The recent Commerce Department announcement that it would start levying duties ranging from 2.9 percent to 4.73 percent on imports of Chinese solar panels, as well as panels made in other countries that have Chinese-made solar cells, received much attention and mixed reactions from various players within the U.S. solar industry.
The decision, made after finding evidence that China’s government provided illegal subsidies to its export manufacturers, was largely seen as a way to assuage domestic solar manufacturers who have suffered in the past two years as prices for solar modules dropped precipitously. Whether this is an opening salvo to a trade war with China, the solar industry needs to refocus its efforts on a less dramatic but ultimately more important issue — cost reduction.
The photovoltaic industry is currently reliant on the 30 percent federal Investment Tax Credit and varying state incentives to make solar projects economically attractive. In light of recent legislative paralysis regarding renewable energy incentives and open hostility from some members of the government, we cannot reasonably expect any new support from the federal government. Much the same can be said with regard to the state level as well.
In our region, Maryland, D.C. and Virginia, the most urgent work to be done is to address the cost of installation. That means improving our business processes, working with utilities to ease system interconnection, and addressing the wildly varying permitting requirements that add unnecessary roadblocks to system development. Lowering these “soft” costs will help get us to cost-competitiveness just as surely as will lowered module prices. However, if the cost of installed solar sticks at 1.3 to 1.5 times the cost of grid power, it is a very real possibility that the industry will fail to move forward in a meaningful way.
Regardless of whether module prices continue to drop, stagnate or inch up, the downward trend on overall costs must continue.
In order to maintain growth and ensure the success and survival of the industry, solar cells must become cost-competitive with the retail cost of utility power, quickly. The tax credit ends in 2016, which means we have roughly four and a half years to make that happen. If we can reach that benchmark in at least a dozen states before the end of 2016, there will be no stopping this industry; it will have reached its “tipping point.”
Unless these cost reduction efforts are given our full attention, we run the risk of derailing the progress that has been so hard won for the solar industry. We cannot afford to be distracted or slowed down. We must be cost-competitive on the retail level with utility-supplied power by 2016. If we miss that goal, it won’t matter much who won or lost a trade war in 2012.
Tony Clifford is chief executive of Rockville-based Standard Solar.