Solar Eclipsed

It seems like boom times for U.S. solar. With demand skyrocketing, about $11 billion worth of solar power is set to be installed this year, and more than five times that amount is coming down the pike. Solar is employing 100,000 Americans, a number that rose by 7% last year even as overall employment barely grew at all.

But even as solar power thrives in the U.S., many think the business could be growing faster–and creating more American jobs–if it weren’t for alleged foul play by China, the country’s biggest solar rival. “The Chinese are eating our lunch,” said Michigan Representative John Dingell, a Democrat, during a congressional hearing on renewable-energy funding. The feeling resonates with politicians who fear the U.S. is losing its edge because of unfair trade practices abroad, especially in China. In his State of the Union speech last month, President Obama vowed to take action “when our competitors don’t play by the rules.” But despite the ripe political climate for erecting trade barriers, the solar industry is split about the merits of protection.

The division is simple. If you’re a customer buying solar panels or running a business that installs or services them, you’re doing well. But if you make solar modules–especially in the U.S.–your balance sheet looks ugly. That’s because solar power is getting much cheaper: prices for modules have dropped 40% over the past five years. “The good news for solar is that it’s rapidly getting less expensive,” says Kevin Lapidus, a senior vice president at the solar-services company SunEdison. “Eventually we’ll sell solar the same way we sell anything.”

But some U.S. manufacturers believe cheap imports from Chinese panelmakers, which receive billions of dollars in aid from Beijing, are causing the nosedive in solar prices. As a result, China now produces three-fifths of the world’s solar panels–a proportion that is likely to increase. “Western manufacturers cannot survive this,” says Ben Santarris, spokesman for the U.S. arm of SolarWorld, a major German panelmaker.

Last year, those concerns prompted SolarWorld, on behalf of seven solar manufacturers, to file a complaint of unfair trade practices by China. The Department of Commerce is investigating the case and is scheduled to make a decision by March 2. If Commerce and the U.S. International Trade Commission side with SolarWorld, the government could slap hefty tariffs on imported Chinese panels–as much as 50% to 100% of the modules’ value. The Obama Administration has punted on the issue in the past, partly out of fear of igniting a trade war with Beijing, which has already threatened retaliatory action.

There are other qualms. While tariffs might help some U.S. manufacturers in the short term, both consumers and the larger domestic solar industry would likely suffer if the resulting higher prices hampered demand. A recent study commissioned by the Coalition for Affordable Solar Energy (CASE)–a trade group of solar companies that oppose tariffs–found that a 100% tariff on imported modules would result in a net loss of as many as 50,000 jobs in the U.S. over the next three years and would cost consumers up to $2.6 billion; a 50% tariff could eliminate up to 43,000 jobs and cost consumers up to $2.3 billion. “The analysis makes it clear that tariffs on polysilicon solar cells would be devastating for American workers,” says Jigar Shah, president of CASE.

That might sound surprising; after all, tariffs are supposed to protect domestic workers. And a coalition of U.S. solar manufacturers that support tariffs noted that the study was “highly speculative” and depended on optimistic projections for solar growth in the years ahead. But installers and service providers point out that manufacturing jobs make up less than a quarter of the roughly 100,000 jobs in the U.S. solar industry, with far more found in maintenance, installation, sales and service. In that way the solar industry is like the U.S. economy as a whole. Despite all the lip service politicians give to factories, less than 10% of American jobs are in manufacturing, down from around 30% in 1950. “The jobs in this industry are increasingly found outside of manufacturing,” says Lapidus.

The question is whether China’s protections, if left unchecked, would give it a leg up in other areas of solar in which the U.S. remains competitive. A recent government study suggests American solar companies still have an innovation edge over their Chinese counterparts. Of course, environmentalists say the focus of any solar policy should be the planet, and that means making solar power cheaper faster. “China’s focus on renewable energy and high technology is here to stay,” wrote Melanie Hart, an energy analyst for the Center for American Progress, in a recent research note. “That can be a great thing for the U.S.” as it seeks to create a greener economy. The real war over solar isn’t the U.S. vs. China–it’s solar vs. fossil fuels, and victory is still up for grabs.