On Monday President Trump instituted a 30% tariff on solar panels manufactured outside the United States. Optics/first take: Defies logic, common sense, and basic economics … not surprising given the ignoramus in chief.
On the surface, it's sad: Ideology trumps reality. Here's a quick summary of the irrationality of POTUS's move:
- Solar is the fastest growing industry/job creator in the U.S., and is projected to grow faster than any industry over the next 10 years.
- Less than 5% of solar panels are manufactured domestically. Why such tepid market share? We cannot produce a reliable, cost-effective product.
- When property owners go solar, the economy benefits and is decentralized: Less money is paid to utilities, more money is kept (and recirculated) by home- and business-owners.
- And, the environment benefits, immensely.
In reality — importantly -- it will not matter. The 30% tariff will increase the gross cost (investment) of a solar system by 8-10%, at worst. Much of this inflation has already been priced into the market: Solar panel prices increased $0.15-0.20 per watt in September, in fear of the pending tariff. (We were fortunate to secure enough solar panels (at pre-tariff prices) to supply Repower property owners through early spring.)
And, the first 2.5 gigawatts (GW) -- or, 2,500 megawatts; 2.5 million kilowatts; 2.5 billion watts; simply, ~8 million solar panels -- imported each year are exempt from the tariff. (By comparison, an estimated 7 GW of imported solar modules were installed in the U.S. in 2017.)
Worst-case: The simple payback for a residential system will increase by 4-6 months. From an article in today's Politico:
Since solar cells and panels make up only a fraction of a new solar system's costs, analysts expect the tariffs to bump up overall installed prices by 6 percent for residential rooftops and about 10 percent for utility-scale plants. Rocky Mountain Institute's own analysis says that the ongoing decline in solar installation costs will wipe out the price increases from the tariff in 18 months.
It could have been worse, and many solar industry leaders are relieved the Trumpster did not throw the solar industry in the dumpster. Solar is a but a crumb of our economic pie, and the tariff is much like a small sliver in your had: Temporary pain, but long-term it's nothing.
Solar is an ever-growing bonfire. Even with the tariff, solar-generated electricity still much less expensive that utility electricity (i.e., you can generate solar energy for ~8 cents per kWh; the average cost in PG&E territory is 26 cents/kWh). Again, from Politico:
"I don’t want to suggest that anyone is invulnerable," said Greg Wetstone, CEO of the American Council on Renewable Energy. "But we have a tremendous amount of momentum in the marketplace. I think the administration understands it's not in their interest to get in the way of the driver that is producing tremendous amounts of investment and creating jobs."
Be calm, solar on.