In June of 2019, the Trump Administration announced that bifacial solar panels -- panels made from solar cells that collect the sun's energy on both sides -- would be exempt from import tariffs that were originally put in place in January 2018. This was seen as a huge win for solar developers, who could see lower-cost panels coming into the U.S. as global manufacturers ramp up bifacial production.
But this week, the Trump Administration reversed course, announcing that the bifacial solar exemption would end on Oct. 28. The news is bad for solar developers and manufacturers with overseas production, but there are two companies that should be cheering the decision right now, and they're among the best renewable energy stocks to own today.
First Solar's nightmare is over
When solar tariffs were first announced, First Solar (NASDAQ:FSLR) was the clear winner -- it makes thin-film solar panels that won't be subject to tariffs, even if they're made overseas. On top of that benefit, the company has the most U.S. production in the solar industry, so it's winning a disproportionate amount of its business in the U.S.
Utility-scale solar developers would see bifacial solar panel imports as the best competitor to First Solar's solar panels, so the elimination of this competition will be huge for the company. I wouldn't be surprised to see bookings tick up in the back half of this year and margins expand slightly as a result of this ruling, so keep a close eye on the company's earnings reports.
SunPower's deals pay off... for now
No company has done more to expand in the U.S. and avoid tariffs than SunPower (NASDAQ:SPWR), and the bifacial exemption made those efforts a little less worthwhile. But now SunPower should see some additional benefit from its moves to build U.S. manufacturing.
The biggest move SunPower made was acquiring SolarWorld Americas and then installing P-Series solar panel manufacturing in its Oregon plant. P-Series panels use commodity solar cells, which SunPower could import tariff-free (up to a limit), and assembles them into a panel that's slightly more efficient than commodity solar panels. They're made for commercial- and utility-scale solar projects, so eliminating the bifacial exemption should make the company incrementally more competitive in those markets in the U.S.
Residential solar is SunPower's most important market, and the company got a tariff exemption for its back-contact solar cells, in part because it made the effort to expand U.S. manufacturing. But bifacial solar panels could have undercut the company's residential products by being more cost competitive than panels under tariffs were. I don't expect a huge windfall, but even a slight improvement in SunPower's position in the residential market will be good for the company's margins.
First Solar and SunPower get a much needed boost
Tariffs were meant to protect U.S. companies and manufacturing, and I think the elimination of the bifacial tariff exemption will do just that. The exemption was potentially a very large loophole; now First Solar and SunPower should be able to benefit from their U.S. manufacturing and their respective exemptions from tariffs on solar imports.
The problem is that tariffs are only set to last through January 2022, so they need to turn today's benefit into profitable operations. This is a boost they need -- now it's time for the rubber to hit the road.