A friend of mine recently asked me for my thoughts on what the solar industry would look like in five years. My first inclination was to say, “It depends.” But the dark circles under his eyes, furrows in his brow, and wringing of hands told me it wouldn’t be a good idea to be so flip.
While my initial reaction still stands—it really does depend—here are the two issues that will determine how the solar industry will look in 2020.
What Happens With the Investment Tax Credit (ITC)
Most people reading this blog know what the ITC is, but in case you’ve been out of the loop for the past two years, I’ll summarize. The ITC has been the driving force behind the explosion of growth in the utility-scale and commercial solar markets (as well as residential). It provides developers with, as the name implies, tax credits for the development of solar projects. In other words, companies that invest in solar can lower their federal taxes. Since corporations are always looking to lower their taxes, this encourages them to install solar.
Right now, the ITC is 30%, but it’s set to drop to 10% for utility-scale and commercial projects (and will disappear completely for residential projects) in 2016. The last time the expiration date loomed in 2008, the Solar Energy Industries Association (SEIA) fought hard and succeeded in getting it extended until 2016. President Obama recently called for a permanent extension of the ITC, which was music to most solar industry ears.
Here’s the challenge: The makeup of the Congress has changed significantly since 2008, so it’s going to take a Herculean effort to get an extension—but it must happen.
The industry currently employs more than 174,000 people. If the ITC drops as planned, experts are projecting significant job losses.
Please read that again: jobs will be lost. Can an economy still recovering from the 2008 financial disaster take that kind of hit? To be determined.
If there is no extension, I fear that solar markets will be dramatically smaller by 2020, and all the extensive gains of the past five years will be washed away like so much limestone in a stream. So all of us have to work our fingers to the bone to make sure the ITC is extended.
Will the Trade War Ever End
There’s nothing quite like a self-inflicted wound to make my blood boil. Such is the case with this idiotic, offensive, and downright dastardly trade case against Chinese panel manufacturers by a certain company (I can’t even bring myself to write its name).
This nonsense started with a complaint to the US International Trade Commission in 2012, alleging the Chinese were dumping panels into the United States at below-market prices. The company won and got punitive sanctions slapped on all panels coming from China. In 2013, however, a World Trade Organization (WTO) panel judged that the US’s actions were rule breaking and that it amounted to illegal protection of its own solar producers. Ignoring the WTO finding, the company filed another complaint to close the loophole that allowed Chinese manufacturers to move manufacturing to other Asian countries to avoid the tariffs. It won again, and more tariffs were imposed. Now rumor is that the company will file another complaint soon to chase the Chinese out of Malaysia. Enough already.
This trade war, started by a company that can’t compete in the open market, has raised prices of panels so that US solar companies pay more than in any other country. It has already added nearly 15 cents per watt to the price of a solar system—that’s an additional $750 to the cost of an average residential system.
It’s halting investment in innovation and jobs in the US solar industry. Dow Corning and REC Silicon have pulled out of US manufacturing expansions because of retaliatory tariffs by the Chinese against American producers of polysilicon, a major component of solar cells. This solar trade war is an economic textbook example of why tariffs do not work. It’s nonsense for these trade cases to go on, raising solar prices and stunting the growth of the industry long term.
If industry efforts are successful in finding a negotiated settlement sooner than later, then we’ll see solar expand exponentially in the United States to 2020 and beyond.
Call me crazy, but I’m optimistic about what solar will look like in 2020. I believe the industry will succeed where Sisyphus (with his boulder constantly rolling back down the mountain) failed. We will get the ITC extended. I also believe that the company will eventually come to its senses and settle, which will provide pricing certainty and expand the industry in all its segments.
As a result, solar will be the leading new energy source in the United States by 2020. Never forget, you heard it here first.
Have a tip for CleanTechnica, want to advertise, or want to suggest a guest for our CleanTech Talk podcast? Contact us here.