Impact of Solar Tariff on Solar Projects

By Renée Azerbegi, President 

Ambient Energy is still recovering from the shock that this solar tariff policy passed, but upon further research, the tariff will not have that much of an impact on our projects.

For the solar industry, the president approved tariffs for the next four years. A tariff of 30 percent will be levied on imported modules and cells in the first year. That will fall to 25 percent in the second year, 20 percent in the third year and 15 percent in the fourth year. In each of the four years, the first 2.5 gigawatts of imported solar cells will be exempted from the tariff.”1

In 2016 in the US, for reference, there were 13.5 GW of imported and domestic solar modules, of which 12.8 GW was imported.2 The 2.5 GW exemption will therefore apply to less than 20% of the imported solar based on 2016 production levels.

The cost of the modules alone, which the solar tariff is targeting, is $0.85 per watt to $1.25 per watt for a typical solar panel. The average cost of an installed residential system is about $3 to $4 / watt for a system on the order of 5 to 10 KW.3 This cost can get down to less than $1 / watt for large scale utility systems.

According to Blake Jones, CEO of Namasté Solar, “There will be a relatively small impact on the residential market because the cost of solar PV modules can be as low as 15%-20% of the total retail price of a residential solar project.  So, a 30% tariff on solar PV modules translates to an approximately 4%-6% increase in total project price (assuming that solar companies don’t absorb any of the cost increase, which Namaste Solar is partially doing).  And that’s just with current solar PV module pricing, which we expect to continue its ongoing decline in coming years.  At the other end of the spectrum, for large commercial and utility-scale projects, the cost of solar PV modules can be as much as 40%-50% of the total project price, and customers are much more sensitive to price and overall economics.”

This policy decision may affect the financial equation for solar projects, especially power purchase agreements, by making solar more expensive. Other potential outcomes of this decision include:

  • The panels may need to be purchased in the first quarter of the year to be within the threshold limit.
  • Domestic solar pricing may go down as supply and demand go up. Currently only Suniva Inc. and SolarWorld produce modules domestically, due to about 30 US manufacturers going out of business between 2012 to 2016 from foreign competition. Maybe those former manufactures will reopen shop!
  • The World Trade Organization will likely say this is a violation and overturn the ruling.4

We hope that you will still consider solar projects in the years going forward, and Ambient Energy is ready to help you analyze and determine the Total Life Cycle Cost of your investment as third-party energy and renewable energy consultants.