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Key Takeaways | Lender Outlook on the Debt Financing of Renewables and Transactions

During the latest webinar in our Energy Transition series, McDermott Partners Robert da Silva Ashley and John Bridge hosted Paul Pace, SVP and team leader at KeyBank, and Andrew Chen, managing director at CIT, to discuss the current outlook of leading lenders in the US renewables and transactions space. More specifically, they focused on lender outlook regarding the state of debt market support for the growing range of renewable power generation and clean energy infrastructure projects.

Below are key takeaways from the webinar:

1. The financing market for renewable projects remains extremely competitive, compressing pricing for lenders and driving innovations in financing structures with credit increasingly given to shorter tenured power purchased agreements (PPAs) and earlier merchant tails.

2. Current supply chain delays and inflationary pressures are creating significant stress. Solar panels and other major equipment are stuck in ports and sharp rises in project costs (insurance, labor wages, operations and maintenance, etc.) are starting to have a noticeable effect on the viability of certain project developments.

3. Lenders have been leaning heavily on client relationships with established track records of successful project developments, strong financial footing and credibility with industry counterparties helping to navigate the current challenges.

4. Environmental, Social and Governance (ESG) remains a focus for banking institutions driven by regulatory and environmental factors.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




What COVID-19 Means For Renewable Projects And Financing

The world is facing a situation unprecedented in modern times with the global spread and impact of COVID-19. Its rapid spread has brought severe disruption and uncertainty to everyone’s personal lives, as well as to the wind, solar and storage industry supply chains, the renewable project financing market, and global markets at large.

While the speed and complexity of the virus make it impossible to know the full effects it will ultimately have on the world, what follows is what we know today about the impact of COVID-19 on the supply chains for solar, energy storage and wind developers, as well as the project finance market.

Access the full article.




International Trade Commission Issues Recommendations for Tariffs on Imported Solar PV Equipment

On October 31, 2017, the US International Trade Commission (ITC) released its recommendations to impose a tariff on imported solar equipment. The proposals it issued, however, would result in duties substantially lower than those sought by the petitioners. The ITC’s four commissioners issued several remedy recommendations, including, at the high end, a 35 percent tariff on imported solar modules and a 30 percent tariff on solar cells. This would result in an estimated 10-13 cent per watt increase on imported solar panels, far below the tariff levels requested by the petitioners.

In May, Suniva, a US solar cell manufacturer, filed a petition at the ITC requesting relief from foreign imports. The petition alleged that a global imbalance in supply and demand in solar cells and modules and a surge of cheap imports caused serious injury to the domestic solar manufacturing industry. SolarWorld, another US manufacturer, joined the petition and the ITC instituted an investigation. Suniva and SolarWorld requested a 32 cent per watt tariff on crystalline silicon photovoltaic (CSPV) cells, and Suniva sought a price floor on solar panels of 74 cents per watt.

While US solar manufacturers argued in favor of imposing duties on foreign imports, others like the Solar Energy Industries Association (SEIA) have opposed the petition, arguing that it poses a major threat to the 260,000 US workers in the solar industry.  Specifically, SEIA argues, the higher cost of panels would lead to decreased demand and make solar energy less competitive in the United States, costing jobs in solar installation and other areas of the solar industry. Solar manufacturing accounts for approximately 38,000 jobs in the United States while solar installation accounts for over 137,000 jobs.

In September, the ITC found injury to the US solar equipment manufacturing industry. Since that finding, the ITC has been working on the remedy phase of the proceeding.

The commissioners issued three separate sets of recommendations. One recommendation proposes, among other things, imposing tariffs of up to 30 percent on imported CSPV cells and a 35 percent tariff on imported CSPV modules, each of which would be incrementally reduced over four years. A second proposal recommended imposing a 30 percent tariff rate on imports of cells exceeding 1 gigawatt, decreasing by five percentage points and increasing the in-quota amount increase by 0.2 gigawatts each year over a four year period, as well as a 30 percent tariff on modules that would be phased down by five percentage points each year. The third proposal recommended a quantitative restriction on cells and modules starting at 8.9 gigawatts in the first year, increasing by 1.4 gigawatts each subsequent year.

