After years of steady job growth and support from friendly policymakers in Washington, the solar industry now finds itself grappling with an increasingly uncertain future.
Industry Report: Solar Jobs Fell for First Time since 2010
In February, The Solar Foundation – a nonprofit solar advocacy organization – released its 2017 National Solar Jobs Census. This much-anticipated annual report uses results gleaned from a survey of thousands of solar businesses to provide a detailed overview of the state of the solar industry. The 2017 survey includes responses from 2,389 solar businesses, and it was conducted in October and November of 2017.
For the first time since the Solar Foundation started conducting its census in 2010, the solar industry contracted year-over-year. The Solar Foundation’s census found 250,271 people employed in the solar industry in November 2017, a decrease of 3.8% from the same point in 2016.
Additional key findings from the report:
Employment in the solar industry has grown by 168% since 2010.
78% of solar establishments have less than 50 employees.
Over the last five years, solar employment grew nine times faster than the 1.76% annual growth of the U.S. economy.
Solar represents just under 2% of total energy generation in the U.S., yet it employs twice as many people as the coal industry.
29 states and the District of Columbia saw an increase in solar jobs from 2016 to 2017.
California (-13,636), Massachusetts (-3,053), and Nevada (-1,807) experienced the greatest reduction in solar jobs from 2016 to 2017.
The Solar Foundation chalks up the one-year decline to a rare trifecta of events that spurred many solar companies to shelve investment plans in 2017.
1) Solar investment tax credit uncertainty: In 2015, there was concern that Congress wouldn’t move to renew the solar Investment Tax Credit (ITC) program beyond 2016. This caused solar companies to rush to complete projects before the tax credit program expired. The boom carried over into 2016 given the months-long project timelines that some solar projects face. Ultimately, the ITC program was amended in December 2015 to extend beyond 2016, but the proliferation of solar projects in 2016 set the stage for an inevitable drop off in 2017.
2) Uncertainty over Section 201 case: The Solar Foundation survey was in the field when the Section 201 trade petition filed by Suniva and SolarWorld was fresh on everyone’s mind. Of those companies surveyed, 71% said that they had already felt negative effects from the case in 2017, likely due to the uncertainty that the trade case cast over the industry through much of the year.
3) Policy and economic challenges hit big solar states: California faced an unusually wet 2017 with torrential rains early in the year proving to be especially disruptive to the state’s solar industry. Changes to state policy in California and Massachusetts also dealt an acute blow to these states in 2017. The complexities around California’s new Time-of-Use rates that are designed to shift energy consumption away from peak periods put a damper on the residential PV market, while a surcharge on new net metering customers in Massachusetts had a similarly negative impact on that state’s solar industry in 2017.
In 2017, there was a perfect storm of sorts that made a downturn in the solar industry likely. The question now becomes whether or not 2018 will usher in a reprieve for the industry, or if the storm clouds linger.
Keeping an Eye on Solar Manufacturing Jobs
In January, President Trump rocked the renewables industry when he announced a 30% import tariff on solar modules and cells; a move that he claims will jump-start solar manufacturing in the United States.
The tariffs are set to gradually decline over a 4-year period, and will allow for up to 2.5 gigawatts worth of solar cells to be exempt, which is an enticing carrot that the Administration hopes will attract more investments from solar manufacturers.
As Trump put it at a signing ceremony for the tariff proclamation:
“We’ll be making solar products now much more so in the United States. Our companies have been decimated, and those companies are going to be coming back strong.”
Unfortunately for the President, an array of solar industry experts, Republican politicians, economists, and conservative groups like the Heritage Foundation were quick to condemn the solar tariffs as short-sighted and ill-advised, alleging that they will erase more solar jobs than they create over the long-run.
Hugh Bromley, a solar analyst at Bloomberg New Energy Finance, was one of many to throw cold water on the President’s prediction that solar manufacturing jobs are soon to come roaring back. According to Bromley:
“Anyone expecting a U.S. manufacturing renaissance as a result of these tariffs is set to be disappointed. A tariff lasting only four years and ratcheting down quickly is unlikely to attract any manufacturing investment that was not going to occur anyway.”
In the short-term, however, Trump’s message to bring back solar manufacturing jobs to the U.S. appeared to gather some quick momentum.
Jan 25: Taiwan’s United Renewable Energy announces plans to invest $300-500 million in a PV module plant in the United States.
Jan 29: Chinese solar manufacturer, JinkoSolar, confirms their plans to invest $410 million in a facility in Jacksonville, FL that will create 800 jobs.
Feb 6: San Antonio-based Mission Solar announces plans to double solar module manufacturing out of its San Antonio facility.
