The growth of solar in the United States continues to be prohibited by tariffs placed on the industry in 2018. However, despite the tariffs, the commercial solar growth forecast is not all doom and gloom.
Tariffs and the Commercial Solar Industry
While tariffs may be prohibiting the overall solar industry from quickly growing in the U.S., the commercial sector is experiencing steady growth.
Wood Mackenzie reports costs for utility-scale solar engineering, procurement and construction (EPC services like what Melink Solar offers) fell by more than 50% from 2013 to 2019 in the U.S. Moreover, Business Energy Investment Tax Credits (ITC), as well as state and federal financing programs, available for commercial projects can offset the tariffs’ impact.
Likewise, a business’ investment in solar can reduce its carbon footprint by 10% to 100%, lock in its energy rate for the next 30 years, and support its long-term corporate social responsibility goals.
Understanding the Tariffs
The tariffs impacting the solar industry vary by amount and regulation.
The most well-known solar tariff is Section 201 of the Trade Act of 1974. Section 201 composes a four-year program targeting imported solar crystalline silicon photovoltaic modules, These tariffs — starting at 30% and dropping by five percentage points each year through 2021 — were designed to boost U.S. manufacturing and to lock out unfair competition from foreign countries, primarily China.
Section 232 of the Trade Expansion Act of 1962 declares a 25% tariff on steel and 10% tariff on aluminum. In turn, this increases the cost of solar racking, wiring, and ground mount posts.
Lastly, Section 301 of the Trade Act of 1974 taxes U.S.imports from China. In regard to solar, the tariffs target companies that manufacture products with semiconductors from China. This plays into solar inverters and modules.
The Tariffs’ Impact
Ultimately, the tariffs have slowed the flow of lower-cost product available to U.S. developers, keeping the overall cost of solar projects cost-prohibitive to many, especially in the residential sector. Consider the average homeowner: the higher cost of a home solar project due to tariffs does not make the technology as easily attainable.
In fact, according to energy research firm Wood Mackenzie Power & Renewables, solar modules imported into the U.S. are 45% more expensive than those sold into Europe and Australia.
The tariffs (and the resulting lost projects due to the cost of investment) equate to 10.5 gigawatts in missed solar energy installations, according to the U.S. Solar Industries Association, the leading solar trade association in the U.S.
The Future of U.S. Solar Tariffs
At this time, approximately 98% of solar panels and their components are manufactured outside the U.S., according to the Congressional Research Service. In light of the tariffs, many solar manufacturers are circumventing the restrictions by cutting prices and moving production factories from China to Section 201-exempt countries such as Mexico and the Philippines.
Currently, the U.S. administration is conducting a midterm review of the tariffs. Experts suggest that a complete removal of the tariffs would result in a 30% drop in solar pricing, potentially creating an influx of large-scale solar projects for developers.