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Solar-Manufacturing Renaissance Already Falling Apart

Travis Hoium, The Motley Fool

The Trump Administration's tariffs on solar imports were supposed to drive a manufacturing renaissance in the United States. SolarWorld, a German company with operations in the U.S., is reportedly hiring workers here again, although progress remains slow. But beyond that, there's hasn't been a flood of companies willing to invest in the U.S. 

One source of great hope was JinkoSolar's (NYSE: JKS) announcement, shortly after tariffs were announced, that it plans to spend $410 million to build a solar factory in Jacksonville, Florida, and hire 800 workers. But the company that was expected to build the poster plant of the solar-tariff era is already scaling back its plans to the point its U.S. investment would be almost unnoticeable. 

Solar farm with a setting sun in the background.

Image source: Getty Images.

JinkoSolar backtracks

Under the new plan, JinkoSolar's investment in Florida will shrink to $50.5 million, and the company will hire only 200 workers. That sharp reduction may be a sign that the economics of building manufacturing capacity in the U.S. still aren't strong, despite tariffs. 

There's been only one other major manufacturing announcement -- from United Renewable Energy, a private U.S. company formed by three Taiwan-based solar cell manufacturers -- but details are sparse and there's no guarantee a plant will be built (I have my doubts). 

More bad news: SunPower (NASDAQ: SPWR) halted $20 million of investment because of the tariffs, which would hurt SunPower more than competitors given its premium price and therefore higher tariff paid per panel brought into the country. If SunPower and JinkoSolar, two of the leading contenders to build manufacturing int he U.S., aren't expanding production, it's clear there's not going to be a big manufacturing investment because of solar tariffs. 

Time is limited for solar manufacturing

The clock on the promised solar-manufacturing renaissance is ticking as the tariffs are set to phase out. They will decline 500 basis points annually from 30% early in 2018 to 15% beginning in 2021, before a planned sunset in 2022. If manufacturers don't move quickly, they won't have much time to take advantage of tariffs. 

It takes at least six months to build a solar-module assembly facility, which would still require importing solar cells made in other countries. A solar cell manufacturing facility would likely take closer to two years to build, so even if a manufacturer started building a plant today, it may only have two years of tariffs to exploit. 

It looks like tariffs won't drive U.S. solar investment

Solar tariffs are going to raise costs for all installers, costing an estimated 23,000 jobs over the next four years. The upside was supposed to be growth and hiring in solar manufacturing. But a $50 million investment and hiring 200 workers in Florida by JinkoSolar will barely move the needle for the industry. 

It looks like the solar-manufacturing renaissance the Trump Administration was hoping for isn't coming to fruition, and there's very little likelihood that any manufacturer will step up to build a plant in the next few years. So far it appears tariffs are not a win for the solar industry, even for U.S. solar manufacturers. 

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Travis Hoium owns shares of SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.