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Federal tariff could stall solar projects until market stabilizes with domestic producers' re-entry
A community solar garden project in Farmington has been stalled until prices reduce
FARMINGTON — Solar power projects in the Four Corners and throughout the United States may be put on the back burner as federal tariffs on imported solar panels could drive up the price to invest in the renewable energy source.
In some cases, they already have been, but local utility experts hope that the costs will stabilize to an affordable rate that will benefit solar customers and domestic producers.
U.S. President Donald Trump in January recommended that the U.S. impose a 30-percent tariff on imported solar panels, citing a report from the U.S. International Trade Commission that found imported solar products are saturating U.S. markets and driving out domestic producers.
Though the volume of infrastructure installed more than tripled between 2012 and 2016. Imported solar products — predominantly from Chinese companies — account for the majority of units sold, according to information from the White House.
“China now dominates global supply chain capacity, accounting for nearly 70 percent of total planned global capacity expansions announced in the first half of 2017,” a White House fact sheet states. “… Prices for solar cells and modules fell by 60 percent (between 2012 and 2016), to a point where most U.S. producers ceased domestic production, moved their facilities to other countries, or declared bankruptcy.”
The tariffs recommended by Trump will start at 30 percent in the first year and drop by five percent each year over the next three years, according to the fact sheet.
Hank Adair, director of the Farmington Electrical Utility System, said the price of a single solar project increased by approximately 60 percent over the past six months because of both the tariff and changes in tax laws. The price hike prompted the Farmington City Council to hold off on a proposed community solar garden on March 1.
“From when we bid it — our bids closed at the end of October — till now, things have changed,” Adair said on March 12. “The tariff came into play, and also for the industrial utility side, there was some tax laws that increased, too, so both those combined increased the pricing. ... Our council said no to it the other day, but they said keep your ear to the ground, and when the price is right, we’ll bring it back, so that’s what I’ll do."
The solar tariff accounted for about 10 percent of the increase on this particular project, Adair said, but he predicted the price would stabilize in a few years.
“Now is it probably related to our (project) and the taxes and everything being kind of shook up in the solar industry? I think it is,” Adair said. “It’s kind of tumultuous right now, but once it settles down a little bit, the prices will come back down.
Warren Unsicker, CEO of Four Corners Economic Development, said Farmington’s stalling of the solar project could be a part of a larger effect as potential customers wait for prices to stabilize.
“That’s the most near-term effect that it’s having,” Unsicker said on March 12 of the increased cost of solar products because of the tariff. “It may make (domestic solar producers) more or less competitive, but some of these projects that have been in the books for ages may go offline because they can’t afford them anymore, so it’s kind of this Catch-22 where yeah, it might make us more competitive but at the same time, projects may be shelved because of the cost barrier. So it’s anyone’s guess at this point.”
For residential solar customers in Farmington, the tariffs will increase prices, but Adair said demand for residential solar infrastructure is not high in Farmington. FEUS currently has six solar customers, three of which have signed up since January, Adair said.
“The tariff will (affect customers who) are more financially based to do solar, but frankly, Farmington’s FEUS rates are so low right now that people aren’t doing it right now, based on financials,” Adair said, adding that FEUS “rates are very, very low, so there’s not a lot of financial benefit to install solar."
The tariff may have a bigger impact on commercial customers interested in solar, but Adair said large companies typically are committed to using renewable resources, citing the Target Corp., which recently installed solar infrastructure at its Farmington location.
One of the tariff’s goals is to make the market friendlier to domestic producers. Adair said he’s seen a pattern in solar products in preparing for the potential community solar garden.
“We just recently went through six bids and looking at components, I would say that a lot of it is States-based for the steel, the structure, the tracking, the stuff like that, and then the cells and modules were from overseas,” Adair said.
That trend is a change from 15 years ago, according to Ken George, director of the Aztec Electric Department, who began looking into solar power in 2002 after community interest increased.
“I don’t remember any foreign companies that we looked at as far as equipment" when he started looking at solar in 2002, George said on March 12. “I think it was all U.S. manufacturers at that time in 2002.”
Aztec eventually did invest in solar, in partnership with Guzman Energy – the one megawatt field went online in June 2016, according to The Daily Times archive. The farm's panels come from Astronenergy Solar Inc., the U.S. office of a global company headquartered in China's Zhejiang Province.
George said Aztec’s switch to solar energy is a sign of our times.
“As a nation, as a whole, we’ve come to the realization that renewable energies are going to be part of the future,” George said. “We know that they can’t cover everything, but it’s going to be a big piece for the future of power in the United States. So yeah, the tariff may hurt right now, but American manufacturers will figure out a way to get that price down so they can sell the product."
Another goal of the tariff is to strengthen the domestic industry and create jobs, and though there’s potential in the state, Adair, George and Unsicker agreed that the Four Corners area likely won’t see solar manufacturing flooding the region with its current commercial transportation infrastructure — or lack thereof.
“We have no rail, and we’re not close to an interstate, so getting the product from San Juan County out to the rest of the United States or even the world, that’s the holdup,” George said. “That’s why places like Houston and San Diego and even anything along the Mississippi River (with barges), and especially Back East, where they have rail everywhere. What do we have out here? We’d have to truck it in and truck it out, so we’re kind of hurting through the whole state as far as any manufacturing. We have a good labor pool, I think, but we have a problem getting any product moved in mass quantities.”
Megan Petersen covers business and education for The Daily Times. Reach her at 505-564-4621 or email@example.com.