Impact of the US/China trade deal on solar

china us solar agreement

Over the last two years, one of the primary stories in the solar has been the ongoing trade dispute between the United States and China. From tariffs on imported solar panels from China to a sharp decline in imported American polysilicon to China, the political back-and-forth has developed a sense of uncertainty around the solar industry in this country. However, with January 15th's Phase 1 trade deal, the solar industry can breathe a partial sigh of relief. Here are a few of the immediate ramifications of the agreement and how this initial trade deal may ease future uncertainty for solar in the US.

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Over the last few years, the US-China trade war has left no part of the solar industry unspared. In January 2018, the Trump Administration levied a tariff against imported solar goods under Section 201 of the Trade Act of 1974. The tariff focused on the components of solar panels–either the components of solar panels or fully assembled modules–and began at 30%, gradually declining by five percentage points per year over four years. (Note: This tariff was levied against goods from countries other than China.)

The following product hit was solar inverters, a part of the large suite of imported Chinese goods tariffed under Section 301 in the fall of 2018. These duties began at 10% and increased to 25%. Finally, energy storage systems were also tariffed, with the US Trade Representative increasing duties on imported lithium-ion battery cells–which China is the primary manufacturer of globally–from 10% to 15% in September of 2019.

It's worth noting that it wasn't exclusively imported solar equipment that was impacted, but also American solar exports. Specifically, US solar-grade polysilicon manufacturers were adversely affected by Chinese tariffs, effectively cutting off American polysilicon producers from one of the world's largest buyers.

The first impact of the US-China Phase 1 trade deal is on energy storage: the trade deal cuts tariffs on imported lithium-ion battery cells in half, reducing them from 15% to 7.5%. Given that China accounts for nearly two-thirds of lithium-ion battery manufacturing globally and that much of America's energy storage capacity is imported, this decrease in tariffed prices will impact the affordability of home energy systems.

The second primary, immediate impact of the Phase 1 deal is that US polysilicon manufacturers can now export their products to China again. Solar panels are made using high-grade silicon, which forms the basis for solar cells. Solar-grade polysilicon is the primary building block for solar panels and the semiconductor industry, making it a vital international resource.

During the trade war, China imposed tariffs on imported polysilicon from American manufacturers, effectively shutting out US producers from one of the largest markets in the world. The impact was swift and extensive: several companies, including REC Silicon and SunEdison, were forced to either table plans for expansions or shutter their operations entirely.

As a part of the Phase 1 deal, China has agreed to reopen its borders to imports of American-made polysilicon, potentially paving the way for a rebirth of that industry in the US.

However, despite the minor, momentary relief for the solar industry, tariffs remain on various imported solar products. While the tariffs and ongoing threat of the trade dispute have led to a slight uptick in solar manufacturing capacity in the US–with Hanwha, LG, Panasonic, Silfab, and Jinko all purchasing or building manufacturing facilities in the US–the price is ultimately borne as a tax on solar shoppers. EnergySage found that the tariffs imposed a quarter-billion dollar tax on American solar shoppers in the first nine months after the US International Trade Committee's finding of injury to the solar industry. Decreasing or removing these tariffs on imported solar equipment would improve the economics of solar for all Americans.

There's never been a better time to go solar in the US. With solar prices declining and the solar Investment Tax Credit disappearing over the next couple of years, now is the time to get the best deal on solar. And regardless of the long-term impact of the US-China trade deal, you can be sure that you'll receive a very competitive price for solar with quotes from EnergySage's installer network. To see how much solar could save you on your monthly electricity bills, register for a free account on the EnergySage Marketplace.

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