Trump Dumps On Solar Industry Domestically

The Trump administration recently imposed a tariff on imported solar panels (and laundry machines, though they aren’t getting nearly as much awareness) that would seem to be a straight hit to the fastest-growing job opportunity in the U.S.: solar panel installers.

Before the tariff announcement, the U.S. Bureau of Labor Statistics had the “Solar Photovoltaic Installers” job set to improve 105%, the highest growth rate of all American jobs over the subsequent decade. With this action, the Solar Energy Industries Association estimates that the U.S. solar industry will lose 23,000 American jobs this year only.

So why institute a tariff that will put downward pressure on these growing middle-class jobs?

The U.S. installed approximately 7,000 MW of solar in 2017, the vast preponderance (roughly 80%) of which used imported panels. Trump’s scheme waives the tariff for the first 2,500 MW of panels, and then the duty kicks in at 30% on any excess. That’s for the first year only; the duty then steps down 5% over 4 years to 15% and then goes away. This is also the same time horizon for which the solar Investment Tax Credit (ITC) disappears.

The tariff only applies to the module, which makes up about 20-30% of the total installed cost of a utility-scale solar system and about 12% of a residential system. According to the two charts below from NREL, modules cost approximately $0.35/W across all PV sectors, so a 30% tariff would increase the cost of all types of installations by roughly $0.11/W, ceteris paribus, in the first year.

Net Outcome

The net outcome is that a utility-scale project would cost about 10% more than it does today, and a residential system would require about 6%-7% more.

These tariffs are not as Draconian as petitioned initially for by Suniva and SolarWorld. That said, GTM Research predicts they could reduce the amount of solar installed in the U.S. from 2018-2022 by around 8%, or about 5,000 MW.

The tariff follows adjustments to the tax code that also could make it harder for solar to obtain permanent financing. While, in my view, it is hard to argue against the lower corporate tax rate, tax code modifications also could have the result of degrading the tax equity available for offset by solar tax credits. And the Base Erosion Anti-Abuse Tax or (BEAT) provision, while not as bad as it could have been, could still limit some investors’ appetite for solar tax credits. Many solar projects have been placed on hold pending this ruling.
 

Oddly Solar Remains

Oddly, the sort of protectionism on performance with the imposition of this tariff is atypical of Republican diplomacies, in which such acts are often considered taxes on consumers.

While this is being done beneath the guise of supporting U.S. construction jobs, four years is too short of a time horizon to develop any significant domestic manufacturing.

From a political perspective, the Trump Administration’s determination to levy a tariff on solar modules is unusual in that, while it is true that solar doesn’t support that many long-term jobs, it does generate tons of short-term employment. If Trump wanted to take credit for one of the fastest-growing job businesses over the next three years, he should take action to accelerate solar, rather than administering the brakes.

Want to save and be guided by experts who do the research and know the answers? Go to HahaSmart.com and try our price checker tool. How much solar power you need and how much you can save on your energy bills each month.