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Impact of the U.S. – China trade deal on solar

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One of the primary stories in the solar over the last two years 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 deal, and the ways in which this initial trade deal may ease future uncertainty for solar in the US.

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What has been impacted by the trade dispute?

Over the last few years, it seems that no part of the solar industry has been left unspared by the US-China trade war. 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 5 percentage points per year over four years. (Note: This tariff was levied against goods from countries other than just China.) 

The next product hit was solar inverters, which were 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 impacted by Chinese tariffs, effectively cutting off American polysilicon producers from one of the world’s largest buyers. 

Decrease in battery prices imported from China

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 given that much of America’s energy storage capacity is imported, this decrease in tariffed prices will make a material impact on the affordability of home energy systems. 

Ability to export American-made polysilicon to China

The second primary, immediate impact of the Phase 1 deal is that US polysilicon manufacturers will now be able to 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 major building block for not only solar panels, but also for the semiconductor industry, making it an important resource internationally. 

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 large: a number of companies, including REC Silicon and SunEdison, were forced to either table plans for expansions or to shutter their operations entirely. 

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

Next step: reduction or removal of all tariffs on solar panels

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 has 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. In fact, 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. 

Explore your solar options with EnergySage

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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About Spencer Fields

Spencer is the Content & Research Manager at EnergySage, where he writes about all things energy. Prior to joining EnergySage, he spent five years at Synapse Energy Economics, providing environmental, economic and policy analysis for public interest groups. Spencer has degrees in Environmental Studies and Hispanic Studies from Brown University, meaning when he's not in the office you can find him outside or traveling somewhere to work on his Spanish.

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