Solar-cell tariffs fuel debate on jobs
Most positions in distribution, installation, sales, not production
5/2/2012LOS ANGELES -- A simmering trade dispute is highlighting a debate about the kinds of jobs America can sustain in a greening economy.
The Obama Administration's recent decision to slap import tariffs on Chinese solar cells was hailed by some domestic solar manufacturers as a victory for job creation, leveling the field while sending a powerful message to Beijing about monopolistic behavior in crucial industries.
But a close look at the U.S. solar industry suggests that the tariffs may kill jobs because the vast majority of positions in the sector aren't on the assembly line. Instead, upward of 70 percent of U.S. solar employment is in installation, sales, and distribution, and firms that hire those workers argue that solar cells must get significantly cheaper to stay competitive with other energy sources.
"What China is doing to boost its manufacturers is unfair, but tariffs could actually reduce jobs," said Gordon Johnson, a green tech analyst at Axiom Capital Management. "The price of solar panels goes up and looks unaffordable compared to alternatives."
Although the United States pioneered photovoltaic solar cells decades ago, it has fallen increasingly behind lower-cost manufacturers, including China, South Korea, and Malaysia.
But the United States is among the world's fastest-growing solar consumers, opening vast opportunities for service-sector jobs in the business.
The matter is to come to a head in mid-May, when the Commerce Department is to announce a determination on a second round of tariffs on Chinese-made silicon-based photovoltaic cells, which are by far the most popular solar technology.
Although tariff advocates say protecting a solar manufacturing base is crucial to the nation's energy security, others argue that the United States has lost that race. Instead of swooping in to rescue remaining plants, they say, the focus should be on reducing the cost of solar to speed liberation from fossil fuels, which dovetails with the goal of reducing unemployment.
"Installation is where all the jobs are," said John Smirnow, vice president of trade and competitiveness at the Solar Energy Industry Association. "There are 5,600 firms in the healthy, vibrant, and growing solar-services sector."
The Commerce Department's May 17 ruling, in response to allegations of dumping by the U.S. unit of a German solar panel maker, could fundamentally alter the solar landscape in the United States. Dumping occurs when a firm or industry sells its products below cost to capture the market. If more tariffs are applied, they probably will be much higher than the relatively light first round announced in March, which ran from 2.6 percent to 4.7 percent.
The smaller tariffs -- aimed at balancing out Chinese subsidies of its solar factories -- could squeeze margins for installers, but most experts agree they aren't enough to radically reduce consumption. But anti-dumping duties could run above 20 percent, dramatically increasing the cost of switching to solar.
Cost is a key factor in getting businesses and homeowners to convert to solar power.
A typical residential roof setup costs about $25,000, which rebates and tax incentives can lower. At that price, it still could take about 12 years for the systems to pay back the up-front costs through lower electricity bills.
If tariffs on Chinese cells come in as high as many say, they could raise the out-of-pocket cost of such an installation by $1,250 -- and commercial projects by far more.
Such an increase could be a deal breaker for many would-be customers, especially with a 30 percent federal tax credit set to expire after 2016, said Lyndon Rive, chief executive of SolarCity, the nation's largest solar installer.
SolarCity has 1,600 employees in 14 states and is hiring at the rate of three a day. The San Mateo, Calif., company puts solar panels on Wal-Mart stores, government offices, and university campuses, as well as thousands of houses.
"The No. 1 decision for our customers in terms of going solar is if they can save money," said Mr. Rive. "We have to be competitive with what the local power company charges, or we're in trouble."
According to a study by the Solar Foundation, 52,503 Americans worked in the installation business last year, and 17,722 worked in sales and distribution, compared with 24,064 in manufacturing.
Although almost 10,000 installation jobs were created in 2010 and 2011, manufacturing lost almost 1,000 positions while domestic makers went out of business.
Those included Solyndra Inc., which failed despite government loan guarantees.