Before the Section 232 tariff announcement, many module buyers were anticipating a roughly $0.03/W to $0.05/W impact, with $0.06/W to $0.07/W generally seen as an upper-end outcome. A consensus formed around a more stringent pricing impact. While the ultimate clearing price remains uncertain, we believe the low end of pricing across the value chain could rise by roughly $0.14/W for modules, $0.11/W for cells, and $0.10/W for wafers. Before Section 232, imported module pricing ranged from approximately $0.24/W for fully imported products to roughly $0.43/W for imported wafers converted into US-made cells and modules.
The key question is whether higher pricing results in demand destruction or simply project delays. We estimate that a $0.10/W increase in module pricing translates into approximately $4/MWh to $5/MWh in additional power purchase agreement (PPA) pricing. Since many developers had contemplated only $0.06/W to $0.07/W of module inflation, the eventual impact of Section 232 could force some projects to renegotiate PPAs.
Trade enforcement
The US Department of Commerce and US Customs and Border Protection have reportedly been preparing for implementation for months. As a result, we do not expect significant stockpiling between now and December. Importers are likely to face heightened documentation requirements and audits, making warehouse strategies riskier than during the Biden administration’s two-year moratorium on collecting duties on imported cells and modules.
The proclamation also includes an important “tuning mechanism” that allows the commerce secretary to adjust minimum import prices without requiring another presidential proclamation. This gives the administration a relatively rapid way to respond if market pricing or trade flows develop differently than expected.
Price floor
The mechanics of the minimum import price (MIP) are important. Using an example of a module entering the United States at $0.28/W against a $0.38/W MIP, the importer would owe a $0.10/W equalizing duty plus a 15% ad valorem tariff, or approximately $0.042/W. That results in a landed cost of roughly $0.422/W.
Once the module enters the United States, certification requires the first arm’s-length sale to occur at no less than $0.38/W. In practice, this means discounting below the floor does not benefit the buyer, as the discount is largely transferred to the US Treasury through the equalizing duty.
The economic incentive therefore pushes foreign suppliers toward pricing directly at the MIP rather than selling below it. This mechanism could pull transactions toward approximately $0.38/W and potentially higher depending on market conditions.
This also changes our earlier view that importers might be able to capture significant profits by buying below the MIP and reselling at the floor.
Finally, we believe Section 232 could prove more durable across political administrations than some investors expect. The policy is explicitly designed to incentivize additional US ingot, wafer, and cell capacity. If it succeeds in creating meaningful domestic investment and employment, a future Democratic administration may have limited incentive to unwind it.
Stock performance
The Invesco Solar ETF (TAN) underperformed the S&P 500 and Dow Jones Industrial Average (DJIA) in July.
The Invesco Solar ETF decreased by 14.7% for the month of July, while the S&P 500 increased by 0.1% and the DJIA rose by 0.3%.
The top three solar stocks in the United States for the month of July were ReNew Energy Global Plc (0.6%), HA Sustainable Infrastructure Capital Inc. (-2.0%), and Enlight Renewable Energy Ltd (-3.0%).
The top underperforming US solar stocks for July were Maxeon Solar Technologies Ltd. (-91.8%), SunPower Inc. (-54.5%), and FTC Solar Inc. (-44.8%).
Residential solar stocks fell by 39.6% in July and decreased by 36.8% year to date (YTD). The companies included are Enphase Energy Inc., Maxeon Solar Technologies Ltd., SolarEdge Technologies Inc., SunPower Inc., Sunrun Inc., and Zeo Energy Corp.
Utility-scale solar equipment stocks decreased by 23.5% for July and decreased by 26.3% YTD. The companies include Array Technologies Inc., First Solar Inc., FTC Solar Inc., Nextpower Inc., and Shoals Technologies Group Inc.
Independent power producer stocks were down 5.9% in July, but maintained YTD growth at 19.0%. The companies include Clearway Energy Inc., Enlight Renewable Energy Ltd, and Ormat Technologies Inc.
About the authors
Jesse Pichel has more than 25 years of experience as a Wall Street sell-side analyst and investment banker specializing in the energy transition and disruptive technology. He has completed over 300 transactions totaling more than $47 billion. He is recognized as a pioneer in sustainable investing and has built a broad industry network. Together with Roth Capital Partners, he has established a leading market share in public transactions in the sector.
Lev Seleznov is a senior associate on the sustainability investment banking team at Roth Capital Partners, where he focuses on clean technology and the energy transition, providing financing and advisory services to small- and mid-cap renewables companies. Seleznov previously worked at a private equity search fund and a boutique credit-focused investment bank.
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