Tiny Tuesday: What the Solar Tariff Means for You

If you’re planning to install solar panels in the near future, it might cost you more than you expected. And if you work in the solar industry, you better have a backup plan.

On January 22 the Trump administration announced tariffs on imported solar cells and modules for the next four years. (A solar cell is a single semiconductor that converts light into electricity; a module is a sealed series of solar cells. A solar panel combines modules with a frame for installation and hardware for wiring.) The tariffs start at 30% the first year and drop to 15% the fourth year; the first 2.5 gigawatts of imported cells each year are exempt.

According to Solar Energy Industries Association (SEIA), the US installed 12 gigawatts of solar in 2017. Roughly 80% of solar cells installed in the US – that’s 9.6 gigawatts – are imported, mostly from Asia. Imagining for the moment that installations stay constant, 7.1 gigawatts of solar will be subject to the 30% tariff. Averaging this tariff over the total 12 gigawatts installed means an 18% increase in cost for solar cells across the board. Distributers will generally pass this cost on to consumers.

But in reality, basic economic theory tells us the cost increase will depress consumer demand for solar panels. In particular, companies that procure and install solar panels will take a hit due to declining customers. SEIA estimates that of the 260,000 solar jobs in America, 23,000 will be eliminated by the end of the year.

On the other hand, there are signs that the tariff will achieve its stated intent – to encourage domestic solar manufacturing. Before the announcement, foreign solar cells were clearly cheaper than American-made cells, in part because of low labor costs, but also because foreign governments subsidize the product. The tariff levels the playing field.

Chinese company Jinko Solar bore this out last week by announcing its plan to build a factory in Florida. This factory aims to build 1.75 gigawatts of solar modules over three years, all of which will avoid the tariffs. The profits from this venture will go to Chinese soil, but nevertheless the plant will employ Americans. Other foreign companies may follow suit. So it’s not all job losses; jobs will be created as well.

Solar installations will decrease; solar manufacturing will increase. In the short run, we’ll need to pay more to get our electricity from the sun. But we have a strong national trend toward clean energy, the Trump administration’s indifference notwithstanding, and I predict that in the long run we’ll come out ahead.

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