|Executives in America's fast-growing wind and solar power sectors say that their companies are under increasing financial pressure due to higher raw material and equipment costs. |
Source: Associated Press
Tariffs levied by the Trump administration in its widening trade offensive are causing trouble for a broad group of companies in the U.S. renewable energy industry, challenging the president's recent claim that the cost of the import duties is being shouldered by other countries.
Since imposing tariffs on most foreign-made solar cells and panels in January, President Donald Trump has set taxes on imported steel and aluminum and is considering duties on power electronics used in solar arrays as part of a package of potential import restrictions on $200 billion worth of Chinese goods.
"Tariffs will make our country much richer than it is today," Trump wrote on Twitter Aug. 4. "We are using them to negotiate fair trade deals and, if countries are unwilling to negotiate, they will pay us vast sums of money in the form of Tariffs." However, executives in America's fast-growing wind and solar power sectors say their companies are under increasing financial pressure due to higher raw material and equipment costs.
"The impact of the tariffs is really, really significant," SunPower Corp. Chairman and CEO Thomas Werner said on a July 30 earnings call, putting the cost of the duties to the solar cell and panel maker at $17 million during the first six months of 2018 and an estimated $51 million during the second half of the year. SunPower, which is headquartered in California and has factories in Mexico, France, the Philippines and Malaysia, requested an exemption from the solar tariffs, saying the savings would be put toward research and development and domestic production. SunPower is pursuing a deal for the Oregon-based manufacturer SolarWorld Americas Inc.
"If we continue to pay tariffs, we're going to have to make changes in R&D," Werner told analysts.
First Solar Inc.'s thin-film technology was exempt from the solar panel tariffs and was seen as a potential beneficiary of the taxes now dragging on its competitors. However, the Arizona-based company is facing its own struggles with raw material tariffs, particularly on aluminum, that are "eating into ... margins and threatening to create cost headwinds" as it fights to ramp production of a new line of panels at factories in Ohio, Malaysia and Vietnam, according to analysts at Guggenheim Securities LLC. A First Solar spokesman declined to comment.
|A wind turbine blade at a Vestas factory in Windsor, Colo. |
Source: Associated Press
At Broadwind Energy Inc., executives are grappling with "sharp increases in domestic steel prices" and "working hard to avoid being squeezed between our customers and our suppliers," Stephanie Kushner, president and CEO of the Illinois wind tower manufacturer, said on a July 31 earnings call.
At the time of the call, the spread between U.S. and Chinese steel prices was at least 40% wider than normal, Kushner said. With nearly 200 tons of steel used in a single tower, a tower made in Broadwind's factories in Wisconsin and Texas is at a $70,000 disadvantage to those produced by competitors overseas, she added.
Historically, the cost of shipping from Asia largely offset higher U.S. steel prices, Kushner said, "but this wider gap represents a challenge for maintaining competitiveness."
More trouble could be on the way for the U.S. wind sector. Steven Lockard, president and CEO of TPI Composites Inc., said Washington's trade fight with Beijing could limit future imports of wind turbine blades and other components, increasing costs.
"We've done a great job as an industry of driving costs down and being just economically driven in many ways, so it would be a shame to reverse some of that trend," Lockard said on an Aug. 7 earnings call. "But if the tariffs stick, there will be cost increases."
TPI Composites, which is based in Arizona and makes wind turbine blades at factories in Iowa, China, Mexico and Turkey, would try to avoid passing along higher costs to customers, including General Electric Co., Vestas Wind Systems A/S and Siemens Gamesa Renewable Energy, Lockard said.
"We don't plan our global supply chains based on one presidential cycle or two years ... but if some of that sticks, then supply chains adapt," he said.
If Washington imposes new tariffs on power equipment from China, Israeli manufacturer SolarEdge Technologies Inc. plans to start relying on factories in Romania and Hungary for U.S.-bound shipments, chairman and CEO Guy Sella said on an Aug. 2 earnings call.
"Instead of producing in Europe for Europe, we'll produce for Europe in China and for the U.S. in Europe," he said.
REC Silicon ASA President and CEO Tore Torvund wants the Trump administration to continue increasing tariff pressure on China in order to force Beijing into negotiations. The Norwegian company, which supplies polysilicon to the solar industry, blamed layoffs at a plant in Washington in July on a years-old trade fight keeping U.S.-made polysilicon out of the Chinese market.
"We can increase the export into China, which is one of the goals of President Trump, and we can then continue to employ high-paid [workers] in the U.S.," Torvund said on a July 19 earnings call.
Wacker Chemie AG, a German polysilicon producer with a plant in Tennessee, has also pushed for a "comprehensive settlement" to the U.S.-China solar trade fight. However, the biggest threat the company faces is from "a potential slowdown of the global economy as a result of general protectionism," President and CEO Rudolf Staudigl said on an earnings call July 26.