May 12—The prospect of new U.S. tariffs on solar panel imports from some Asian countries has thrust the local and national solar industry into crisis, causing project cancellations and layoffs in New Mexico and elsewhere.
Affordable Solar, New Mexico's largest installation company, is now downsizing its workforce, and Albuquerque-based Array Technologies — one of the nation's largest makers of solar tracking systems — projects up to $250 million in lost revenue this year alone because of project cancellations or postponements.
Smaller rooftop installation firms are also feeling the pinch, with solar panel prices surging everywhere.
The U.S. Commerce Department ignited the crisis on April 1, when it opened an investigation into solar manufacturing operations in Malaysia, Thailand, Vietnam and Cambodia to determine whether companies there are circumventing import tariffs by incorporating Chinese equipment and components in their products that would otherwise face U.S. trade restrictions imposed on China.
The investigation could culminate in new tariffs of up to 250% on imports from those countries, which together supply more than 80% of the solar modules used in U.S. installations.
The fallout was swift, with Asian exporters immediately freezing product shipments to the U.S. to await the outcome of the federal investigation. And solar developers, in turn, are canceling major projects across the nation, since investors can't calculate development costs until the Commerce Department rules on new tariffs, which could potentially be made retroactive to November 2021.
NM effects
Overnight, Affordable Solar's utility-scale projects screeched to a halt, with investors canceling or indefinitely postponing more than half a dozen contracts, nearly all of them in New Mexico, said Affordable CEO Ryan Centerwall.
"We're stuck now in a waiting period to see what the Commerce Department does, and we're incurring a lot of damage in the meantime," Centerwall told the Journal. "Unfortunately, we've had to let some valuable people go already."
Centerwall didn't reveal how many employees the company laid off. But utility-scale operations account for about 70% of Affordable's annual revenue, and the laid-off employees represent "a significant portion of our utility-scale solar business," he said.
Even if the Commerce Department rapidly concludes its investigation and rejects tariffs, many of Affordable's now-stalled projects will be permanently canceled, Centerwall added.
"A significant percent of our pipeline will never come back," he said.
Array Technologies, meanwhile, told investors in an earnings conference call Tuesday that it expects to lose between $225 million and $250 million in revenue this year from postponed projects.
The company, which employs about 350 people in Albuquerque, expected to generate up to $1.6 billion in revenue in 2022, thanks to a massive order backlog for its solar trackers. But given the uncertainties created by the Commerce Department investigation, Array scaled back its 2022 revenue projections to between $1.3 billion and $1.5 billion, said Chief Financial Officer Nipul Patel.
"Unfortunately, as the largest domestic solar-tracker supplier, we're not immune" to the trade dispute, Patel told investors. "A portion of our company will be impacted."
The four Democratic members of New Mexico's congressional delegation sent a joint letter on Monday to President Joe Biden urging a rapid conclusion to the Commerce Department investigation and rejection of new solar tariffs. In New Mexico alone, 1 gigawatt of new solar capacity, representing about $1.55 billion in investments, could be canceled or indefinitely suspended, the letter said.
"One individual company projects 1,400 construction jobs and 75 full time permanent jobs associated with just six solar projects hangs in the balance," the delegation wrote.
Nationwide import
Nationwide, the Solar Energy Industries Association, or SEIA, says more than 80% of U.S. solar-related companies report project cancellations and frozen solar panel supply chains, threatening some 70,000 or more American jobs.
As of early May, SEIA had counted 318 solar projects that were canceled or delayed by the trade dispute, representing more than a third of utility-scale solar development across the country.
A new study released Tuesday by global consulting firm Rystad Energy estimates that about 17.5 GW of new solar installations planned in the U.S. for 2022 may now be wiped away, cutting construction from about 27 GW expected previously to below 10 GW this year.
Potential to worsen
The losses could rapidly mount the longer the federal investigation drags on. And, if the Commerce Department does impose tariffs, another 34 GW of solar deployment could be lost over the next four years, according to SEIA.
Commerce has until April 2023 to conclude its investigation, with a "preliminary" case determination due in August.
Industry and congressional supporters are aggressively pushing the Biden administration for a rapid conclusion and rejection of tariffs, and New Mexico representatives are in the thick of it.
"We've seen the entire industry rally behind the opposition, and we're front and center," said Patel of Array Technologies. "We've been meeting with legislators and officials to seek practical, stable solutions for our industry."
U.S. Sen. Martin Heinrich, D-N.M., is particularly active. He co-led 22 senators in a May 1 bipartisan letter urging the president for an expedited end to the case.
And last week, during a hearing in the Senate Energy and Natural Resources Committee, Heinrich asked U.S. Energy Secretary Jennifer Granholm to address the tariff issue, revealing serious disagreements within the Biden administration.
"What's at stake is the complete smothering of the investment, and the jobs, and the independence that we would be seeking as a nation to get our fuel from our own generation resources," Granholm responded. "I certainly am deeply concerned about being able to achieve the goal of getting to 100% clean electricity by 2035 if this is not resolved quickly."
The Commerce Department has said it's required by statute to investigate an industry claim that companies in other countries are circumventing import duties.
But industry leaders say that request came from one tiny California-based solar module manufacturer, Auxin Solar Inc., with no direct documentation that Southeast Asia companies are actually circumventing tariffs.
Auxin reportedly employs just 35 people with $9.7 million in annual revenue, representing an "insignificant" role in the U.S. solar industry, American Council on Renewable Energy President and CEO Gregory Wetstone said in a May 5 letter to the Commerce Department.
"It's disappointing that Commerce relied on such a tenuous basis and considered only the views of a single small company in launching an inquiry with such devastating impacts," Wetstone said.
