TODAY’S STUDY: THE U.S. SOLAR FOREIGN TRADE

(Note: Today’s lead post, a profile of a new report definitively documenting the fact that the U.S. solar energy industry is an exporting success story, is dedicated to Congresswoman Gabrielle Giffords (D-Ariz), a great champion of solar energy.)

U.S. Solar Energy Trade Assessment 2010:Trade Flows and Domestic Content for Solar Energy-Related Goods and Services in the United States
November 2010 (GTM Research)

Executive Summary

This study is a comprehensive analysis of trade flows and domestic value creation in the U.S. solar energy industry based on data from the calendar year 2009. Many sources of data and analysis focusing on solar trade balance issues exist. To date, however, most of these efforts have taken a fairly simplistic view of solar products. Most focus exclusively on individual product components, such as solar modules, analyzing what proportion of those components are manufactured domestically. In contrast to existing research, this study:

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• Captures critical elements of the solar value chain such as installation labor, legal costs, and other “soft costs”, the value of which accrues directly to the U.S.

• Analyzes unique trade flows of components of a solar installation, such as polysilicon, that are omitted in other analyses

• Examines, in the case of photovoltaic modules, not just the location of final assembly but also production locations for earlier steps in the value chain.

• Examines all mainstream solar technologies types individually and aggregated – photovoltaics (PV), concentrating solar power (CSP), and solar heating and cooling (SHC).

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A significant portion of the revenue generated by solar projects resides beyond the physical components – as site preparation, installation labor, permitting, financing and other soft costs comprise nearly 50% of the total cost. Accordingly, when evaluating solar installations this study focuses on the percent of “total value created” in the U.S., rather than just the components that would figure into a “domestic content” calculation.

This study seeks to answer two fundamental questions:

• What percentage of the value in U.S. solar installations was created domestically in 2009?

• What was the value of solar products that were imported into, and exported from, the United States in 2009?

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Key Findings: Solar Energy

• The U.S. is a significant net exporter of solar energy products with total net exports of $723 million in 2009.

• The largest solar energy product export is polysilicon, the feedstock for crystalline silicon photovoltaics, of which the U.S. exported $1.1 billion in 2009.

• 2009 U.S. solar energy installations created a combined $3.6 billion in direct value, of which $2.6 billion (74%) accrued in the U.S.

- 81% ($2.1 billion) of the domestic value created by solar in the U.S. came from the PV sector
- 16% ($431 million) came from the SHC sector
- 3% ($76 million) came from the CSP sector

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Photovoltaics (PV)

• 71% of total PV system value was created domestically in 2009. The domestic value was primarily created in the areas of module manufacturing, site preparation, labor, soft costs, and value chain markup for the module distributor and system installer.

• 31% of the value of PV modules deployed in U.S. installations in 2009 was created domestically, while the remaining 69% came from foreign sources. The domestic value was primarily created in the areas of polysilicon production and module assembly for crystalline silicon modules, and capital equipment, glass manufacturing, labor, and value chain markup for thin fi lm modules. On a technology and application-blended basis, modules accounted for 32% of the total representative system cost.

• U.S. PV-related imports in 2009 totaled $1.6 billion while exports totaled $2.3 billion, making the U.S. a net exporter of PV goods by $723 million. Key export goods included polysilicon and modules, while modules and inverters were the most prominent imported goods. China and Mexico were the locations that contributed the most to imports, while Germany, Japan, and China were the most prominent export destinations.

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Concentrating Solar Power (CSP)

• 93% of the total value of 2009 CSP installations was created domestically. Materials sourced from other countries were molten salt (used for thermal storage), and turbines.

• U.S. imports of CSP-related goods totaled $3.8 million, coming from Germany. The U.S. did not export any CSP–related goods in 2009 in signifi cant quantities. Looking forward, trade flows for CSP should remain relatively small, as many of the components are low value per pound commodities (i.e. steel, concrete, mirrors), where the economics favor domestic sourcing to avoid transport costs.

• Note that data for CSP installations in 2009 is limited as there were only two commercial installations in the U.S. in 2009.

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Solar Heating and Cooling (SHC)

• For solar water heating (SWH) systems, 78% of the total value of 2009 installations was sourced domestically. Storage tanks represented the largest portion of equipment obtained from foreign sources.

• For solar pool heating (SPH) systems, 95% of the total value of 2009 installations was sourced domestically. The 5% of value sourced from abroad was primarily due to Israeli-made collectors.

• Imports of SWH and SPH collectors in 2009 totaled $11 million, compared to exports of $16 million; this made the U.S. a net exporter of SWH and SPH products by $5 million. China was the most prominent import location, while Mexico contributed the most to SWH and SPH exports.

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Aggregate Findings

The figure below details total and domestic value creation for all solar energy-related goods and services in 2009, created by summing all the analysis conducted in previous sections. In total, $3.6 billion of value was created in the U.S., of which $2.7 billion, or 74%, was sourced domestically. PV clearly constituted the majority of domestic sourcing, at $2.1 billion, with non-module costs playing a material role in the outcome. At the same time, almost all of the value created from foreign sources also came from PV, primarily in the area of module manufacturing.

Aggregating trade flows for all solar energy segments for 2009 yields a total export fi gure of $2.3 billion, while imports sum up to $1.6 billion. Net exports, therefore, totaled $723 million for 2009. The bulk of this, as indicated below, comes from polysilicon, where the U.S. has a strong manufacturing presence. While module exports to Germany and Japan amounted to $1.0 billion in revenue, they were offset by imports of $1.2 billion from lower-cost locations such as China and Mexico.