Is a Solar Panel Tariff on the Horizon?
The most significant materials cost on a solar project are the solar panels, but thanks to innovations in technology and manufacturing, their cost has decreased over time. The incentives associated with the solar industry have also been marked to decline accordingly, as it was anticipated that the cost to produce the panels would follow the same trend as other manufacturing industries throughout history. Panels manufactured in China and other parts of Asia are typically the least expensive, and thus are the preferred option for many installers looking to control project costs.
Earlier this year, U.S. solar panel manufacturer Suniva, Inc. filed a trade complaint against the lower-priced panels being imported from overseas. Suniva claims that the inability to manufacture the panels domestically and price them competitively with imports put domestics at a disadvantage. They have asked the U.S. International Trade Commission to investigate, hoping to impose a tariff on imported solar panels. A tariff would charge a “tax” on imported panels, essentially levelling the cost to those produced domestically and allowing U.S. manufacturers to compete with overseas manufacturers.
The Trade Commission’s recommendation heads to President Trump’s desk later this week. The President will have the final decision on whether to impose a tariff. On one hand, the tariff will make it easier for U.S. manufacturers to sell their products into the market. If they can compete with overseas manufacturers, they may be able to expand production – which means more domestic jobs. On the other hand, there are currently very few U.S. manufacturers, so increasing the cost of imported panels will mean the costs of solar projects in general will increase, which runs counter to what was expected when the phaseouts of the incentives were put in place. Increased project costs may result in a reduced number of imports, delayed construction starts, and job cuts.
It's difficult to predict which way this will go. The President has taken a hard line against China on other issues, and may view this as an opportunity to push back on imported goods from China while bolstering domestic production. However, the President has also been vocal about promoting oil, gas, and coal jobs and seems less interested in renewable technologies. If this is the direction the administration chooses to take, a panel tariff may not be on the horizon, potentially spelling the end of domestic panel production.
The number of installation companies far outweighs the number of manufacturing companies in the U.S. Because of this, it seems that imposing a tariff would only help a very small number of companies, while being detrimental to a vast majority of companies which need to purchase the panels in order to complete their installations.
In either case, U.S. solar panel resellers and installers have been trying to purchase as many panels as possible before a potential tariff goes into effect. This has caused a shortage of available panels, and delays in construction. Once the decision is made, the market should return to normal, and the price will land accordingly. But until then, the industry waits to see what the President will do.
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