Standards Solution

The recent tariff imposed by U.S. Customs on solar modules m ay be interpreted as an act of consumer protection.

However, not every consumer requires the same protection.
Large purchasers of solar energy systems -- such as electric utilities -- are able to protect themselves with knowledge and with their power in the market. Unsuspecting small purchasers are vulnerable to the vagaries of a solar energy industry that is often either owned by, or beholden to large energy companies. Many solar module manufacturers recognize that their immediate, most profitable market is electric utilities. These giants of central planning are proponents first of distant, megawatt solar arrays. Solar companies that are successful in this market sector must produce quality products in quantity, and be able to provide long-term support. This more profitable market sector favors the stronger solar companies.

Newer, smaller and (statistically) more ephemeral solar companies often vie for position in the remaining market sectors that are generally less profitable. Ironically, in our nation’s sunniest state, the repressive rate schedules imposed by the electric utilities help to keep the profit margins in these competing market sectors exceedingly thin.

Many of these newer, smaller companies are foreign or manufacture their modules overseas. In fact, the vast majority of solar modules are manufactured overseas. Some of these modules are substandard and irresistibly attracted to the United State’s unguarded market. Perhaps, U.S. Customs is simply ‘stepping up’?

If we want to protect more vulnerable consumers, then there are better methods than protectionist tariffs. Established, internationally-recognized performance standards exist that provide some assurance of product durability and reliability. Most quality solar module or solar collector manufacturers see these tests as mandatory for their designs. Often, they are mandatory; knowledgeable customers will demand that their purchases are qualified by these standards. ASTM International (originally the American Society for Testing and Materials) has also initiated work on a new photovoltaic module standard. So, why have the most vulnerable consumers been left unprotected for so long?

The testing regimens are quite expensive. The monetary costs for testing a single module design are on the order of tens of thousands of dollars. The costs for a family of module designs can run over a hundred thousand dollars. The tests for a series of unrelated designs can cost several hundred thousand dollars. Obviously, the larger, established solar companies are better able to absorb these costs.

However, the monetary costs of testing pale in comparison to the costs of the time it takes to complete testing. In the best of circumstances, testing can take many months to accomplish. Unfortunately, the solar testing industry is in its infancy. Testing is often performed at laboratories born of academia where they have little understanding of the demands of the marketplace and suffer from a dearth of business experience. An unprepared solar company can be overwhelmed if a crucial module design fails near the end of several months of testing, with only the prospect of another several nervous months of testing a redesign lying ahead; or if a dysfunctional testing laboratory develops a backlog and delays the delivery of the test results.

The industry’s history of boom-and-bust cycles also affects the industry’s ability to address the issue of performance standards. During booms, attention is drawn elsewhere and the swell of new ‘players’ resists anything that might act as a brake on the market. The unprepared testing laboratories have also been easily overwhelmed during booms.

Ultimately, lax protection serves the interests of energy companies who seek to perpetuate their recently consolidated control over the flow of energy by slowing the adoption of locally generated energy.

Because it is so absolutely foundational, the energy market and, more specifically, the solar energy market must adhere to Conway’s Law. The markets must operate efficiently in order for energy efficiency to be realized. Protecting every consumer of solar energy products would be another important step towards this crucial goal.

Shield Tariff

The recent tariff imposed by U.S. Customs on solar modules may be something other than an ill-considered decision based on a misconstrued technicality. The lack of technical understanding on the part of Customs so defies belief, that one is compelled to seek alternative explanations.

One might construe their decision as a thinly-veiled attempt to slow a growing trade imbalance in the crucial solar industry. Much like patchwork efficiency programs, tariffs are often a reactionary ploy to disguise embarrassing deficiencies, if not a corrective for more dangerous imbalances. This perception is reinforced by the tardy and mixed reaction of the Solar Energy Industries Association (SEIA) whose members comprise both domestic and foreign companies. Some domestic companies must be tempted to retard objections to the tariff in the interest of their competitive advantage.

