Back in early 2018, just as the US was initiating a slew of tariffs on goods from China and Europe, the federal government also set in place a 30% tariff on imported solar panels. With companies already looking for ways to increase efficiency and reduce soft costs in a competitive solar market, this price uncertainty added to the complexities of business planning. Now that a year under the tariff has gone by and the tax rate is changing, let’s look at how that tariff played a role in solar panel prices and what you can expect for solar panel pricing going forward.
What Effect Did the 2018 Tariffs Have on Solar Panel Prices?
The tariff–essentially a government tax–on solar panels took effect on February 1, 2018 at a rate of 30%. The tariff was designed to be steep at first–30% in the first year–before tapering to 25% in the second year, 20% in the third year, and 15% in the fourth year. In each of these years, the first 2.5 gigawatts worth of panels that a single importer brings into the country will be exempt from the tariff.
You may not have noticed these tariffs increasing the price of solar panels in 2018, in part thanks to the collapse of prices in the Chinese solar panel industry right as the tariffs went into effect. China is the largest source of imported solar panels for the US, and solar panel prices tumbled by 30% in 2018–enough to offset the cost of the tariffs for the US solar industry.
What to Expect in 2019
The taper to a 25% tariff rate kicked in on February 1, 2019, further lowering the price of solar panels for your team. However, you may find the price of solar panels remaining relatively steady compared to 2018 as the Chinese solar industry consolidates and the base price of imported solar panels rebounds by up to 10-15%.
Translating all these competing rates into how much extra–or less–a solar panel installation will cost your team and your customer depends on the number and wattage of solar panels you need. The rule of thumb that experts in solar panel pricing forecasts are using is that the tariffs will increase the price of solar panels by between 8 and 10 cents per watt. For a typical residential home installation, you can expect the tariff and increasing price of Chinese solar panels to bump the price of the installation by between $500 and $1,000.
For a typical residential home installation, you can expect the tariff and increasing price of Chinese solar panels to bump the price of the installation by between $500 and $1,000.
Of course, that price increase can be significantly higher if your company is involved in commercial-scale projects. One immediate effect of the tariff announcement was that as much as $2.5 billion in commercial- and utility-scale solar installations that had been planned to take advantage of the falling price of Chinese solar panels was cancelled by US installers.
Solar Panel Pricing Beyond 2019
Going into 2020 and beyond, you and your customers should expect the price of solar panels to fall further as the tariff rate continues to taper and panel prices stabilize in the Chinese market. The tariff is set to fully expire in February 2022, although depending on the economic and political situation at that time it is possible that the tariffs could be re-enacted in some form.
In the meantime, experts predict that the tariffs will add between 6 and 7 cents per watt to the cost of solar panels in 2020 and between 4 and 5 cents per watt in 2021. This equates to an added $400 for a residential solar panel installation in 2020 and an added $250 in 2021.
Experts predict that the tariffs will add between 6 and 7 cents per watt to the cost of solar panels in 2020 and between 4 and 5 cents per watt in 2021.
Bear in mind that these estimations do not account for improvements in solar panel manufacturing technology, which could be more important for pricing in the short-term by making solar panels cheaper overall. Because the tariffs are percentage-based, as the prices of imported solar panels fall so to does the effective tax rate on those panels. For this reason, the eyes of economists and utility-scale solar installers are on China, where the end of government subsidies for the solar industry could create an incentive for panel manufacturers to dramatically reduce the cost of their panel-making process.
On the other hand, you and your team may also be able to offer customers American-made solar panels in the near future as a result of the tariffs. The ramp-up of American solar panel manufacturing has been slower than some expected in response to the 2018 tariffs–partly due to other tariffs imposed on steel and aluminum which are used to make panel framing and components.
However, there is some traction as Panasonic and Tesla are planning to produce one gigawatt of solar panels in New York, and Hanwha Q CELLS is planning a 1.6-gigawatt manufacturing facility in Georgia. That said, even with tariffs in place you can expect Made in America solar panels to remain more expensive than imported offerings and useful primarily for residential customers who are willing to pay an additional premium to support US industry.
The Bottom Line
If your company’s focus is residential solar installations, the effect of the 2018 solar tariffs have so far been muted thanks to deflated price on imported Chinese panels. You should expect a slight increase in prices going into 2019, but the overall price increase for residential installations will be limited this year and beyond.
On the other hand, if you’re a commercial-scale installer, it’s worth closely watching the Chinese market and the tapering tariff rates. Solar panel pricing may fluctuate anywhere from pre-tariff pricing to as much as 10 cents more per watt over 2019, although prices should decrease quickly going into 2020 and 2021.