Red states will be the real losers from Trump’s solar tariff

Red states will be the real losers from Trump’s solar tariff
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The Trump administration’s decision to raise taxes on low cost imported solar cells is a terrible idea.

Thousands of Americans will lose their jobs and, perhaps more harmfully, jobs that were on pace to be created will be delayed for years. Investment will suffer as billions of dollars in energy infrastructure investment will no longer happen. Finally, people and businesses all across the country will no longer have the opportunity to capture the energy savings low cost solar provides.

It’s simple math: Tariffs increase solar costs, higher costs mean less solar, and less solar means fewer jobs, lower investment, and reduced energy choice. 

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Trump’s new tariffs start at 30 percent and drop over the four years of the penalty to 15 percent. In terms of prices, that means an increase of 10 cents per watt on average in the first year, which ticks down to 4 cents per watt in the fourth and final year of the tariffs.

 

That increased price will mean a 7.6-gigawatt reduction in solar installations according to a Greentech Media (GTM) analysis. On jobs, the Solar Energy Industry Association (SEIA) expects a reduction of 23,000 — a loss of approximately 9 percent of the American 260,000 solar jobs. Analysis also shows that utility scale solar will be hurt more than residential solar because their margins are much tighter.

 Losing tens of thousands of jobs and billions in investment isn’t even the worst-case scenario. The analysis has only looked at the direct economic impacts of the tariffs on solar. It’s difficult to quantify the impacts of possible retaliatory tariffs that other countries may impose on U.S. exports — which would make the economic impacts of a terrible decision exponentially worse. 

But while it’s true that everyone loses with this decision, the reality is those losses will be worst in Trump Country.

The reason is simple. The biggest growth opportunity in utility scale solar is in the Southeast, Texas, and Southwest — regions that went heavily for Trump and also have important Senate elections later this year. 

In much of the country, the solar industry has been booming over the past decade. Solar jobs have more than doubled in the last five years. But that growth had lagged in key Trump states — particularly Texas and the Southeast. Those states are among the most cost sensitive and competitive electricity markets in the country — and are states where the remarkable drop in solar costs over the last decade had just recently made the economics of solar work.

Increasing the cost of solar by 10-cents a watt will mean projects aren’t built, people aren’t hired, and investment isn’t made. Specifically, GTM analysis shows that states like Texas, Florida, Georgia, and South Carolina are all among the most significantly impacted by the tariffs. Other solar states in the Midwest such as Wisconsin and Michigan will be hurt as well — states that were critical to Trump’s election.

The irony is that blue states won’t be impacted in the same way.  

The solar industry is strongest on the Pacific Coast, across the Southwest, Mountain West and East Coast. Those are all places that either have great sun, a high cost of electricity, strong state solar incentives — or all three.

Regions of the country with high electricity prices — places like California and Massachusetts — are places where the economics of solar will still work. Electricity markets in the Northeast and on the West Coast will see lower margins for solar developers but don't expect lots of cancellations. Expect to see smart states take steps to protect jobs and lessen the impact of the tariffs. 

Because California is far and away the largest state for solar jobs — more than 100,000 as of last year — expect them take the biggest reduction in pure numbers in jobs. But don’t be fooled, the opportunity cost that red states will pay in jobs never created and investment never made will be largest.                                      

What makes this all so nonsensical is that these solar tariffs won’t lead to any significant increase in U.S. solar cell manufacturing. It is the rest of the solar manufacturing supply chain that will be hurt the most.

The U.S. is home to great companies that build solar racking systems and other electrical components utilized in solar installation. By one estimate there are 36,000 U.S. jobs in the manufacturing of solar components compared to 2,000 U.S. jobs in solar cell manufacturing. As installs decline because of higher costs those U.S. component manufacturers will come under pressure. Some will go out of business.

If we do see any growth in U.S. solar manufacturing it will be small or scammy — firms importing solar cells and then fabricating them into modules here. That is the solar equivalent of making t-shirts in China and then sewing Made in the USA labels on them in Saipan.

In the end, this won’t destroy the U.S. solar industry. It’s too strong, innovative, and dynamic — and the economics are only improving. But certain parts of the solar industry are going to be hurt badly.

State policymakers and Congress have a role to play in order to keep American solar shining bright. Thanks to the solar tariff, that work will need to start in Trump country.

Tom Matzzie is CEO CleanChoice Energy, which sources renewable electricity from wind and solar farms.