The US Capitol is seen as lawmakers work to avert a government shutdown in Washington, DC. - AFP pic
US President Donald Trump's move to slap steep tariffs on the imports of solar panels may have a detrimental effect on some Malaysian-based companies.
Malaysia is one of the world's leading producers of solar panels, First Solar (Malaysia) Sdn Bhd, Tek Seng Holdings Bhd
and Panasonic Energy Malaysia Sdn Bhd counting among companies that manufacture solar panels in the country for international export.
In the Sama Jaya Free Industrial Zone in Sarawak, Xi’an LONGi Silicon Materials Corp from China has invested about RM1.3bil in expanding the company's various manufacturing facilities to boost the production capacity of solar panels.
However, according to Bloomberg, President Trump may have just dealt his biggest blow to the renewable energy industry.
It said on Tuesday that Trump has approved duties of up to 30% of solar equipment made abroad, which threatens to handicap a US$28bil industry that relies on parts made abroad for 80% of its supply.
Bloomberg reports:
Just the mere threat of tariffs has shaken solar developers in recent months, with some hoarding panels and others stalling projects in anticipation of higher costs. The Solar Energy Industries Association has projected 23,000 job losses this year in a sector that employed 260,000.
The tariffs are just the latest action Trump has taken that undermine the economics of renewable energy. The administration has already decided to pull the U.S. out of the international Paris climate agreement, rolled back Obama-era regulations on power plant-emissions and passed sweeping tax reforms that constrained financing for solar and wind. The import taxes, however, will prove to be the most targeted strike on the industry yet and may have larger consequences for the energy world.
“We are inclined to view it as posing greater trade risk for all types of energy, particularly if other nations establish new trade barriers against U.S. products,” Washington-based research firm ClearView Energy Partners LLC said in a report Monday.
Solar Surges
U.S. panel maker First Solar Inc. jumped 9 percent to $75.20 in after-hours trading in New York. The Tempe, Arizona-based manufacturer stands to gain as costs for competing, foreign panels rise.
Trump approved four years of tariffs that start at 30 percent in the first year and gradually drop to 15 percent. The first 2.5 gigawatts of imported solar cells are exempt for each year, the president said in an emailed statement.
The duties are lower than the 35 percent rate the U.S. International Trade Commission recommended in October after finding that imported panels were harming American manufacturers. The idea behind the tariffs is to raise the costs of cheap imports, particularly from Asia, and level the playing field for those who manufacture the parts domestically.
Despite higher anticipated costs for American solar installers, SunPower Corp., Vivint Solar Inc. and Sunrun Inc. all jumped in after-hours trading. “A 30 percent tariff in Year One is bad,” said Gordon Johnson, a New York-based analyst at the Vertical Group, but “it’s less than what the consensus was.”
Jigar Shah, co-founder of investor Generate Capital Inc. and an outspoken advocate for the solar industry, went as far as to describe the decision as “good news.” The tariffs are “exactly what the solar industry asked for behind closed doors” to prevent a negative impact on companies, he said.
Not Deterred
The duties won’t be entirely devastating for the U.S. solar industry, said Hugh Bromley, a New York-based analyst at Bloomberg New Energy Finance. He estimated they’ll increase costs for large solar farms by less than 10 percent. The expense of a residential system, he said, will rise by about 3 percent.
The decision will “destruct some demand for new projects in the next two years,” Bromley said. “But they will likely prove insufficient in magnitude and duration to attract many new factories.”
For Trump, the tariffs represent a step toward making good on a campaign promise to get tough on the country that produces the most panels -- China. Trump’s trade issues took a backseat in 2017 while the White House focused on tax reform, but it’s now coming back into the fore: The solar dispute is among several potential trade decisions that also involve washing machines, consumer electronics and steel.
The decision comes almost nine months after Suniva Inc., a bankrupt U.S. module manufacturer with a Chinese majority owner, sought import duties on solar cells and panels. It asserted that it had suffered “serious injury” from a flood of cheap panels produced in Asia. A month later, the U.S. unit of German manufacturer SolarWorld AG signed on as a co-petitioner, adding heft to Suniva’s cause.
Suniva had sought import duties of 32 cents a watt for solar panels produced outside the U.S. and a floor price of 74 cents a watt. Trump’s tariffs impose a charge of about 10 cents a watt, according to Bromley.
Read More: U.S. Solar Has a $1.5 Billion, Long-Shot Plan to End a Trade War.
While Trump has broad authority on the size, scope and duration of duties, the dispute may shift to a different venue. China and neighbors including South Korea may opt to challenge the decision at the World Trade Organization -- which has rebuffed prior U.S.-imposed tariffs that appeared before it.
Lewis Leibowitz, a Washington-based trade lawyer, expects the matter will wind up with the WTO. “Nothing is very likely to stop the relief in its tracks,” he said before the decision. “It’s going to take a while.” - Bloomberg
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