It is far too early to gauge how the solar tariffs will ultimately impact solar manufacturing jobs in the United States, but one thing is for certain though based on the Solar Foundation annual census; the solar manufacturing sector could use a much-needed jolt in the arm. Solar manufacturing job growth in the U.S. has leveled off in recent years.
Source: “2017 National Solar Jobs Census,” The Solar Foundation
Uncertainty Likely to Remain in 2018
The uncertainty that defined the solar industry in 2017 is unlikely to abate much in 2018.
Some of the key drivers that paint a potentially bumpier ride for the solar industry in 2018 include:
1. Tax bill fallout:
The solar industry emerged largely unscathed by the tax reform bill signed into law last December. The biggest win for the industry was that the ITC was maintained in its current form. However, the tax bill creates further uncertainty in the ever-critical solar tax equity market. For one, the reduction in the corporate income tax rate makes the tax benefits obtained from tax equity investment less attractive to potential investors. The bill also includes the Base Erosion Anti-Abuse Tax (BEAT) which targets the type of international financial institutions that make up such a large portion of the solar tax equity investor pool in the United States. Historically, tax equity comprises between 40% and 50% of financing for solar projects, and reports indicate that in just the two weeks after the tax reform bill was passed, up to $3 billion in tax equity deals for renewables were put on hold.
Click here for a good summary of the ins and outs of solar tax equity financing, and how recent changes to the tax code could stymie big solar projects.
2. Solar tariffs:
The biggest area of uncertainty for the solar industry in 2018 will of course be in how the industry adjusts to the recently implemented tariffs. The SEIA forecasts that the industry will lose almost 23,000 jobs in 2018 alone, with manufacturing jobs in interconnected sub-markets (racking systems, inverters, etc.) bearing the brunt of the pain.
On the more optimistic end of the spectrum, it’s likely that solar projects already under construction and/or those projects with modules already in inventory will cushion the blow for the industry in 2018. Look for 2019 to be when the full impacts of the solar tariffs are felt by domestic solar companies.
3. Steel tariffs and aluminum tariffs:
Apparently, the solar tariffs were just the appetizer for a President who appears hungry for a trade war. President Trump just recently imposed tariffs on imported steel and aluminum. Solar energy systems are heavily reliant on these two commodities, both of which are used in ground-mount and rooftop racking systems.
Source: AP Solar Racking
Make no mistake about it, the fact that President Trump has pursued two major tariffs that directly or indirectly affect the solar industry, just months into 2018, is a big deal. The U.S. solar industry, like most other major industries in the country, is inextricably tied to global supply chains and import/export markets. The combined “double whammy” effect of the solar tariffs and the steel and aluminum tariffs will add additional costs to solar projects that will inevitably have to be passed on to consumers.
Dan Whitten, VP of communications at SEIA, is already seeing this scenario play out, based on his interactions with solar companies. According to Whitten:
“Some of our installation companies have told us that the increase in the price of steel would further add to the costs of solar projects. I’ve been told that at a 25 percent tariff rate, it could add as much as 2 cents a watt to the cost of a utility-scale project. That is a significant added cost, especially on top of the job-killing solar tariffs.”
The last thing that the solar industry needs in 2018 is a trigger-happy President itching for a trade war, but alas, that appears to be exactly what we’ll be getting in 2018.
Prospects for Solar Industry Still Trump Coal
The unfriendly policies towards the solar industry coming out of Washington these days offer a striking juxtaposition against the pro-coal policy agenda that the Trump Administration has pursued from Day 1.
The U.S. has never had a more pro-coal president since perhaps the days of Teddy Roosevelt. Even so, the significant efforts that the Trump Administration has taken to subsidize the coal industry – often at the expense of solar – have produced few meaningful results, despite rhetorical promises to rescue the dying industry.
Employment in the solar industry continues to dwarf that of the coal industry, and it’s hard to imagine any realistic scenario in which that trend flips during the lifetime of any living American.
Note: Solar figures come from National Solar Jobs Census; Coal figures come from Economic Modeling Specialists Int’l (EMSI), BLS QCEW jobs only (NAICS Codes: 212111, 212112, 213113, 324199, 423520)
Despite the recent tumult in the U.S. solar industry, the steady march towards solar energy achieving price parity with fossil fuels continues across the world. Renewable energy continues to make up a growing share of the U.S. energy portfolio, while coal’s steady decline shows no sign of letting up.
A difficult 2017 and a potentially uncertain business climate for the industry in 2018 won’t reverse those long-term trends. They may make for a bumpy ride, however, so solar enthusiasts would be wise to buckle up.