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Solar Protectionism Gone Awry and the Impact in Maine

January 22, 2018

This afternoon, the Trump administration ended months of speculation and uncertainty within the U.S. solar industry by enacting a 30% tariff on a majority of imported solar cells and modules. The move was an effort to protect domestic solar cell and solar module manufacturers, specifically two manufacturers – SolarWorld and Suniva – that filed a complaint with the U.S. International Trade Commission after each filing for bankruptcy in 2017.

The decision is a controversial one for the solar industry. Solar developers and manufacturers across the country expressed significant opposition to the tariff. In a press release, the Solar Energy Industry Association – the national solar trade association – claims that the decision will lead to the loss of 23,000 U.S. jobs due to the decreased demand resulting from higher prices.

It is expected that a complaint will be filed with the World Trade Organization.

Here in Maine, the tariff comes as new solar buyers adjust to a change in the compensation received from the state’s investor-owned utilities. With stories about a compensation decrease of 10% slated to begin on May 1, 2018 and this new 30% tariff pushing module prices upward, the impacts seem staggering.

Let’s get into the numbers.

How much are system prices going up? 

While a 30% increase in module prices is significant, the impact on the total project cost is not nearly as high. At current prices, solar modules represent roughly one-quarter of the cost of a residential installation. As a result, the tariff is expected to increase prices by 7.5%. For commercial installations, the change will be slightly higher since module prices are a larger portion of the total cost.

How much is compensation going down? 

The 10% decrease in compensation is only applicable to the delivery portion of an electrical bill. For CMP customers, delivery represents less than half of one’s monthly bill (supply – the actual electricity – representing the other half). For Emera customers, delivery represents roughly 60% of one’s bill. Taking into account the nuances of billing rates, CMP customers are likely to see a decrease in compensation of roughly 3-4% and Emera customers are likely to see a decrease in compensation of 4-5% due to the new PUC rule.

How is payback affected?

Taken in isolation, these two factors together would seem to impact payback by about 10-12% for new residential solar customers in Maine. In reality, the payback is not drastically different for customers in 2018 than it was for customers in 2017. This is due to dramatic increases in electricity costs that took place on January 1, 2018. Supply prices increased by 14% for Emera customers and by 18% for CMP customers.

Compared to 2017, the change in payback within CMP’s territory will be roughly 2%. In Emera territory, the change in payback is roughly 5%.

Can customers avoid the tariff?

Technically? Yes. Practically? Not really. Not all foreign manufacturers were found to be injurious to U.S. module and cell manufacturers. REC, a company that manufactures its modules in Singapore with US-sourced silicon (and Insource’s module of choice), was found not to cause harm. It has yet to be announced whether they will be subject to the tariff. Even if they are not, dwindling supply and increased demand has been pushing their prices up since mid-2017. It is highly expected that tariff-free modules will see comparable price increases.

Can customers get ahead of the curve?

With the decrease in compensation slated to take place on May 1st, there is still time for Maine customers to secure full retail net metering by installing their systems within the next three months. There may also be an opportunity to secure system pricing at pre-tariff prices by installing a system with a company that has modules in inventory.

Are there changes in the near-term that will resolve these changes?

The tariffs are set to decrease each year, which should result in decreased costs. Concurrently, the level of compensation received by new customers is also slated to decrease resulting in decreased benefits. Ultimately, these two factors are expected to roughly cancel one another out.

The one immediate measure that might change this trajectory is action by the Maine legislature on the PUC changes to net metering. LD1686 is currently under consideration by the legislature and would lessen the impact of compensation changes to new solar customers.

 

— Vaughan Woodruff, President

 

 

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