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How the 2018 U.S. Solar Tariff Will Impact the Price You Pay
We’ve been receiving lots of questions about the new solar tariff from shoppers on the
EnergySage Solar Marketplace.
Here’s the bottom line for homeowners: this tariff will increase the cost of a typical home solar installation by $500 to $1,000. The good news is that comparison-shopping on EnergySage can save you between $1,500 and $3,000. For commercial customers, the savings could be even higher (more on that later.)
Background on Trump’s solar tariff
On January 22nd, 2018, the Trump Administration
levied a 30% tariff on solar imports to the United States. The tariff covers both imported solar cells, a key input to manufacturing solar panels, and solar modules, otherwise known as solar panels. According to a
fact sheetreleased by the U.S. Trade Representative, this tariff will last for four years and will fall by 5% annually, dropping to a 15% tariff in 2021.
We at EnergySage support free trade and are firmly opposed to any trade restriction. We also expect this action to have a limited impact on the price of home solar installations in the United States. The brunt of the impact of the tariff is expected to be felt by utility scale developers. This expectation was confirmed by
a June report published by Reuters that revealed U.S. companies have cancelled or frozen
$2.5 billion in large PV installation projects due to the tariffs on solar panels.
What this solar tariff means for American consumers
A tariff is simply a tax on imports or exports. There are two types of tariffs, those which are calculated as a fixed percentage on the item and those that are calculated as a fixed dollar amount.
Trump’s tariff imposes a 30% tax on imported panels in year 1, which is actually preferable to a fixed dollar amount if you’re thinking about going solar.
Because the tariff is percentage-based, its actual impact on prices will shrink each year as the price of imported solar panels continues to fall.
Due to advances in solar manufacturing, the
cost of solar panels has fallen by between 2% and 6% per year for the past several years. In China, South Korea, and
other countries that dominate solar panel manufacturing, falling costs and technological advances won’t slow down simply because there is a U.S. tariff – and in fact, the tariff may give them an incentive to decrease costs faster.
The end result is that the percentage-based tariff, which is already set to fall each year, will be even smaller because it will be applied to ever-decreasing module costs. An example of this trend is illustrated below, where the dollar amounts shown are in dollars per watt of solar energy.
Tariff estimated impact on solar costs over time
TARIFF IMPACT YEAR 1 YEAR 2 (EST.) YEAR 3 (EST.) YEAR 4 (EST.)
Module prices (low) $0.33 $0.32 $0.30 $0.29
Module prices (high) $0.40 $0.38 $0.36 $0.34
Tariff percentage 30% 25% 20% 15%
Tariff impact (per watt, low) $0.10 $0.08 $0.06 $0.04
Tariff impact (per watt, high) $0.12 $0.10 $0.07 $0.05
Tariff impact (for a 6 kW system, low) $600 $480 $360 $240
Tariff impact (for a 6 kW system, high) $720 $600 $420 $300
Market experts estimate that the impact of the tariff in year 1 will be between $0.10 to $0.12 per watt. For a typical American homeowner, that represents
only a 3% to 4% increase in the cost of a solar panel installation. (This corresponds to a
recent analysis conducted by Greentech Media.)
By year 4, the tariff’s impact falls to only $0.04 to $0.05 per watt, which results in less than a 2% increase in installation costs. It is worth mentioning here that leading
solar manufacturing countries like China, Taiwan and South Korea can simply reduce their export prices faster, and render obsolete any impact of the solar tariff.