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The cost of installing solar could go up 15% this year. Here’s why.

Pile of cash
May 20, 2017, updated October 31st, 2017

Suniva, a United States manufacturer of solar panels, filed for bankruptcy last month. A week later, it petitioned the U.S. International Trade Commission (ITC) for an emergency increase in tariffs on solar cells imported from other countries. Big deal, right?

It is.

It could mean that solar panels will soon cost double what they do today, bringing solar installation costs up by 15%.

What happens next?

The ITC has 120 days to review the petition, and a couple months more to report its findings and make recommendations to the Trump Administration. That will happen sometime this autumn. At that point the President and his advisors can implement a plan.

UPDATE, October 31, 2017:The ITC has submitted its initial recommendations for tariffs, with final recommendations due to the President by November 13th. The initial recommendations call for between 10% and 30% tariffs on imported solar cells and modules, which if adopted by the Trump Administration would increase the installed cost of home solar by about 5% based on cells and module current prices.

If however, the President decides to adopt tariffs recommended by the Suniva and other petitioners, the 15% cost increase posited within this article could still come true. More here.

Previous update, September 22, 2017:The ITC commissioners have unanimously agreed that the importation of solar cells and panels into the U.S. has caused “serious injury or threat of serious injury” to manufacturers of those products here in the U.S.

As a result, the ITC will determine a recommendation for “remedy,” which will likely mean tariffs on foreign solar panels. Last we heard, those recommendations will be submitted to the President by November 13th, 2017.

We will continue to update this story as it develops.

Suniva is asking for tariffs of $.40/watt for solar cells, and a minimum cost of $.78/watt for solar modules (aka panels). A typical solar panel is rated to produce 270-300 watts, and current wholesale prices are around $.35/watt, so the price range for one panel would increase from $95-$105 to $210-$235.

That would make the United States the most expensive country in the world to buy a solar panel.

Why are they doing this?

U.S. Solar manufacturers are having a hard time competing with prices from overseas competitors. The reasons might seem obvious: lower labor costs allow southeast-Asian companies to churn out cheap panels, flooding the market and driving the competition (Suniva et al) out of business.

But past studies have found other reasons for the disparity, including scale and supply-chain advantages. And on top of that, China continues to have very aggressive plans to invest directly in solar manufacturing going forward.

This new filing is actually part of a complicated trade dispute between the world’s solar manufacturing companies. Since the beginning of the decade, U.S. solar companies have alleged that their Chinese competitors have been “dumping” cheap solar panels on the U.S. market at ultra-low prices, in order to destroy their competitors.

But we’re not here to discuss the recent history of solar trade disputes. We’re here to look at how the proposed changes could affect homeowners.

What does more expensive solar mean for you?

An upset woman with a tipped-over piggy bank

If you’re considering solar and you’ve done some basic research, you probably know that it costs a lot less to install solar panels than it used to even 7 or 8 years ago. Like half as much.

Solar systems are measured by the number of kilowatts (kW) of energy they can produce under direct sunlight, and solar costs are expressed as dollars-per-watt. Costs per watt go up or down based on system size, and a typical 5-kW home system is usually priced at $15,000, or $3/watt.

That price is what the solar industry calls the “installed cost,” and includes everything that goes into getting the system on your roof, like labor, solar panels and other materials, overhead, profit for the installer, and more. Here’s a quick breakdown of costs:

  • Solar Panels – $1,750
  • Inverter – $1,600
  • Other Hardware – $1,200
  • Installation Labor – $1,800
  • Permitting and Inspection Labor – $1,200
  • Overhead/Other Business Expenses – $5,750
  • Profit – $1,700
  • Total System Cost (before incentives) – $15,000

So the first line, where it says “solar panels” will be affected if Suniva’s suggestions become the law of the land. That $1,750 price could go to $3,900, making the total system cost $17,150, which is about what the price was 2 years ago.

The what-ifs

One thing to keep in mind is we’re talking worst-case scenario here. So the 15% price increase will happen if and only if:

  • The ITC finds in favor of Suniva and recommends its preferred course of action (4 years of tariffs and price floors for foreign-made solar panels)
  • The Trump administration follows the ITC recommendations directly and puts the recommended fixes in place
  • American solar panel manufacturers charge prices at or near the foreign panel price floor

Those are a lot of what-ifs, but as Greentech Media reports, John Gurley, a trade lawyer with knowledge of these kinds of disputes, gave the above scenario a better-than-even chance, saying “history tells us it’s more likely we’ll get a remedy than not.”

How the change would affect payback for a typical residential solar system

The first thing to remember is that the cost of the system would still qualify for the Federal Investment Tax Credit of 30% of the cost. If you bought the system at today’s price of $15,000, you’d get $4,500 back on your tax bill next year and have $10,500 left to recoup. If the price goes up to our estimate of $17,150, you’d get $5,145 back, which would leave you with about $12,000 to pay.

Depending on where you live, that extra $1,500 could take you 1 or 2 years to pay back. Here’s how that would look:

Effect of increase in solar panel prices on payback time

We used the example of Colorado, a good state for solar with moderate electricity prices and no statewide incentives. The increase in installed cost of $1,500 carries through to the end of the system’s life, and causes the payback time for a solar system to get pushed back by 2 years.

So what should you do?

If you’re considering installing solar panels this year, it’s time to step up your research game and get ready to get quotes from local solar installers.

Start by grabbing our Ultimate Guide to Going Solar, and checking out your state’s dedicated solar page on our site.

And, as always, stay tuned for more solar news from Solar Power Rocks!

Last modified: May 21, 2019

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