By Mandy Ellis
After President Donald Trump imposed a new tariff on imported solar cells and modules, consumers may be wondering how it has affected the solar industry at large as well as residential solar installations. To shed some light on the situation, here is an explanation of the tariff plus small-scale and large-scale impacts on solar energy.
What is the tariff?
President Trump’s tariff, effective February 7, 2018, applies a 30 percent cost increase, after the first 2.5 gigawatts of solar materials, to all imported silicon-based solar cells and modules. The tariff begins at 30 percent in year one, and drops by 5 percent until 2022 when it reaches 15 percent. Because the United States imports more than 90 percent of its solar technology, almost every solar panel and solar cell is affected.
What small-scale impacts is the tariff making?
Residential solar will see less of an impact than commercial solar. Although homeowners may see a cost bump of $500 to $1,000 on solar installations, a chart from The Los Angeles Times with data from PVinsights says solar panel prices initially climbed to about 36 to 37 cents per watt, but have now dropped back to summer 2017 prices at 34 cents per watt.
“Unfortunately, this tariff will raise the cost for residential solar because the biggest hardware cost is the module,” said Bill Ellard, CEO of Energy Solutions Partners, LLC in Boulder, Colo., and energy economist for the American Solar Energy Society (ASES), “I think we’ll see this short-term negative in the market with the tariffs implemented against solar modules and solar cells.”
Despite the tariff’s temporary pricing impacts, residential solar will continue to decrease in price, with the Solar Energy Industries Association (SEIA) stating solar installation average costs have fallen 70 percent since 2010, from $7.50 per watt to $1.50 per watt.
“The tariff isn’t going to destroy the residential market,” said Joy Seitz, CEO of American Solar and Roofing in Tempe, Ariz., “What consumers should pay attention to is: it’s one more variable that will continually impact their return on investment.” Even with the tariff implementation, Seitz’s company has maintained the same installation prices.
What large-scale impacts have occurred?
SEIA estimates the tariff could eliminate 23,000 jobs and cancel or delay billions of solar investment dollars, and Reuters reports U.S. companies have canceled or frozen investments of more than $2.5 billion in large utility-scale projects.
For example, from November 2017 to mid-2018 due to the tariff:
- McCarthy Building Companies put a $100 million solar farm on hold along with cancellations of $400 million of their national solar projects
- Cypress Creek Renewables LLC cancelled or froze $1.5 billion in solar projects
- Southern Current cancelled or froze $1 billion in solar projects
- SunPower announced postponement of their $20 million U.S. factory expansion
Additionally, a forecast from GTM Research shows the U.S. solar market will see an 11-percent reduction in installations, with utility scale solar accounting for 65 percent of the decline. And manufacturing job growth could flounder because the majority of U.S. solar employment opportunities are in installation, maintenance, and electrical and mechanical engineering.
Outlook on the effects of the tariff on solar
“An impact to keep in mind is with the tariffs, the Chinese currency has been decreasing in value versus the U.S. dollar,” said Ellard. “That means it’ll lower the price of solar modules coming into the U.S. and the tariff could end up being a wash.”
Solar panels are still only about 34 percent of the total installation cost, states research from HomeAdvisor, and even if installer prices increase, the change would be minimal and temporary. In fact, EnergySage states in year one, only a 3- to 4-percent increase in cost is likely, while by year four, it’s less than a two percent increase.
To help with pricing, solar experts recommend working with well-reviewed, reputable local contractors in your area. Understand residential solar arrays are typically 5- to 10-kilowatt systems that shouldn’t cost more than $3 per watt, or $15,000 for a 5-kilowatt system, explains Ellard.
“We feel like solar has made it’s mark, consumers should be investing in it, and there’s always a good time to go with solar. You’ll see noise in the field because solar’s path mirrors moving from horse and buggy to an automobile,” said Seitz. “Because we’re creating a new way of providing energy, tariffs, rate changes, legislation, policies and debates will continue to happen. But I won’t be surprised if solar becomes a mainstay with an assumption like, ‘Of course, you have solar; why wouldn’t you?’”