We now know that the International Trade Commission will recommend some kind of protective measures against solar module imports to President Trump in November. We don't know what those recommendations will look like, but the industry is preparing itself for the worst.
I recently highlighted that protectionist measures will force manufacturers to turn elsewhere to sell solar modules and hit installers in the U.S. hardest. But before we get there, it's likely there will be a windfall for solar manufacturers.
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U.S. developers in a rush to finish projects
Solar developers in the U.S. who have projects due to be completed in 2017 and 2018 are currently in a frenzy to get the solar modules they need. Multiple reports have module prices up 20% or more since early summer, and the surge in prices could rise if it looks like tariffs will be extremely punitive.
Developers and installers have already started stockpiling modules ahead of the final ruling, assuming it will work against them. That surge in demand is keeping manufacturers' operations running at full steam and pushing prices higher.
SunPower (NASDAQ: SPWR) said its solar plants are running at 100% capacity as demand and prices remain high in the U.S. First Solar (NASDAQ: FSLR) is keeping some of its older manufacturing capacity open longer than anticipated to reap some of the windfall. And Chinese exporters like Canadian Solar (NASDAQ: CSIQ) and JinkoSolar (NYSE: JKS) will reap the benefits from both rising module prices in the U.S. and abroad.
As a result, the fourth quarter of 2017 will likely be a good quarter for solar manufacturers. The question is: What happens in 2018?
Tariffs will hit everyone
If the Trump administration decides to put tariffs or price floors on solar imports, it could make the boom I've described above into a bust early in 2018. Developers who are stockpiling modules in 2017 wouldn't need to purchase any/many in 2018, and if they did they could be price prohibitive. U.S. demand for solar modules could drop like a rock.
There are some countries -- India or China -- that could fill in the gap from lost U.S. demand, which GTM Research estimates will be 12.4 GW this year out of around 85 GW globally. But it's unlikely the entire gap will be filled, and the loss in demand would likely lead to lower prices for manufacturers.
As a result, a windfall for solar manufacturers in 2017 could lead to a terrible year in 2018. Then again, everyone in the industry thought 2017 was going to be a bad year, and it's going to be a global record for solar installations. Investors will have to wait and see if there really is a drop in demand next year, but I think it's a safe bet that the rest of 2017 will be better than expected.
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