By Nichola Groom
LOS ANGELES (Reuters) - U.S. solar companies are snapping up cheap imported solar panels ahead of a trade decision by the Trump administration that could drive up costs and cloud the fortunes of one of the economy's brightest stars.
Domestic consumers and businesses have been embracing solar energy at a furious pace - thanks to a big assist from China. Low-cost photovoltaic cells and panels made in China and other Asian countries have helped drive down costs by around 70% since 2010, enabling more Americans to go solar.
Installations in the United States last year hit a record. Jobs are mushrooming too. The domestic industry now employs more than 260,000 people, according to The Solar Foundation, most of them construction workers hammering panels on rooftops and erecting utility-scale solar plants in the nation's blistering deserts.
But signs of a chill are already visible as the industry waits to see how President Donald Trump responds to a recent trade complaint lodged by a Georgia manufacturer named Suniva. The company has asked the administration effectively to double the price of imported solar panels so that U.S. factories can compete. About 95% of cells and panels sold in the U.S. last year were made abroad, with most coming from China, Malaysia and the Philippines, according to SPV Market Research.
Trump has wide latitude to levy tariffs to protect domestic firms. His actions could determine whether sun-powered electricity can compete with fossil fuels to light the nation's homes and businesses.
The White House would not comment on the solar trade case. But the administration has vowed to protect steelmakers and other U.S. manufacturers by penalizing "unfair" imports.
That has the solar industry bracing for the worst. Panic buying has sent spot prices for solar panels up as much as 20 percent in recent weeks as installers rush to lock up supplies ahead of potential tariffs.
Skittish U.S. energy customers are putting some solar projects on hold. Manufacturers are eyeing other markets to develop. And some investors are running for cover. Funding for large U.S. solar deals fell to $1.4 billion in the second quarter, down from $3.2 billion in the first quarter and $1.7 billion a year earlier, primarily due to concerns about the trade case, according to research firm Mercom Capital Group.
Developers of solar farms that provide utilities and big companies with energy are particularly vulnerable; panels account for as much as half of the cost of their projects.
A steep rise in panel prices "could be huge and disastrous for large-scale solar," said Tom Werner, chief executive of San Jose-based SunPower Corp <SPWR.O>, a top U.S. solar company that is majority owned by France's Total <TOTF.PA>. "Developers are alarmed and planning."
Solar firms that cater to homeowners are nervous too. A spike in panel prices could slow residential installations and all the jobs that come with them.
(For a look at the booming U.S. solar sector, see http://tmsnrt.rs/2ttRRLG)
Ed Fenster, chairman of San Francisco-based Sunrun <RUN.O>, said moves by Trump to punish foreign manufacturers could harm American blue collar workers he has vowed to help. The solar industry employs more than five times as many workers as the coal mining industry that Trump has championed.
"A solar-panel tax imperils what our country needs most: well-paying jobs that can't be exported or automated," Fenster said.
The solar spat is just the latest example of global trade that has been hard on U.S. factories but delivered huge cost savings for consumers.
The United States invented photovoltaic technology and accounted for more than a quarter of global solar manufacturing as recently as 2001. But its share has dropped to less than 2 percent due mainly to China, now the world's top producer.
Competitors have long complained that Chinese companies use government subsidies and illegal dumping to capture market share. The United States in 2012 slapped duties averaging around 40 percent on firms from China, and in 2014 imposed average duties of about 20 percent on producers from Taiwan, according to GTM Research.
Those levies are still in effect. But Suniva, which filed for bankruptcy protection in April, is looking for more. Less than two weeks after its Chapter 11 filing, it lodged a rare form of trade complaint with the U.S. International Trade Commission (ITC).
In its petition, Suniva said previous tariffs weren't working because China and Taiwan were just shifting production to other low-wage countries to avoid the duties.
It asked the government to establish a minimum price of 78 cents a watt on panels produced anywhere outside the U.S. to keep companies from circumventing the penalties. That's more than double the average of 35 cents a watt that prevailed before the recent price run-up.
Ironically, Suniva since 2015 has been majority owned by a Chinese firm. In May, SolarWorld Americas Inc., the U.S. division of Germany's SolarWorld AG <SWVKk.DE>, joined Suniva as a co-petitioner on the case.
Suniva is looking to give American producers "the opportunity to succeed," the firm's attorney Christian Hudson told Reuters in an emailed statement.
"If U.S.-based solar manufacturing disappears, then developers and installers will ultimately face greater volatility, as the manufacturing industry will ultimately come from one sector of the world," Hudson wrote.
The ITC has said it will decide by September 22 whether imports have harmed domestic producers. If it finds serious injury, the commission by November 13 will recommend remedies to the president, who is free to implement ITC's advice or do something different.
What Trump might do is anyone's guess. He has been largely dismissive of renewable energy until recently, when he suggested putting solar panels on his proposed border wall with Mexico.
China is all but certain to retaliate if he takes action. It responded to the 2012 tariffs by imposing its own duties on U.S.-made polysilicon, the raw material used in solar cells.
BRACING FOR THE WORST
Solar players are already changing their business practices.
Korea-based Hanwha Q CELLS Co Ltd <HQCL.O> has inserted a clause into its contracts allowing the panel maker to cancel or suspend U.S. shipments if Trump imposes new trade remedies.
SunPower, which manufactures panels in the United States and the Philippines and is also a major U.S. project developer, would "without question" look abroad for more business if the U.S. industry is hobbled by tariffs, Werner, its CEO, said.
Southern Current LLC, a South Carolina-based solar company that builds utility-scale and residential projects, has been purchasing modules and warehousing them for future use. Normally the company waits until a deal is financed, according to Bret Sowers, vice president of development and strategy.
"We are putting money at risk to buy panels because we are worried that we won't be able to get them," he said.
In Texas, utility Austin Energy warned that one of its solar power plants could be delayed if tariffs are imposed, it said in an emailed statement.
St. Louis-based McCarthy Building Companies, which constructs large solar farms, recently had a project shelved due to all the uncertainty, said Scott Canada, senior vice president of renewable energy.
But at least one company is benefiting: Tempe, Arizona-based First Solar Inc <FSLR.O>.
First Solar's panels are made from cadmium telluride, not the crystalline silicon that dominates the market and is the target of the trade case. The company's shares have gained more than 50 percent since Suniva filed its petition.
First Solar declined to comment, saying it was in a "quiet period" ahead of releasing its quarterly results on July 27.
For a graphic on U.S. solar is booming, but not in factories, click http://fingfx.thomsonreuters.com/gfx/rngs/USA-SOLAR-TRADE/0100502K05P/index.html
(Additional reporting by Yuna Park in Seoul; Editing by Marla Dickerson)