When the Trump administration announced on Monday that it would be applying a tariff to imported solar panels from countries like China, South Korea, and Malaysia, it didn’t come as a surprise to Alpha Solar Group founder and CEO Shelley Cohen.
“We’ve been anticipating this,” she says. “We’re learning that we can’t have all our eggs in one solar basket.”
Based in Washington, D.C., Cohen’s company develops solar projects throughout the mid-Atlantic. It’s headquartered just a few miles from a presidential administration that has repeatedly dealt blows on the solar industry. The White House’s latest shot, a four-year tariff on imported solar panels that begins at 30 percent in 2018, is a supposed attempt to ramp up manufacturing efforts at home. The more immediate effects, though, likely will be on installers throughout the U.S.: Currently, 80 percent of panels installed here are manufactured abroad.
Entrepreneurs in the industry are worried. Alpha Solar Group has been looking at other business offerings, like energy storage. The company is already in talks with other founders about partnering up to offer energy planning services to new markets. “We have to stay flexible and a little nimble,” Cohen says, “and be prepared to offer other services to our customers to make sure we can still stay in business.”
The solar industry first became nervous about the possibility of tariffs soon after President Trump took office, given both his stated disdain for imported goods and his general lack of support for green energy. This past summer, when two bankrupt solar companies invoked a seldom-used law to request a government review of U.S. trade practices, industry experts began to believe such a tax was coming.
At that time, Alex Saenz, founder and CEO of solar installer U.S. Green Energy Technologies, went right to the source: the manufacturers.
“They were all very candid,” he says. “They said it would affect them dramatically.”
Indeed, many solar manufacturers began increasing their prices throughout the past several months in anticipation of what might be coming. That has led Saenz, whose San Diego-based startup has 24 employees, to look for ways to cut back.
“We’ve already looked at downsizing our building,” he says. “Of course, employees are another place where you can cut, unfortunately. We don’t want that, but it’s just a fact. The residential market is tight as it is. The profits are not extravagant.”
This week, the Solar Energy Industries Association (SEIA) estimated that 23,000 U.S. jobs would be lost this year as a result of the tariff. The solar industry currently employs about 260,000 people, only about 1 percent of which are in cell and panel manufacturing.
“It’s another shortsighted plan by the Trump administration,” Saenz says. “They say they’re protecting American jobs, but they’re costing Americans jobs in other places. It doesn’t make any sense.”
“You scratch your head.”
The tariff’s effects could extend far beyond the industry. “It’s not just solar workers who are going to lose their jobs,” Cohen says. “We use electricians. We use structural engineers and geotechnical engineers. All these businesses are fueled by the installation of solar projects. Once these projects are delayed or put off, that has a domino effect on the support industries.”
Entrepreneurs say the solar sector has already seen funding for new projects slow down in recent months, with several commercial and utility-scale projects being put on hold or canceled. The SEIA claims the tariff will result in billions of dollars of canceled investments in the solar industry.
It’s the latest action from a presidential administration that has repeatedly prioritized fossil fuels over the renewables sector. After campaigning on the promise of bringing back coal jobs, Trump announced in June that the U.S. would pull out of the Paris climate agreement, an accord that has the participation of every other country in the world. The president has since rolled back emissions regulations and passed a tax reform bill that reduces incentives for solar and wind energy and electric vehicles.
Still, not everyone in the industry is worried about the tariff. David Murray, co-founder and CEO of Los Angeles-based Greenspire, doesn’t expect to feel much impact. For his company, which had a 2016 revenue of $42 million and finished at No. 9 on last year’s Inc. 500, solar panel installations account for about 80 percent of its business. The company also equips HVAC systems with smart controls and installs security systems.
“There are 90 different ways that I can cut costs,” Murray says. “In the grand scheme of things, this will only raise our costs 1 or 2 percent. We can cut costs by 1 percent elsewhere, whether it’s reducing our installation times or making our marketing channels more efficient. Or we can raise our price by 1 percent.”
The startup, which does much of its business in California, also has the luxury of operating in a state that offers tax incentives for customers. States like New York, Massachusetts, and Colorado have similar programs, which provide companies a degree of insulation from federal meddling.
For New Orleans-based PosiGen, the crunch might be a little tighter. “Any price movement we see in Louisiana is magnified a little bit by the fact that we don’t have a state rebate,” says co-founder and CEO Tom Neyhart. “That forces us to pay very close attention to where our price points are.” He says his company, which had a revenue of $55 million in 2017, offset the rising costs by bargaining with its installers and other material vendors, like the ones that make its racking systems. “A smaller company might not have the same negotiating power,” he says. “I think it’ll squeeze some.”
The entrepreneur is baffled as to why the federal government’s actions don’t align with the views of its constituents, pointing to a 2016 Pew poll that found 89 percent of Americans believe the U.S. should invest more in solar. “We’ve had bipartisan support up until these recent occurrences,” he says. “Solar is renewable. It’s clean. We’re not burning anything to create electricity.” Not to mention the fact the industry also creates jobs.
“The majority of people believe that it makes sense,” Neyhart says. “Then you look at the way we do things and you scratch your head.”
This article was originally published in Inc. by Kevin J. Ryan