How Tariffs and Chinese Supply Crushed Solar Panel Stocks in 2018


Nick Sciple: Let’s talk about the segment
of the market that probably has suffered the most from that cyclicality. That’s the
solar panel makers and manufacturers. Earlier this year, we saw President Trump
put in place a 30% tariff on imported total solar panels. However, even in spite of that, taking a lot
of this imported supply, making it more expensive, we’ve still seen solar panel prices decline
significantly over this past year as demand has fallen. Do you want to talk a little bit about what’s
going on with that over the past year or so? Jason Hall: Initially, at least in theory,
the way it was presented was that the idea behind the panel tariffs that were put in
was that it was supposed to create incentive to bring solar manufacturing
to the U.S. Frankly, that hasn’t happened. There were a few projects
that were announced. I know that First Solar is making a big expansion,
but they’re expanding a facility where they were already doing some
domestic manufacturing. Ironically, their solar panels are excluded
from the tariffs anyway, because the thin film technology they use is not the same monocrystalline
multicrystalline technology that’s where the tariffs are. Hanwha Q CELLS announced a big plant in Florida
that was supposed to add like a thousand jobs. It was going to be a huge deal. After multiple revisions, what they’re saying
now is, it’s going to create 50 or 100 jobs, and it’s going to be completely assembly. They’re taking cells that are still being
manufactured overseas, shipping them into the United States and
assembling them into panels. Frankly, the tariffs haven’t generated anything
like what was purported to be the job creation and bringing solar panel manufacturing to the U.S.
Now, a couple of reasons why that’s happened. Probably the biggest short-term reason is
the U.S. announced these tariffs early in the year. Close to the middle of the year, China made
some substantial changes to its domestic distributed solar policy, which absolutely
cratered demand for panels. Panel prices have plummeted since then because
you have this massive overcapacity. It’s like oil. OPEC has announced this cut of
oil because there’s too much oil. The idea is, that should
restore some supply and demand. Essentially overnight, we had
a massive oversupply of solar panels. Solar panel prices in the U.S. have actually
fallen more than the amount of the tariffs because of this massive cut in China’s
domestic program to add distributed solar. You could actually buy solar panels in the
U.S. today for your house, theoretically, for cheaper than you could
have a year ago. [laughs] That’s where we are. The end result is, you think about an industry
that’s already a fairly commodity product, companies like Canadian Solar, Jinko Solar,
who by revenue are two of the biggest solar panel manufacturers, and the vast majority
of their manufacturing happens in Southeast Asia. They sell a commodity panel. It’s a low
efficiency panel and they lead on price. They’ve had to slash their prices because
demand has evaporated in China.

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