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How the 2018 U.S. Solar Tariff Will Impact the Price You Pay

Update: a new section was added at the bottom of this article in September 2018 to show the tariff’s impact on residential solar prices

We’ve been receiving lots of questions about the new solar tariff from shoppers on the EnergySage Solar Marketplace. Here’s the bottom line for homeowners: this tariff will increase the cost of a typical home solar installation by $500 to $1,000. The good news is that comparison-shopping on EnergySage can save you between $1,500 and $3,000. For commercial customers, the savings could be even higher (more on that later.)

Background on Trump’s solar tariff

On January 22nd, 2018, the Trump Administration levied a 30% tariff on solar imports to the United States. The tariff covers both imported solar cells, a key input to manufacturing solar panels, and solar modules, otherwise known as solar panels. According to a fact sheet released by the U.S. Trade Representative, this tariff will last for four years and will fall by 5% annually, dropping to a 15% tariff in 2021.

We at EnergySage support free trade and are firmly opposed to any trade restriction. We also expect this action to have a limited impact on the price of home solar installations in the United States. The brunt of the impact of the tariff is expected to be felt by utility scale developers. This expectation was confirmed by a June report published by Reuters that revealed U.S. companies have cancelled or frozen $2.5 billion in large PV installation projects due to the tariffs on solar panels.

What this solar tariff means for American consumers

A tariff is simply a tax on imports or exports. There are two types of tariffs, those which are calculated as a fixed percentage on the item and those that are calculated as a fixed dollar amount.

Trump’s tariff imposes a 30% tax on imported panels in year 1, which is actually preferable to a fixed dollar amount if you’re thinking about going solar. Because the tariff is percentage-based, its actual impact on prices will shrink each year as the price of imported solar panels continues to fall.

Due to advances in solar manufacturing, the cost of solar panels has fallen by between 2% and 6% per year for the past several years. In China, South Korea, and other countries that dominate solar panel manufacturing, falling costs and technological advances won’t slow down simply because there is a U.S. tariff – and in fact, the tariff may give them an incentive to decrease costs faster.

The end result is that the percentage-based tariff, which is already set to fall each year, will be even smaller because it will be applied to ever-decreasing module costs. An example of this trend is illustrated below, where the dollar amounts shown are in dollars per watt of solar energy.

Tariff estimated impact on solar costs over time Tariff impactYear 1Year 2 (Est.)Year 3 (Est.)Year 4 (Est.) Module prices (low)$0.33$0.32$0.30$0.29 Module prices (high)$0.40$0.38$0.36$0.34 Tariff percentage30%25%20%15% Tariff impact (per watt, low)$0.10$0.08$0.06$0.04 Tariff impact (per watt, high)$0.12$0.10$0.07$0.05 Tariff impact (for a 6 kW system, low)$600$480$360$240 Tariff impact (for a 6 kW system, high)$720$600$420$300

Market experts estimate that the impact of the tariff in year 1 will be between $0.10 to $0.12 per watt. For a typical American homeowner, that represents only a 3% to 4% increase in the cost of a solar panel installation. (This corresponds to a recent analysis conducted by Greentech Media.)

By year 4, the tariff’s impact falls to only $0.04 to $0.05 per watt, which results in less than a 2% increase in installation costs. It is worth mentioning here that leading solar manufacturing countries like China, Taiwan and South Korea can simply reduce their export prices faster, and render obsolete any impact of the solar tariff.

How EnergySage helps consumers offset the solar tariff

The good news is that EnergySage can help both residential and commercial solar shoppers minimize the impact of these tariffs on their solar costs. The power of using an online marketplace like EnergySage means that solar-interested consumers can more than offset the impact of the solar tariff by simple online comparison-shopping.

A 2017 study by the National Renewable Energy Laboratory (NREL) examined the effect of EnergySage (a “quote aggregator”) on prices within the residential solar industry. This groundbreaking report, titled “The Value of Transparency in Distributed Solar PV Markets,” was based on a robust analysis of 70,000 quotes sourced from EnergySage as well as outside of EnergySage, and took nearly one year to complete.

Their big finding: “improved market transparency [on EnergySage] results in lower installation offer prices … [and] PV customers benefit from gaining access to more PV quotes.” In terms of actual dollars and cents, the researchers uncovered that “PV installers bid $0.24 per watt lower on [EnergySage] than when they bid directly to the same customers [offline].” NREL also found that savings can go as high as $0.48 per watt. For an average 6 kW system, these translate into $1,440 to $2,880 of real and tangible savings for shoppers.

What this means for solar-interested homeowners today: the new solar tariff will increase costs for an average solar shopper by approximately $660 ($0.11 per watt x 6,000 watts). However, savvy EnergySage users also benefit from savings of $0.24 per watt, according to NREL. The end result, even with the tariff, is $0.13 cents per watts of real savings ($0.24 savings – $0.11 tariff), or approximately a $780 discount for a 6 kW system. The savings for commercial shoppers installing larger systems would be even higher.

While we regret that the Trump Administration has made the decision to go forward with its solar tariff, we are happy to report that using EnergySage more than offsets the tariff’s impact. If you’re interested in installing solar panels, we encourage you to get started today or share this information about EnergySage with your friends and family.

Update: One year later, looking back on the price impact of solar tariffs

The impact of the Trump Administration’s tariff on imported solar panels over the last twelve months is twofold. First, it caused the cost of solar quoted to American homeowners to spike. Second, though the cost of solar has since restarted its decline, it is not declining at the same rate we’ve observed in previous years. The end result is that the cost of solar is 5.6% higher now than it would have been if costs had been allowed to fall at their preexisting rate of decline.

Solar prices spike with finding of injury

Over the 27 months between July 2015 and September 2017, EnergySage observed a 17% decline in the average quoted cost per watt of solar quoted in its Marketplace, which equates to an average monthly decline of 0.7%. This rate of decline stopped in late September 2017.

In fact, the timing of the spike in solar prices corresponds with the International Trade Commission’s (ITC’s) finding of injury to US solar manufacturers in late September 2017, and not with the enactment of actual the tariffs in January 2018. Following the ITC ruling, solar prices momentarily spiked: from September to November 2017, the cost of solar increased by nearly one percent per month.

Although the cost of solar has since restarted its decline following the ITC ruling, solar costs are now only declining at a rate of 0.5% per month. This new rate is only two-thirds the pre-ITC ruling rate of 0.7% per month.

Tariffs on panels cost consumers $236.5 million in nine months

Customers who installed solar between February and June 2018 were quoted prices that were 5.6% higher, on average, than would have otherwise been expected. This price hike is above the three percent to four percent price increase we estimated in January 2018. For the average consumer, the Trump Administration’s solar tariffs have resulted in a price increase of about $0.16 cents per watt, or $960 for a standard six kW system. When we apply this price increase across all residential solar capacity additions after September 2017, we find that Trump’s solar tariffs have created a $236.5 million tax on American consumers.

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