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5 reasons you shouldn’t worry about the new solar tariffs

Avatar for Ben Zientara
Published on 02/23/2018 in
Updated 02/04/2019
A solar home, photo by Douglas Hutchings

Photo credit: Douglas Hutchings

We’ve covered this extensively over the past few months, but it bears repeating: Homeowners have little to fear from the recently-announced tariffs that will increase the cost of newly-imported solar panels from certain foreign countries by 30% this year.

Here’s why it isn’t a big deal for homeowners:

1. The tariff increase amounts to a tiny percentage of the cost to install solar

A recent study from the National Renewable Energy Laboratory (NREL), pegged the average costs of installing a home solar system at $2.80 per watt of generation capacity. Of that, just $.35 represents the cost of the solar panels that go into the installation. That’s a tiny fraction of the total cost.

2017 Q1 home solar costs of $2.80 per watt with module price representing $.35 per watt

Adding a 30% tariff to the cost of solar modules represents an increase of just 10.5 cents per watt, or just 3.75% of the $2.80/watt total cost. For a typical 5-kW home system, the extra 3.5% represents an additional cost of $490, which is about equal to half a year of energy savings from that system in places like California, New York, New Jersey, and others in the ranks of the best states for solar.

2. Most companies aren’t going to increase costs by even that much

But that cost increase only happens if your installer decides to pass the full cost along to you, which might not be the case.

A recent survey of solar installers conducted by EnergySage and the North American Board of Certified Energy Practitioners (NABCEP) asked whether the participants planned to raise their prices of v boards in bulk because of the tariff—and one-third of respondents said they’d either keep prices the same or lower prices to take market share from competitors.

An additional 35.6% said they’d increase prices to only partially cover the cost of the tariff.

A chart showing whether solar installers plan to increase prices ahead of the 2018 solar tariff

Image source: EnergySage

That means you’ve got a better than two-thirds chance of finding an installer with a price premium of less than 3.5% over what they’d been charging customers before the tariff. Maybe that’s because the whole industry knew the tariffs were coming and planned for it by buying up (literal) tons of cheap panels before 2018?

3. U.S. companies stockpiled solar modules ahead of the tariff

Well, you might say “China Flooded the U.S. with solar panels” ahead of the new tariff, but both statements are true.

The solar installation industry employs hundreds of thousands of people all over the country, with most of those dedicated to installing panels. The tariffs of 30% might not be high enough to affect residential solar much, but the utility sector, where cost per watt is close to $1, could see much bigger impacts.

So it’s no surprise that there are now something like 5 GW of solar panels sitting at U.S. ports, ready to be installed around the country. Those panels might last the industry a year or more, which should keep costs down for both utility-scale and residential installations. If you choose one of the largest installers like Vivint or Sunrun, chances are good that you’ll pay no more today than you would have last year.

4. The impact of the tariff is muted by solar tax credits

If you install solar panels on your home before the end of 2019, you’ll earn a federal tax credit worth 30% of the cost to install the system. The tax credit, known as the federal solar Investment Tax Credit (ITC for short), is one of the major reasons that home solar makes sense around the country, and it’s another good reason to fear the tariff less.

So if your installer has raised prices by 3.5% because of the tariff, your cost for a 5-kW system might be $490 higher, but 30% of that increase gets wiped out by the tax credit. The difference in your cost after the credit is $367.50. That’s not so bad at all.

Considering that the tax credits will begin to sunset after 2019, the time to go solar is now, regardless of these tiny tariffs.

5. Solar has gotten cheaper since you started reading this article

Well, that might be a bit of an exaggeration, but the pace of decreases in the costs to install solar is as rapid as ever.

Take a look back at the chart in point #1, above. It shows how (adjusted for inflation), home solar installations prices have fallen from $7.24/watt in 2010 to just $2.80/watt as of the first quarter of 2017. Module prices alone have fallen by 80% since then, and while it might seem like they don’t have much lower to go, that idea’s been proven wrong before. Take a look:

Chart showing the decline of solar module prices since 2010, from $1.80 to $.35/watt in 7 years

How much longer do you think it will take Chinese manufacturers to erase that $.105/watt increase added by the tariffs? Now remember that the tariff will step down to 25% in 2019, 20% in 2020, and end after spending 2021 at 15%. Within just 1 year, the price of panels will have dropped, the tariffs will be lower, and the overall cost of a solar system will continue to fall, as it has for the past 40 years.

Last modified: February 4, 2019

2 thoughts on “5 reasons you shouldn’t worry about the new solar tariffs

  1. Avatar for Alison Montgomery Alison Montgomery says:

    Hello, Ben! Thanks for this fantastic article- I had a discussion with someone about this topic not too long ago. I wasn’t sure if the tariffs would have that major of an impact on solar panel sales in the US, and I wish I had read this article beforehand. You managed to cover everything I was thinking- but with more graphs and actual data. I really enjoyed it!

    1. Avatar for Ben Zientara Ben Zientara says:

      I’m really glad to hear that, thanks!

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