Another interpretation is that the tariff is an economic shield raised to protect unsuspecting and vulnerable solar module buyers in the U.S.

There is a void of effective consumer protection with respect to solar modules sold in the U.S. Currently, only safety certification is required for solar modules to be sold in the United States. Unlike most other markets in developed economies, no performance qualification is required in the U.S. This results in the U.S. being an attractive market for substandard modules that cannot be sold elsewhere.

This absence of any assurance of durability and reliability beyond module manufacturers’ warranties has profound implications. Few smaller solar energy systems today are effectively monitored. Over the years, as modules naturally and slowly degrade, many systems with substandard modules will experience accelerated performance degradation. It may actually be good fortune for a system owner to experience outright failure if the manufacturer is extant, able, and willing to meet its warranty obligations. As it is, much inordinate performance degradation is likely to linger unattended. As damaging as might be the loss of energy, the potential damage to the industry’s reputation may be tragic.

More than three decades ago in Arizona, foolhardy incentive programs led to a surge of companies offering solar domestic hot water systems as a response to rapidly increasing energy costs. Many of these “solar” companies were disreputable. Much of the technology was poor and untested. When these solar hot water systems began to fail, the systems -- and the companies -- failed spectacularly. Today, the broader solar energy industry still must deal with the echoes of this fiasco. It is a dismal memory more persistent than that of the “Alt Fuels Fiasco”. In fact, we all suffered a great loss of money, time, energy, and credence on account of those erstwhile failures of Arizona’s solar hot water industry. It is in everyone’s interest that the solar electric energy industry avoids anything even resembling such a disaster.

That’s Just Tariffic

The Solar Energy Industries Association (SEIA) “hopes to persuade Customs officials to reverse a decision to impose a 2.5 percent tariff on solar panel imports after more than two decades of duty-free trade in the product”, reports Reuters in “U.S. solar industry to challenge tariff ruling”.

The U.S. Customs Service justifies this tariff with a capricious argument that exposes a regrettable ignorance of solar technology. It also exposes a broader and more disconcerting ignorance of the solar energy industry and solar energy’s great value as both a cleaner source of energy for the world and its metaphorical power as a catalyst for cultural transformation.

All sectors of the solar energy industry have long struggled against thin margins, spasmodic markets, spectacular failures such as AstroPower’s, and impediments that include those established by entrenched interests. Despite its struggles, the industry has sustained a steady growth fueled by its bright promise.

“[GES USA] suggested that the Trinasolar TSM-175D solar module is classifiable under subheading 8541.40.6020 of the Harmonized Tariff Schedule of the United States (HTSUS). Subheading 8541.40.6020 provides for "Diodes, transistors and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules…: Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels…: Other diodes: Other: Solar cells: Assembled into modules or made up into panels." However, Explanatory Note (EN) 85.41 (B) (i) states that heading 8541 does not cover panels or modules equipped with elements, however simple, i.e. diodes to control the direction of the current. As such, since the Trinasolar TSM-175D solar module does contain diodes, classification under subheading HTSUS 8541.40.6020 is inapplicable.”
- Robert B. Swierupski Director National Commodity Specialist Division, U.S. Customs and Border Protection.

In this particular case, it is easy to criticize Customs. We can hope that the industry can better inform Customs of the ramifications of its decision. However, there is significant doubt about the industry’s capabilities in such matters. The solar energy industry was late in recognizing and responding to the sudden whim of Customs. The SEIA claims poverty as the excuse for its negligence.

Certainly, the SEIA has long recognized Customs as having an important influence on the economic health of the solar industry. Customs publishes its rulings punctually. We live in an age of inexpensive automation. Furthermore, with official unemployment numbers nearing double digits, automation has a regrettably inexpensive substitute. Poverty is a poor excuse for inattentiveness. In order to avoid such embarrassing episodes in the future, the industry must invest in solutions that can effectively protect its interests.