1<\/sup><\/em>Source: GTM Research<\/em><\/p>\n Solar dominated new electricity generating capacity (39%) in USA1<\/sup>.<\/p>\n 1<\/sup><\/em>Source: GTM Research<\/em><\/p>\n This growth has been predominantly supported by declining cost of solar energy2<\/sup>.<\/p>\n 2<\/sup>Source:<\/em> EnergySage Solar Marketplace <\/em><\/p>\n However, in this booming market an unexpected threat has come from isolationistic trade policies for the second largest solar company in USA, SunPower. Two American solar manufacturers have petitioned the International trade commission by invoking Section 201 of Federal Trade Law (under which the President of USA has broad authority to impose tariffs for protecting a domestic industry3<\/sup>) by claiming that the flood of subsidized imports of Photovoltaic cells from china has forced many US manufacturers of solar cells into bankruptcy.<\/p>\n The trade commission has recommended (to the President) tariffs of upto 35% on solar equipment containing crystalline silicon photovoltaic (CSPV) cells purchased from abroad. With such a tariff solar energy will become more expensive and its adoption in USA will reduce4<\/sup>.<\/p>\n 4<\/sup>Source: GTM research<\/em><\/p>\n As a player in this industry, the shrinkage of market will affect SunPower\u2019s future cash flows and stock price. SunPower is a California based pioneer, manufacturer and installer of high technology solar panels. However, its manufacturing plants are located in Philippines, Malaysia, Mexico, & France. Sun power\u2019s gross margin has been reducing year on year5<\/sup>. Tariffs would increase their cost of revenue and significantly impinge on their profitability.<\/p>\n 5<\/sup>Source: SunPower Annual report 2016<\/em><\/p>\n Furthermore, this tariff is applicable only to CSPV cells and hence doesn\u2019t affect SunPower\u2019s main competitor, First Solar, which uses a different technology (cadmium telluride). This would effectively create a monopoly like industry structure.<\/p>\n Currently, the management of SunPower is opposing the Tariffs with assistance from Solar Energy Industries Association (SEIA) and recommending to the ITC and the President that Tariffs would be harmful for the industry at large. Their arguments are on the following lines:<\/p>\n 6<\/sup><\/em>Source: The Solar Foundation Report<\/em>\u00a0<\/em><\/p>\n <\/p>\n 7<\/sup><\/em>Source: Bureau of Labor Statistics<\/em><\/p>\n SunPower has currently built up a sizeable inventory of solar panels as a hedge, to assure their ongoing contracts of uninterrupted supply for next 6 months9<\/sup>.<\/p>\n As a plan B, if the tariffs come to effect, they could request for an extension or grace period before Tariffs are applied, to prepare for its impact on business. Subsequently they may have to choose their target markets more stringently considering their comparative costs would rise significantly. They will need to absorb the tariffs inorder to maintain prices in market, which could be compensated for by reduced Marketing, R&D spend or further operational efficiency.<\/p>\n In the medium term, they might need to look at setting up manufacturing facilities in USA and explore bringing in high levels of automation to offset increased labor costs. Furthermore, they would need to explore if overseas manufacturing equipment can be shifted to USA. SunPower could also explore buying any of the bankrupt American manufacturers. This of course depends on whether SunPower\u2019s technology can be manufactured in traditional solar cell manufacturing plants.<\/p>\n Expansion into global markets would help hedge against such trade policy surprises.<\/p>\n While sudden tariffs seem unfair on incumbent players who have built a technological advantage over long years, job protectionism is subject to political opinion. But what about the carbon footprint of importing panels from abroad?<\/p>\n <\/p>\n WORD COUNT: (797)<\/p>\n <\/p>\n Endnotes:<\/u><\/strong><\/p>\n <\/p>\n 1<\/sup> Mike Munsell, \u201cUS Solar market grows 95%in 2016, smashes record\u201d, feb 2017 [ https:\/\/www.greentechmedia.com\/articles\/read\/us-solar-market-grows-95-in-2016-smashes-records#gs.iK8H1Q0<\/a> ], accessed Nov 2017.<\/em><\/p>\n 2 <\/sup>Sara Matasci, \u201cHow Much does the average solar panel installation cost in the US?\u201d energysage.com, September 16,2017,[http:\/\/news.energysage.com\/how-much-does-the-average-solar-panel-installation-cost-in-the-u-s\/<\/a> ] , accessed November 2017.<\/p>\n 3 <\/sup>United States International Trade commission [https:\/\/www.usitc.gov\/press_room\/us_safeguard.html<\/a> ]<\/p>\n 3 <\/sup>Ana Swanson, \u201cTo Protect U.S. Solar Manufacturing, Trade Body Recommends Limits on Imports\u201d, New York Times,Oct 31 2017,[https:\/\/www.nytimes.com\/2017\/10\/31\/business\/solar-industry-import-tariffs.html<\/a>] , accessed\u00a0 Nov 2017.<\/p>\n \u00a0<\/sup>4 <\/sup>MJ Shiao, Cory honeyman, Jade jones, \u201cU.S. Solar Outlook Under Section 201: Supply and Demand Impacts of Tariffs at $0.10\/W Increments\u201d , Greentechmedia.com,Oct2017, [https:\/\/www.greentechmedia.com\/research\/report\/us-solar-outlook-under-section-201-supply-and-demand-impacts-of-tariffs#gs.NJysLQA<\/a>], accessed Nov2017.<\/p>\n 5 <\/sup>Sunpower, 2016 Annual Report, pg 53.<\/p>\n 6<\/sup> Avery Palmer, \u201cSolar Accounts for 1in 50 jobs in USA\u201d, thesolarfoundation.org, Feb2017, [https:\/\/www.thesolarfoundation.org\/solar-accounts-1-50-new-u-s-jobs-2016\/<\/a> ], accessed Nov 2017.<\/p>\n 7 <\/sup>Tom Werner, \u201cSunpower CEO Tom Werner\u2019s Oct 3 ITC testimony\u201d, Sunpower.com (blog), Oct 2017 [https:\/\/us.sunpower.com\/blog\/2017\/10\/03\/sunpower-ceo-testifies-us<\/a>-international-trade-commission\/],<\/a>accessed Nov 2017.<\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Picture1-27.png\")
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