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1 [1] (February 2, 2018)

handle is hein.crs/crsmthmbdvn0001 and id is 1 raw text is: $ Congressional Research Service lnforr r a the legasla we debate since 1914 S February 2, 2018 Domestic Solar Manufacturing and New U.S. Tariffs On January 23, 2018, President Trump signed a presidential proclamation imposing emergency tariff restrictions, known as safeguards, over the next four years on U.S. imports of crystalline silicon photovoltaic (PV) cells and modules. The proclamation also included an annual 2.5 gigawatt tariff- free quota for solar cells; however, imports of solar modules are to face tariffs regardless of volume. On February 7, 2018, the initial solar equipment tariff is to be 30%. Thereafter, the tariffs are to decline yearly, bottoming out at 15%. The temporary solar tariffs are set to expire on February 6, 2022, but the President may extend them for a maximum of another four years. The proclamation, one of the first trade actions by the Trump Administration, stems from a petition filed by two U.S.-based but foreign-owned solar equipment manufacturers and a subsequent ruling by the U.S. International Trade Commission (ITC) that imports have caused injury to domestic producers. Solar Photovoltaic Manufacturing The proclamation concerns PV cells and modules made with crystalline silicon, which is the main technology used by solar manufacturers (accounting for more than 90% of global PV production) and used to produce solar energy. Manufacturing such products does not require assembly of complex machinery and thousands of parts; most PV systems have no moving parts at all. Solar cells, the basic components of a PV system, are assembled into modules, also known as panels, and modules in turn are connected to one another in arrays (see Figure 1) that feed energy into a building's electrical system or a utility's power grid. Figure I. Solar (PV) Cell, Module, and Array Source: Adapted by CRS from SamlexSolar. Solar modules are often described as a commodity, meaning they can be mass-manufactured and their quality is similar among most manufacturers. Large producers have a cost advantage because of economies of scale. Major capital investments are needed to build or upgrade a PV manufacturing facility. PV production is highly automated. Domestic module manufacturers have told the ITC that labor costs accounted for about 7% of production costs in 2016. Domestic transportation costs for finished modules produced in the United States are in the range of 2%-3% of value. The costs of materials, capital equipment, and research and development account for much of the rest. U.S. Demand for Solar Equipment Over 1.3 million PV systems (with 14.8 gigawatts of capacity) were installed in the United States in 2016, more than four times the level of 2012. A number of factors account for the growing domestic demand for PV products, including falling cell and module prices, the solar investment tax credit, state standards that require utilities to generate power from renewable sources, and higher efficiency. Domestic Solar Manufacturing Domestic PV manufacturing has expanded in recent years. An August 2017 ITC report found that between 2012 and 2016, production capacity of U.S. PV module manufacturers rose 34%, and domestic production expanded by 24%. Nonetheless, falling prices have made it difficult for domestic PV manufacturers to operate profitably. From January 1, 2012, to July 2017, more than two dozen domestic PV producers were in bankruptcy or shuttered their U.S. operations. Approximately 20 solar PV manufacturing facilities were in operation domestically as of July 2017, according to the ITC. Cell and module production occurs mostly outside the United States. In 2015, U.S. production accounted for 2% of worldwide cell and module production, according to the International Energy Agency. Solar Manufacturing Employment A relatively small share of the 260,000 solar jobs in the United States is in manufacturing; most jobs are in the design, sales, and installation of solar systems. About 38,100 workers-roughly 15% of all jobs in the solar industry-were employed in producing solar equipment in November 2016, according to the Solar Energy Industries Association (SEIA), an industry trade group (see Figure 2). Of the manufacturing jobs, SEIA estimates 2,000 people are employed in solar cell and module production. SEIA, which opposes the safeguards, projects they will raise the cost of cells and modules, leading to a lower number of installations and the loss of 23,000 jobs. Figure 2. U.S. Solar Energy Industry Employment Source: SEIA, National Solar Job Census, 2016. Imports of Solar Cells and Modules According to one estimate, imports of solar cells and modules supplied 88% (roughly 13 gigawatts) of U.S. domestic demand in 2017. Because of the domestic solar industry's high dependence on imported cells and modules, www.crs.gov 1 7-5700

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