The ITC will forward its report, which contains its injury determination, remedy recommendations, additional findings, and the bases for each, to the President by November 13, 2017. The President must make a final decision on whether to impose a remedy and what that remedy should be by January 12, 2018.




ITC Will Decide on Duties for Solar Imports

by Raymond Paretzky and David J. Levine

The U.S. International Trade Commission (ITC) is now beginning its final phase “injury investigation,” which will result in a determination in November as to whether U.S. producers are harmed by imports of allegedly dumped and/or subsidized imports of Crystalline Silicon Photovoltaic Cells and Modules from China.

The parallel dumping and subsidy actions began with the filing of a petition by Solar World Industries America Inc., the U.S. subsidiary of a German parent company, in October 2011. In December, the ITC issued a unanimous affirmative preliminary injury determination, rejecting arguments by companies opposed to the action that price declines in the industry resulted not from Chinese imports but rather from plummeting silicon prices, reduced U.S. government incentives for the housing industry to use solar cells/panels, and limited U.S. demand. The ITC will revisit these arguments in its more expansive final phase investigation, in which importers, U.S. producers, purchasers and Chinese producers will be required to answer ITC questionnaires. All parties with interests at stake are well advised to make their positions and relevant facts known to the ITC.

If the ITC finds that the U.S. industry making these products is in fact injured (or threatened with injury) by the imports, the United States will impose tariffs on imports of these products. The amount of the tariffs will be determined by the U.S. Department of Commerce (DOC) in separate proceedings. DOC preliminarily found that subsidization was occurring in the range of 2.90 to 4.73 percent and dumping in the range of 31.14 to 249.96 percent, but DOC could change these rates in its final investigations, which are currently ongoing.

Key dates in the ITC investigation’s final phase are:

 Questionnaire Responses Due  Aug. 13  Confidential Staff Report Released  Sept. 13  Requests to Appear at Hearing Due  Sept. 19  Prehearing Briefs Due  Sept. 20  Hearing  Oct. 3  Posthearing Briefs Due  Oct. 11  Final Comments on New Info. Due  Nov. 1  ITC Vote (Proposed)  Nov. 7

 




U.S. Department of Commerce Preliminarily Finds Chinese Solar Panel Manufacturers Received Subsidies from the Chinese Government

by David Levine, Raymond Paretzky and Melissa Dorn

The United States Department of Commerce (DOC) released its preliminary determination in the countervailing duty investigation on imports of silicon photovoltaic (PV) cells from China last week.  The DOC preliminarily found subsidy rates for Chinese producers and exporters of PV cells ranging between 2.9 to 4.73 percent—rates that were lower than some industry members reportedly expected, and lower than the rates alleged by the Solar World Industries America Inc., the U.S. producer that petitioned for this countervailing duty investigation and the companion antidumping investigation.  The DOC affirmed Solar World’s allegation of “critical circumstances,” resulting in retroactive application of the countervailing duty deposit requirement on imports of Chinese PV cells beginning in December 2011.

The DOC also clarified that the scope of the ongoing antidumping/countervailing duty investigations covers PV cells and modules produced in China as well as modules produced elsewhere with Chinese PV cells, but does not include modules produced in China from PV cells produced elsewhere.

Countervailable subsidies are receipts of financial assistance by producers and/or exporters from their local or national government that benefit the production or exportation of goods where such benefits are limited to specific enterprises or industries, or are contingent either upon export performance or upon the use of domestic goods over imported goods. 

U.S. imports of Chinese solar panels in 2011 were valued at over $2.5 billion – a significant and growing share of the total U.S. market.  The rapid growth of Chinese imports in fact supporting the “critical circumstances” finding noted above as well as the earlier preliminary determination by the U.S. International Trade Commission (ITC) that the U.S. industry is being injured by imports of PV cells from China. 

Interested members of the solar industry will continue to watch these proceedings closely.  The DOC is expected to announce its preliminary determination in the companion antidumping investigation in May.  The final countervailing duty determination is due to be issued in June, and the ITC will issue its final injury determination in July, though these dates could be postponed.  Interested parties also are closely monitoring the U.S. and global market implications of these investigations, including in the large solar market in Europe, where reports indicate similar trade relief actions against Chinese exports might be under consideration. 




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