President Donald Trump signed a ruling that raised the tariff on imported solar cells and panels to 30 percent. However, while Trump said the increased tariff will boost the U.S. solar power industry, experts believe that this move will have the opposite effect.
When enacting the tariff, Trump said that it would prevent cheap products from entering U.S. markets, which in turn would boost the U.S. solar industry and create more manufacturing jobs for U.S. workers, Reuters reported.
However, several organizations, including the Solar Energy Industries Association, stated that the tariff would lead to job loss, increase costs and deter investors.
A press release from SEIA states that the tariff will result in a loss of 23,000 jobs in the United States. This is in comparison to the 260,000 to 374,000 workers that the solar industry currently employs.
SEIA CEO Abigail Ross Hopper is quoted in the press release, stating that the tariffs “will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs.”
Business owners operating in the solar industry have also expressed their opinion on the issue.
“Government tariffs will increase the cost of solar and depress demand, which will reduce the orders we’re getting and cost manufacturing workers their jobs,” RBI Solar Inc. CEO Bill Vietas stated in the press release.
The first 2.5 gigawatts of imported cells will be excluded from the tariff.
The tariff is also set to gradually decline. According to a graph published by Vox, the tariff will remain at 30 percent for only one year, after which it will decrease by five percentage points during each consecutive year. By the fourth year, the tariff will reach and remain at 15 percent.
Vox also states that, “It’s worth keeping in mind that the panels themselves are less than one-third of the final cost of a solar installation, and as hardware costs go down, the relative costs of labor, permitting, and taxes go up. The 30 percent tariff would add between 10 and 15 cents per watt to the final installed price of solar.”
This is because the solar industry is still largely dependent on technology produced in other countries. According to Newsweek, “The majority of solar industry companies in the U.S. rely on 80 percent of imported solar technology.”
In previous years, the solar industry experienced significant growth that was supplemented with tax credits for some residential and commercial properties that installed solar panels.
According to SEIA data, the solar industry experienced an average annual growth rate of 68 percent between 2006 and 2016. In that same period of time, the cost to install solar panels fell by over 70 percent.
The report concluded by stating that at the end of 2017, the industry reached 1.6 million solar panel installations in the United States. The number of installations was expected to reach 2 million in 2018 and 4 million in 2022.
With the new tariff in place, the industry may not be able to reach these projections.
Job loss and higher tariffs would mean that the number of installations will fall significantly, and some companies may not be able to handle the financial burden. The high cost might also deter new businesses from entering the market.
GTM Research issued a forecast that claims the new tariffs will result in an 11 percent decrease in solar panel installation.
Compared to the previously stated 10 to 15 cent per watt price increase, GTM Research predicts that the price increase will reach 10 cents per watt in the first year but fall to 4 cents per year by the fourth year, when the tariff is set to decrease.
The decrease means that by 2022, there will be 1.2 million fewer homes powered by solar energy, according to GTM Research.
The effects of the new tariff are already being felt, as Newsweek reported that Sun Power is postponing its $20 million factory expansion. The company cited cost concerns as the reason that is preventing it from further growth. Other solar companies have also postponed or cancelled new investments as a result of the tariff.
The U.S. solar industry has experienced rapid growth over the past decade. However, imposing the tariff will have a negative effect on manufacturers who still largely depend on foreign technology to produce its panels.