The Effect of the New Tariffs on Solar Pricing
In the hyper-political world of today, obtaining accurate information about what the new solar tariffs will mean to the average consumer can be a difficult process. While the temporary tariffs could disrupt some of the momentum that the solar industry has had in the country, companies using domestically sourced products are set to keep the industry on target while ensuring that solar remains the wave of the future. Here are seven important takeaways of the new solar tariffs to consider whether you’re ready to put some panels on your property or simply interested in the status of the ongoing solar revolution.
The tariffs are temporary.
Although the tariffs could ultimately be extended, for now they are set for a period of just four years, blunting any long-term pricing impact you’re likely to see on the industry. While companies that import assembled solar panels will likely see a temporary increase in solar pricing, domestic companies will have a short window of competitive advantage while maintaining their current prices. In solar, just like with any budding new technology, four years can certainly feel like an eternity, but the move is unlikely to radically change how solar products are priced long-term.
Consumers have an opportunity to look for higher quality.
In a global economy, consumers naturally tend to gravitate towards the most inexpensive option – regardless of the actual quality of product or installation. That trend plays out in the solar industry on a daily basis, as new solar customers end up buying inexpensive solar imports to save a few bucks upfront. Unfortunately, many domestic solar providers have had a hard time competing with cheaper panels even while offering much higher quality products and services that can have a longer service life.
With solar, consumers are upgrading homes and businesses in multiple ways, as renewable energy will save money in the long run while also adding value to the property. Instead of new consumers being tempted by low-cost installations that can have diminishing long-term value, the tariffs provide incentive to look at more experienced companies like Mountain View Solar, which focuses on American-made panels and the quality of installations by certified professionals.
There’s an important exemption.
The hidden details tell a much different story than the main solar tariff debate, particularly the all-important exemption on imported solar cells. While fully assembled panel imports are the main targets of the new tariffs, the first 2.5 gigawatts of solar cells imported to the United States will actually be exempt. For a little perspective, only 500 megawatts of solar cells – a fifth of the exemption – were imported into the United States in 2017, showing that the exemption will be widely utilized by companies relying upon inexpensive solar cells from other countries. For these companies, prices aren’t expected to substantially increase to cover the cost of the tariffs. Even internationally famous brand Tesla, which lobbied against the tariffs, is expected to see a competitive edge because importing solar cells is a major part of the business and the company also has a significant domestic arm.
The sliding scale.
Tariffs on solar products that have parts manufactured outside of the United States can get hit with up to a 30% tariff in the first year of implementation, but this number is also going to go down. After the first year, tariffs will diminish until they reach a max of 15%, which again points to a shorter-term impact that may not be as big of a deal as the headlines suggest. Even vocal critics admit that the overall impact on solar prices will fade each year until the tariffs are set to expire in 2021.
Long-term solar trends are still intact.
Solar has been a slow-moving revolution that has only become more and more practical for the typical consumer over the years, and that’s a trend that isn’t going to substantially change because of the tariffs. With important tax credits along with technological advances by the entire industry, the average cost of solar has been falling for many years and the incentive to own a solar-enhanced roof has also been steadily increasing. In fact, American consumers have started to literally own the solar transformation and continue to move away from leasing options that seemed to have hit their high mark in 2014, pointing toward an industry that is starting to come into maturity.
Part of the shift towards full ownership, of course, is that the message is getting out about the uptick in home value after solar installation. Though the data was murky in the early years of solar, recent studies have shown that owning solar panels can directly raise the overall value of a home and make installation well worth the investment. As outright ownership increases and pricing trends continue to get more favorable in the grand scheme, the tariffs are unlikely to create a barrier for most consumers ready to go solar.
The top tariff rate is lower than it could have been.
The U.S. International Trade Commission actually recommended that the tariffs be as high as 35%, a move that would go even further to punish companies that utilize imported solar equipment. Some of the main domestic solar providers lobbying for the new tariffs also asked for stricter tariffs than the ones that are being implemented. With the tariffs coming in below this recommendation and a sliding scale being put into place to curb price increases, there is actually a cognizant effort to minimize the disruption to the industry while still providing some relief to domestic solar companies.
The tariffs were implemented under a law not used since 2002.
The Trade Act of 1974 may not be the most well-known law, but it has been occasionally used to try and protect American companies. The last time it was used was early in the George W. Bush administration, as the 43rd president took aim at struggling steel manufacturers inundated by international competitors. Although the solar tariffs certainly come with considerable controversy, there is also a clear precedent based around evening the playing field for domestically based companies hoping to compete with cheaper alternatives.
If you have a reliable local installer that sources American-made solar panels, the reality is that the tariffs won’t do much to change the overall price you’ll pay for solar. While there will likely be some price fluctuation for companies that rely upon importing panels, installers using domestic sourced panels are in a terrific position to step in, and prices for these companies are unlikely to change much in the next four years. Although the solar tariffs will continue to be a political battleground for the immediate future, some solar companies are well poised to ensure that the solar expansion continues uninterrupted and the tariffs are likely to have only a short-term impact on the industry at large.
For more about solar installation and the impact of tariffs, contact our experts for all the details and further information you need.
On January 24th, 2018, the Winchester Star interviewed Mike McKechnie about the tariffs. Watch here!