How much are tariffs holding solar back?
Solar advocates issued dire warnings about the impacts of tariffs on imported solar cells and modules, ahead of President Trump’s January decision to impose the trade penalty.
Solar Energy Industries Association President Abigail Hopper said the tariffs would “create a crisis” for the solar industry and threaten its 260,000 American jobs.
But while the tariffs are having some negative impacts, the industry and its customers now say their concerns were exaggerated. This is largely because solar installed costs have fallen so far and so fast, especially for utility-scale solar, that the relatively small increase in the module price due to the tariffs is having less of an impact than anticipated.
The tariffs will “shrink the total addressable market for U.S. utility-scale solar,” GTM Research (GTMR) Senior Solar Analyst Colin Smith told Utility Dive.
But the industry will still see “consistent increases in new capacity year over year,” he said, adding, “utilities are beginning to realize that the tariffs will not be the end of the industry.”
That view was echoed by representatives from a variety of investor-owned electric utilities who told Utility Dive via email they are monitoring their markets but have seen few impacts. The same applies for developers and installers.
Recurrent Energy, a leading utility-scale solar developer which opposed the tariffs, has reported no project changes. First Solar, an equally important utility-scale scale developer which endorsed the tariffs, has also announced no major changes.
National residential installer Sunnova and California residential installer Spice Solar both told Utility Dive the falling installed cost has offset the tariffs.
It may be time for solar builders and buyers to start thinking about interest rate increases, which could have a real marketplace impact.
The tariffs then and now
The president’s January decision cemented a U.S. International Trade Commission (ITC) ruling. It places 30% tariffs on imported solar photovoltaic modules and cells. The tariffs decline 5% per year, to 15% in 2022.
While the U.S. solar industry adjusts to the tariffs, multiple countries are pursuing challenges against them, both in court and at the World Trade Organization.
While the tariffs are lower than what Suniva and SolarWorld — the U.S. solar manufacturers that petitioned the ITC — said they needed to stay in business, neither has announced a change of status.
SolarWorld Americas spokesperson Ben Santarris said his company is ramping up its capacity and watching market conditions. Supplies were “stockpiled” ahead of the tariffs, limiting immediate market impacts, but “we continue to receive good responses from new and existing customers,” he emailed.
Steve Ostrenga, VP for U.S. module manufacturer Seraphim Solar, said orders are between 25% and 50% higher than they were in Q1 2017. There is also “increased interest by the investment community” in financing U.S. manufacturing, he told Utility Dive.
Other solar sector indicators show an industry adapting.
The Solar Foundation publishes an annual National Solar Jobs Census. Senior Director Ed Gilliland emailed Utility Dive that the tariffs’ impact on jobs will not be clear for “some time.” But respondents to a Solar Foundation 2017 survey done ahead of the final tariff decision predicted “modest, 5% job growth” in 2018.
The tariffs “were not as severe as some of the worst-case scenarios predicted,” he added. “But job growth would almost certainly be higher if tariffs had not been imposed.”