The Trumpet has Sounded
At the start of each new year, many in our industry await what incentives, rebates, and/or tax breaks will be added, changed, or removed. After all, these were the economic mechanisms used to attract customers and blossom the industry into what it is today. The most pressing topic affecting the solar industry thus far in 2018 is the “Trump solar tariff”. As your trusted solar contractor, Peak Power Solutions is committed to being a conduit of information on the subjects that matter most as you seek to make your initial investment or maintain a current solar system.
It’s important to look at why the tariff was initiated to know its intended outcome and to what extent that outcome will reach. Solar panel manufacturers SolarWorld and Suniva applied pressure to the Trump administration, much like Solyndra during the Obama presidency, citing Chinese undercutting as the culprit from keeping U.S companies competitive. In response, the International Trade Commission (ITC) unanimously, by a vote of 4-0, approved the tariff. According to Section 201o F the U.S Trade Act, the tariff could have been as high as 50%.
A common practice of China is to buy up all the silicon, the key raw commodity within a panel that converts and ushers along the electrons produced from the absorbed sun rays. So right off the bat, it’s critical that a delineation is made between a tariff on “solar panels” or on raw commodity itself. I think that been poorly addressed in the mainstream media,this a deeper dive is needed to know what is truly going on. By China controlling the silicon market, they can undercut all competition, keeping themselves as the mainstay panel producer. Essentially, there is no base to operate from; China can reestablish that base as it sees fit in order to achieve its financial goals. They have instituted similar economic measures multiple times in the past; look no further than the glass on the new World Trade Center or the steel within the San Francisco Bay Bridge.
The tariff exempts the first 2.5 gigawatts of imported panels, which translates out to 2.5 million kilowatts. If I was to put that in terms of residential projects, that would be nearly a half million average installations. Building upon that, the tariff is staged over 4 years, starting at 30% and descending 5% for each of the subsequent years. This is important to note as this will not be a legacy tariff, rather a catalyst to other entrants into the market while curtailing China’s ability to manipulate the market. What that does is, encourages capital that was once leaving the U.S. to remain stateside as emerging companies provide viable and competitive options right here at home.
In terms of a solar system installation at the residential level, the costs of the panels represent, on average, 12-17% of the project costs. As noted in my previous Peak Power Solutions posts, an install is a full scale construction project. A project consists of labor, racking, hardware, inverters, combiner boxes, wiring, controls, permitting, and safety gear. According to energysage.com, a residential project cost increase would be in the neighborhood of $660. This equates to about 3% on an average project. If I was to say who will be most affected by the tariff, I would point towards the utility-scale projects. When you start talking about multi-megawatt size systems, there are much larger cost implications, paired with performance contracts, tied between the utility and the generator.
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