Solar Panel Tariffs Have Not Shaken The Industry As Predicted
Despite the president’s goal to level the playing field between US and international solar panel manufacturing, the solar energy industry is not feeling the effects nearly as harshly as initially predicted. Foreign manufacturers often undercut American prices for competing products to break into emerging markets, exactly as foreign solar manufacturers have done with solar. With the tariffs, the expectation was that the increased price for exporting into our markets would make these foreign products more expensive – thereby driving consumers to use less expensive options made in America.
A tariff of 30 percent on imported solar energy components including solar cells and solar modules was enacted January 22nd, 2018, with a 5 percent yearly decrease until a 15 percent tariff is reached by year 2021. Industry analysts across all major market sectors that were affected believed solar installations would not only slow down drastically – but come to a deadening halt after years of industry growth. While there was an initial market reaction in the solar industry, it hasn’t been that much of a pain point – and here’s why.
Initial Reactions to Trade Tariffs
Due to the sudden announcement of 30% trade tariff affecting the solar industry, many large-scale solar projects were suspended or canceled altogether. Forbes examined a U.S. Solar Market Insight and noted some of the market sector effects that quickly came to the surface:
- 8 billion dollars in utility-scale solar projects — those that connect to the transmission grid, were delayed or canceled.
- 9,000 jobs were projected to be lost as a result of the president’s tariffs that were implemented in January 2018.
While these two statistics look concerning, the truth is that the solar industry has rebounded much more quickly than what analysts suggested – as the current market evidence shows offsetting variables that are making the tariffs essentially null for the solar industry.
The Solar Industry is Winning
The added tariffs were meant to increase sales of US solar products and increase competition between states – and not countries. But the fact is that most solar panels are not manufactured domestically. Foremost, even with the tariff, solar is still a less expensive source of energy over fossil fuels in many parts of the country. For this reason alone, clean, sustainable energy sources are still seen as a viable and cost-effective strategy that brings a significant return on investments.
Secondly, the 30% tariff arrived at the best time possible for the solar industry due to a drop in global demand that spun off a decrease in solar panel prices. In 2018 alone, solar panel costs ended down 33 percent – and with the added 30% tariff, it is still cheaper to install solar panels with tariff costs included as opposed to the non-tariff solar prices of early 2018. Both commercial and residential solar installations are more affordable today, and this is actually spurring continued growth in the market.
The Solar Investment Tax Credit
The federal government’s Investment Tax Credit or ITC allows customers of both commercial and residential solar system installations to take a 30 percent deduction of the installation cost off their annual federal taxes – and this is without an upper cap or value limit. When you couple the falling prices of solar components with the ITC deduction, the lower cost of solar installations are even more attractive.
As a property owner, you must own the solar installation as opposed to leasing, and any unused tax credit can be rolled over into the next year if you don’t have enough tax liability to utilize the entire credit at once. The solar energy tax credit has caused a compounded growth of 59 percent since the law was enacted. It is scheduled to begin reducing in 2020.
Residential Solar Installations Still Growing
Americans continue to switch to solar energy because of the many benefits of long-term savings and positive environmental impact. What was once expected to be a casualty of the president’s trade war has actually had little long term effect – aside from an initial knee jerk reaction in early 2018. Utility-scale projects have soared and the falling prices from imported solar equipment has kept residential and commercial installations growing.
Residential solar is still a great idea, even in the colder climates of the Northeast because there are better incentives offered locally in these states and colder states generally have a have higher cost of electricity. As utility companies increase rates, solar electricity savings will accelerate.
As the tariffs continue to decline by 5 percent each year until 2021, a resurgence in solar installations are indicating the tariffs are having less than a 1% impact on solar shipments. Utility scale installations will see the biggest impact as competition tightens, but advanced manufacturing techniques will continue to reduce the cost of solar panels, even those manufactured in South Korea or China. As a matter of fact, the increased tariffs are providing an incentive to manufacturers to develop technologies to increase production while decreasing costs.
If you’re wondering whether converting to solar is worth the investment, established companies like mtvSolar offer no-pressure consultations and free energy evaluations based on your annual electricity bills. Mountain View Solar offers turn-key installation services using North American made panels, as well as financing options that don’t place a lien on your property. It’s a low-risk investment to solarize your home with quality solar equipment and expert installation that will continue to bring savings for 30 years or more.
Contact us now to learn how a residential or commercial solar installation can increase property value and save money for decades. There has never been a better time to go solar as component prices are low, tax incentives are high, and innovative technology has increased the efficiency and durability of solar panels.