Here's Why Solar-Panel Stocks Have Gotten Killed in 2018

The dual impact of tariffs on most panels imported into the U.S. and a huge change in China's internal solar policy have slashed global demand. The resulting oversupply has sent panel prices down 30%, taking a huge bite out of panel-maker profits in 2018.

A full transcript follows the video.

This video was recorded on Dec. 20, 2018.

Nick Sciple: Let's talk about the segment of the market that probably has suffered the most from that cyclicality. That's the solar panel makers and manufacturers. Earlier this year, we saw President Trump put in place a 30% tariff on imported total solar panels. However, even in spite of that, taking a lot of this imported supply, making it more expensive, we've still seen solar panel prices decline significantly over this past year as demand has fallen. Do you want to talk a little bit about what's going on with that over the past year or so?

Jason Hall: Initially, at least in theory, the way it was presented was that the idea behind the panel tariffs that were put in was that it was supposed to create incentive to bring solar manufacturing to the U.S. Frankly, that hasn't happened. There were a few projects that were announced. I know that First Solar is making a big expansion, but they're expanding a facility where they were already doing some domestic manufacturing. Ironically, their solar panels are excluded from the tariffs anyway, because the thin film technology they use is not the same monocrystalline multicrystalline technology that's where the tariffs are.

Hanwha Q CELLS announced a big plant in Florida that was supposed to add like a thousand jobs. It was going to be a huge deal. After multiple revisions, what they're saying now is, it's going to create 50 or 100 jobs, and it's going to be completely assembly. They're taking cells that are still being manufactured overseas, shipping them into the United States and assembling them into panels.

Frankly, the tariffs haven't generated anything like what was purported to be the job creation and bringing solar panel manufacturing to the U.S. Now, a couple of reasons why that's happened. Probably the biggest short-term reason is the U.S. announced these tariffs early in the year. Close to the middle of the year, China made some substantial changes to its domestic distributed solar policy, which absolutely cratered demand for panels. Panel prices have plummeted since then because you have this massive overcapacity. It's like oil. OPEC has announced this cut of oil because there's too much oil. The idea is, that should restore some supply and demand. Essentially overnight, we had a massive oversupply of solar panels. Solar panel prices in the U.S. have actually fallen more than the amount of the tariffs because of this massive cut in China's domestic program to add distributed solar. You could actually buy solar panels in the U.S. today for your house, theoretically, for cheaper than you could have a year ago. [laughs] That's where we are.

The end result is, you think about an industry that's already a fairly commodity product, companies like Canadian Solar, Jinko Solar, who by revenue are two of the biggest solar panel manufacturers, and the vast majority of their manufacturing happens in Southeast Asia. They sell a commodity panel. It's a low efficiency panel and they lead on price. They've had to slash their prices because demand has evaporated in China.