The battle between U.S. and Chinese solar manufacturers continues to get worse according to Friday's announcement by the Department of Commerce that they were adding a very punitive anti-dumping tariff to Chinese and Taiwanese solar manufacturers. The announcement has a far-reaching impact on the industry and investors alike.
Last week's anti-dumping tariffs will be placed on top of the anti-dumping tariffs announced in June and will make it next to impossible for Chinese manufacturers to be competitive in the U.S. Here's a look at what's going on and how investors should look at it.
What tariffs will look like
The anti-dumping tariffs, like the anti-subsidy piece announced in June, depend on the manufacturer. Here's how they look right now.
- Trina Solar will pay a 26.33% anti-dumping tariff.
- Renesola and JinkoSolar will pay a 58.87% tariff.
- 42 other manufacturers will be subject to a 42.33% tariff.
- The surprise is that two Taiwan manufacturers -- Gintech and Motech -- received preliminary dumping tariffs of 27.59% and 44.18% respectively.
Keep in mind that these are on top of 26.89% anti-subsidy tariffs for Chinese manufacturers except for Suntech Power and Trina Solar, which will pay 35.21% and 18.56% respectively.
Yingli Green Energy noted that solar panels made using cells made in a third country and assembled in China using some Chinese components would receive a 47.27% tariff, about what other manufacturers would see as well.
The impact on the world's biggest manufacturers
These tariffs will have a ripple affect across the industry, including at SolarCity, which is by far the largest residential solar installer in the U.S.
SolarCity's purchases were a big driver of Trina Solar and Yingli Green Energy's growth, even into this year. Trina Solar sent 31.9% of its first quarter shipments to the U.S., up from 16.3% in the fourth quarter. After sending 20% of shipments to the U.S. in the fourth quarter, Yingli Green Energy saw that share grow to 24% in Q1 and expected 20% of shipments to come here in the second quarter.
It's likely that shipments to the U.S. will drop to nearly nothing for Trina Solar and Yingli Green Energy, and others will certainly see the same trends.
How this impacts installers
The impact won't just be felt by solar manufacturers, it'll be seen by installers in the form of higher costs. If they were buying panels from China they must have been getting the best product for the cost, meaning they'll have to pivot to new suppliers.
SolarCity is one company already doing that, agreeing to buy panels from REC Solar as well as buying panel manufacturer Silevo. The Silevo acquisition won't produce a significant amount of panels for at least two years, but the move was a nod to coming tariffs that would impact the company long-term.
What should be noted is that SunPower, which is the second largest residential solar installer in the U.S., won't be affected because it makes its own panels. Incrementally, the tariffs are an advantage for SunPower, but with residential costs higher on a per watt basis than larger systems, residential installers will only see a small impact in the pivot to higher cost suppliers.
Who tariffs help
The big impact of these tariffs will be felt on the commercial and utility scale. These projects are much lower cost overall and therefore much more price sensitive than the residential solar market.
While residential solar gets all of the publicity, it's actually commercial and utility solar that account for most of the installations -- and by a wide margin. According to GTM Research, 4,751 MW of solar were installed last year and just 792 MW, or 17%, was residential. Commercial projects were 1,112 MW. and 2,847 MW, or 60%, was utility scale.
So the bigger impact will be felt by SunPower and First Solar, which are two of the biggest utility scale solar builders in the country. They were already two of the lowest cost builders on a per kilowatt hour, or kW-hr, basis, but this will only help widen their margin over competitors and may even allow them to buy projects from other installers for cheap.
The bottom line is that U.S. based companies that make their own panels will benefit from Chinese solar tariffs. Long-term, they're lower risk for investors because they are manufacturers and have downstream projects, so they're not reliant on fickle market or political moves.
If you're thinking about jumping into solar, SunPower and First Solar should be on the top of your list. The escalation in the solar trade war is just the latest reason why.