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Trump Tariff on Solar Could Hamper Its Competitiveness

The Trump administration slapped a four-year tariff on imported solar cells and modules on Monday, a move that could hamper solar's competitiveness against cheap natural gas while also giving a boost to the coal industry, and which analysts say could signal that the White House is stepping back from more aggressive trade policies.

The tariff on solar cells and modules will begin at 30% for the first year, but will decline 5% annually to a rate of 15% in the fourth and final year. The first 2.5 gigawatts (GW) of imported solar cells will be exempt from the tariff, but there was no exclusion for solar modules.

U.S. Trade Representative Robert Lighthizer said the tariff, which was also levied on imported large residential washing machines, was approved by Trump following recommendations that were based on consultations with the interagency Trade Policy Committee and findings from the U.S. International Trade Commission (ITC).

According to Lighthizer's office, China currently dominates the global supply chain for solar cells and modules, accounting for nearly 70% of total planned global capacity expansions announced in the first half of 2017. China currently produces 60% of the world's solar cells and 71% of solar modules.

Although the ITC launched an investigation into unfair trade practices last May at the request of solar manufacturers Suniva Inc. and Germany's SolarWorld AG, the Solar Energy Industries Association (SEIA) said the tariff will cause the loss of about 23,000 American jobs this year, including many in manufacturing.

"While tariffs in this case will not create adequate cell or module manufacturing to meet U.S. demand, or keep foreign-owned Suniva and SolarWorld afloat, they will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs," said Abigail Ross Hopper, CEO of SEIA.

Last November, the International Energy Agency (IEA), in its flagship publication, World Energy Outlook-2017 (WEO-2017), said fast-declining costs would turn solar power into the cheapest source of new electricity generation over the next 25 years.

Irresistible 'Trumpitude'

In a note to clients on Monday, ClearView Energy Partners LLC said "at first blush, it appears that internationalist, free-market advocates within the administration may have successfully redirected the president away from more aggressive trade remedies that hew to his 'America First' policy platform and persistently strong trade rhetoric.

"Today's decision also looks more like what we have characterized as 'Trumpitude' -- situational decision-making instead of inflexible doctrine -- rather than the hard-line protectionist aspect of the president's 2016 campaign."

ClearView estimated that the tariff could increase the cost of residential rooftop systems by about 4%, and the cost of commercial projects by about 6%. The estimations were based on nationwide data from the Nationwide Renewable Energy Laboratory.

In testimony before the Senate Energy and Natural Resources Committee last week, IEA Executive Director Fatih Birol predicted that China and India would lead a host of developing countries in embracing clean energy technologies for power generation over the next several decades.

Last October, at the Energy Bar Association's 2017 Mid-Year Energy Forum in Washington, DC, Brattle Group economist Marc Chupka said the Trump administration could slap a tariff on foreign-made solar panels to help boost the coal industry. At the time, Chupka said such a tariff "might be irresistible for the administration in terms of its domestic manufacturing policy and other policy objectives."

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