Sunny skies have turned cloudy for utility-scale solar PV development in the United States thanks to a trade dispute that has spread from China to Taiwan, raising costs, squeezing margins and delaying and possibly threatening projects.
From the moment German-owned SolarWorld’s U.S. arm initiated trade cases against Chinese companies nearly three years ago, accusing them of benefiting from illegal subsidies and pricing their products below cost, builders and others in the U.S. industry have warned that duties would hinder growth. A first round finalized in 2012 turned out to have minimal impact, but companies and analysts say that new, broader rulings from the U.S. Department of Commerce are exacting a toll.
“It’s no longer an issue of speculation or predictions – it’s affecting projects today. Workers can’t go to work today because of these rulings,” said George Hershman, who runs the renewable energy division for Swinerton Builders, a company that has built some 350 megawatts of solar.
Utility-scale solar PV competes directly with other sources of energy for power purchase agreements with utilities, making it especially sensitive to price increases. Modules make up around half the construction cost of a project, Hershman said, and the price of modules has risen from around 60 cents per watt a year ago to “the mid 70s” now. Not all the increase is attributable to duties, but Hershman’s numbers are in line with a new report from GTM Research, which said that Chinese modules were up to 78 cents per watt this month, “17 percent more expensive than similar modules sold in the rest of the world.”
Industry analyst NPD Solarbuzz last week said the trade cases put 3 gigawatts of U.S. projects at risk.
“Large-scale ground-mount PV installations are particularly vulnerable to cost increases and potential disruption, as many have signed power purchase agreements at aggressive rates,” Michael Barker, senior analyst at NPD Solarbuzz, said in a statement. “Any increase in cost for the projects could mean renegotiation, delay, or even termination.”
The plunge from around $4 per watt for modules in 2008 had made solar PV increasingly attractive to utilities, said Martin Hermann, CEO of developer 8minutenergy Renewables, supplanting solar thermal, providing an often more compelling option than wind due to its afternoon production, and even challenging natural gas. Now, he said, the gains could be lost.
“That’s what makes this so tragic,” Hermann said. “At a time when the United States is looking for a substitute for fossil fuels, at a time when clearly PV is the most favorable option, we’re putting up obstacles.” Hermann said the duties could set utility-scale solar back two years on a growth curve that had seen the sector headed toward 10 to 12 gigawatts in annual installations by 2017 or 2018.
SolarWorld has long argued its own case of disastrous impact, saying that’s exactly what unfolded for it and other domestic manufacturers after cheap Chinese panels began flooding into the market in 2009 and 2010. According to a company representative, SolarWorld’s U.S. workforce fell by around 500 from its peak in 2011 to about 700 now. A report from the nonprofit Solar Foundation reflects a similar slide for the entire U.S. solar manufacturing sector, from 37,941 in 2011 to 29,851 in 2013.
SolarWorld’s initial wins against Chinese competition brought it brief relief, at best, as Chinese companies turned to Taiwan, mainly, for the solar cells that go into modules, thus avoiding duties. So the company petitioned U.S. trade authorities to close that loophole, and also accused Taiwanese companies of dumping products in the U.S. market. The latest rulings are preliminary, but are being enforced pending a final decision expected late this year.
The leading U.S. trade organization for solar, the Solar Energy Industries Association, opposed SolarWorld’s latest petitions, and went so far as to “condemn” the July 25 Department of Commerce preliminary antidumping finding, while continuing its call for a negotiated settlement. A week later, SolarWorld, in a letter to the SEIA that the company made public, lashed out at the organization’s “improper, divisive rhetoric and advocacy of obsolete proposals, both of which can only thwart progress toward a viable and lasting agreement.”
Meanwhile, Simerton’s Hershman said, “we’ve got projects that are either on hold or can’t get a module cost that makes sense.” Among the projects, he said, was an unnamed solar power plant in southern Utah – presumably the Redhills Renewable Energy Park, though we were unable to confirm that – where some 150 people could be at work. In all, Hershman estimated that 400 to 500 jobs through his company are on ice due to the trade dispute.
8minutenergy and partner Silver Ridge Solar last week announced two power purchase agreements with Southern California Edison totaling 401 megawatts, and a separate PPA on its own with SCE for a 51-MW plant. Hermann said those projects won’t falter, in part because California’s requirement that investor-owned utilities source 33 percent of their energy from renewables by 2020 means “the market there in a sense has its own dynamic.” Still, he said, the company will see its margin shrink and its ability to do more projects down the road in the United States will suffer.
