that they'll be priced out of the market.
Time will tell if SunPower indeed slows down its manufacturing investment in the U.S., but if it makes sense for any company to move production here I would think it's SunPower.
A manufacturing renaissance at a cost
While some solar manufacturing may move to the U.S. because of tariffs, there's going to be a cost for the industry. GTM Research estimates that about 10% of the U.S. solar market will be lost because of tariffs, costing the industry about 23,000 jobs (installation is much more job-intensive than manufacturing).
For JinkoSolar, it's not yet clear that the investment in a new plant will even be profitable given the rapid reduction in tariffs from 30% in year one to 15% in year four. But it wants a foothold in the market, and that's notable because manufacturers look like they're ready to fight to stay in the U.S.