President Trump imposed a stiff tariff on cheap solar cells and panels imported from China and other countries, a move industry experts said may decimate the growth of solar energy in Alabama and stunt it elsewhere in the country.
The tariff, imposed Monday, starts at 30 percent for the first year.
“That level would squash Alabama business for us and similar businesses that operate in Alabama to provide turnkey solar systems to residential and small commercial customers,” said Larry Bradford, of north Alabama’s Southern Solar Systems.
About $5.6 billion in projects in just four Sunbelt states – Georgia, Florida and the Carolinas – could be jeopardized by a tariff, according to E&E News, which follows energy and environmental matters.
The tariff could have been worse, though. It drops by 5 percent each of the four succeeding years. It also exempts a substantial portion of initial imports each year.
Alabama is particularly vulnerable to the added cost of a tariff, experts in the field say, because policies of investor-owned utility Alabama Power Co. already limit solar energy penetration in a variety of ways that make solar installations more expensive here.
The tariff issue is coming up now because of an international case filed by domestic panel-manufacturer Suniva and the U.S. affiliate of German manufacturer SolarWorld, both of which are in bankruptcy proceedings. The International Trade Commission made recommendations to Trump, which led to his decision.
The nation’s major solar energy trade groups opposed such a high tariff. There are about 60 manufacturers, most of them employing fewer than 200 people. The Solar Energy Industries Association told the president last week that a high duty would be a job-killer.
Daniel Tait, technical director of nonprofit education and advocacy group Energy Alabama, said a high tariff “might save a few manufacturing jobs in the U.S., but it would really hurt installation and maintenance jobs, the source of most of the industry’s employment.”
Only a handful of state-based solar companies operate in Alabama Power territory, in central and south Alabama, and in north Alabama where the federal Tennessee Valley Authority functions.
Bradford said employment in the solar industry has grown rapidly nationwide, clocking about 15 times the average growth for U.S. jobs.
“You won’t see a 4,000-job solar plant anywhere like you’ll see in north Alabama’s new automobile plant,” Bradford said. “Most panel manufacturers only employ some one or two hundred people. But there are thousands of design and installation businesses averaging 10 employees around the country, so the growth is real,” he said.
Although Alabama’s contribution to job totals is minimal, solar investments have created more than 20,000 jobs across the Southeast, said Katie Ottenweller, senior attorney with the Southern Environmental Law Center, where she leads its solar initiative.
Small Market So Far
Alabama Power Co. has only 44 solar customers who pay a fee on their system’s solar capacity, among its 1.4 million customers, according to Michael Sznajderman, Alabama Power spokesman. Others have installed solar but don’t pay the fee, with a total of 125 customers who have solar systems connected to the grid.
For comparison, 6,000 of Duke Energy’s 3.2 million customers in North Carolina now own solar systems. Duke expects to add about 5,000 more by offering rebates under recent legislation.
In 2015, primarily to satisfy goals of large state businesses and military installations, the Alabama Public Service Commission authorized Alabama Power to develop up to 500 megawatts of solar power over five years. The company recently opened a 72-megawatt solar field in Chambers County to serve Walmart, the state’s largest employer.
With about 200 days of sunshine annually, Alabama ranks eighth in the nation in solar energy potential, but this makes up only 0.02 percent of the state’s electric power mix, according to the U.S. Energy Information Administration.
Alabama: Open for Business?
Alabama recently opened its purse strings with incentives to attract the Toyota-Mazda auto plant to Limestone County, but Bradford said the state’s “open for business” stance does not extend to most renewable energy sources, and few solar installation businesses even consider coming into the state because of its policy barriers.
Sam Yates, CEO of Birmingham’s Eagle Solar and Light, said national companies avoid working in Alabama because of its restrictions. “They go to friendlier states even if they have less solar potential,” he said.
With a more welcoming attitude to solar energy, coupled with the prospect of better, more affordable batteries on the horizon, the industry would “take off like a train,” Yates said.
He, Bradford and others pointed to at least three Alabama practices that increase the cost of solar power, adding years to the time it takes for solar customers to recover their investment.
First, Alabama Power charges a monthly fee of $5 per kilowatt of capacity for most customers to connect a solar system to the power grid. Ottenweller called it the “most punitive such fee of any regulated utility in the country.”
A 5-kilowatt home system, therefore, would mean at least a $25 monthly fee to Alabama Power, and over the 30-year expected life of a solar system, it would cost about $9,000 extra.
Alabama Power said this fee covers its cost of having power ready if a customer’s solar panels are not producing enough energy.
“If the costs are not covered by this customer, they would have to be shifted and recovered from all other customers,” the company said in an email.
In addition, whether customers pay the fee depends on their contracted payment rate.
Second, customers connected to the grid whose systems produce more electricity than they need can sell power back to the power company. But the rate they are paid for energy they generate is significantly lower than the price they are charged for the energy they receive from Alabama Power. Alabama is one of only three states that do not allow this practice, called net metering.
TVA has practices less-restrictive than Alabama Power’s, including no $5 monthly fee on each kilowatt of solar capacity.
The power company said it buys energy from small solar providers “at a price that matches the costs we avoid by buying from them,” such as for fixed costs of generators and transformers and transmission wires. Paying full retail for the excess solar energy returned to the grid would result in the company “subsidizing these customers at the expense of other customers.”
And third, Alabama regulators do not allow a legally clear way for third-party financing of a solar system. Tait said Georgia has allowed the practice since 2015, “which opens up opportunities for ownership to churches and schools, as well as nonprofit community groups that can operate on a subscription basis.”
In Tait’s opinion, public utilities “should stop charging their customers a premium for the privilege of buying renewable energy. Alabama Power should expand access to renewables for everybody and not charge them extra.”
Alabama’s solar policies are not likely to change without “significant advocacy by Alabama property owners who want to be able to modify their homes or businesses as they see fit,” said Conservation Alabama’s director of communications, Stefanie Christensen Francisco.
Could Shrink Solar Use
Such environmental interest groups say that the new tariff might drive utilities away from investment in solar and toward carbon-based fuels, principally coal and natural gas. GTM Research recently wrote that dropping solar prices in recent years have placed it “on the cusp” of beating natural gas prices.
State solar power installation companies say they can survive with a low tariff, but they are likely to look to other states for more business. They’ll target states that allow net metering and have higher electricity costs than Alabama.
Bradford said some of his foreign vendors promised to absorb half the cost of a smaller duty. In addition, the 5 percent annual decrease and exemption for the first 2.5 gigawatts of imported supplies knock some edge off the president’s decision. He uses imported panels unless a customer insists on paying more for American-made products.
Still, Bradford said the 30 percent tariff in the first year could add $1,000 to $2,000 to the initial cost of a system.
This story has been changed to clarify the total number of solar customers on Alabama Power’s grid.