That Solar Panel Tariff
Donald Trump has imposed a tariff on imported solar cells and panels. The initial 30% levy will decline by 5 percentage points each year, then expire in four years. Each year the first 2.5 Gigawatts worth of cells/panels are exempt. What might be the impact of this on the solar industry and the installed cost of residential PV systems?
Analysts at Greentech Media Research estimate that the tariff imposed on inexpensive imported panels — which have fueled the solar industry's explosive growth — will add 10¢ per Watt to the price of photovoltaic (PV) systems the first year, then decline to 4¢/W by the fourth. This translates to a cumulative reduction in solar installations of about 7.6 Gigawatts, or 11%, through 2022, compared with what would have been installed without the tariff.
The tariff will add about $650 to the average residential solar power system, according to the Solar Energy Industries Association. The added cost is unlikely to stop consumers and businesses from going solar or force solar companies out of business. But it may affect solar employment.
For perspective, consider Maine’s winter heating costs. Over the last two months, November through January, Maine’s average fuel oil price increased 18% and that of propane 11%. A year ago, the price of both was about 30% lower. The “average” Maine house burns 143.13 million BTUs/year. At the January 2017 price that amount of energy cost $2,071. The cost rose to $2,508 by last November and to $2,959 today. For propane the numbers are $3,058, $3,971 and $4,368.
Because of its superior system efficiency— 350-400% vs. 85% for oil and propane burning—an electric heat pump can deliver the same amount of heat for $1,480, that is, $1,479 less than oil, and $2,888 less than propane. Add even a modest 50% cost reduction for electricity generated by a rooftop solar system, and the annual heating cost is reduced to $740— $2,219 less than oil and $3,628 less than propane. Of course, the price of electricity from utility companies continues to rise as well. Thus, the economics definitely favor a solar-plus-heat pump system, even after Trump’s ill-advised tariff.
The tariff, supposedly to “defend American workers” by fostering domestic solar panel production, is really a political statement directed at China and a bone thrown to fossil fuel interests at the price of harming the U.S. solar industry and jobs growth. The immediate political push for the tariff came from Suniva and SolarWorld—two domestic solar panel manufacturers facing financial difficulties. Ironically, both are majority-owned by foreigners: Suniva by Chinese investors, Solar World by Germans.
China, the world leader in photovoltaic cell production, flooded the market with below-cost, government subsidized panels, helping drive U.S. photovoltaics giant Solyndra into bankruptcy. Its high profile default on a $500 million Obama-era government loan prompted opportunistic assaults on renewable energy by fossil fuel and nuclear interests.
Meanwhile the low-cost Chinese panels helped launch a large US solar industry. More than 260,000 Americans work in photovoltaic system design and installation. Thanks largely to Chinese products, the materials-cost of a solar-generated Watt of power has decreased from $6.00 in the late 1990s to around 72¢ in 2016, with further drops anticipated. Such prices leave no economic opportunity for any other new electric power generation, except for wind and natural gas. Even gas— its long-term supply prospects uncertain— is close to being priced out.
Trump’s tariff is predicted to cut upcoming solar installations by 10 to 15% at a cost of 23,000 U.S. jobs. Yet it is unlikely to save the two foreign-owned companies that precipitated this protectionist measure. They employ 38,000 in solar manufacturing, but only 2,000 in making PV cells. Should the tariff reduce demand as expected, they too will be forced to lay off workers. No one gains, but opportunities are likely to be curtailed.
California’s booming solar business alone employs more than 100,000 vulnerable workers, more than coal mining nationwide. The owners of four aging nuclear reactors—two in California and two in Ohio— face insurmountable financial difficulties, and are about to shutter them for good. The void left by their closure may generate thousands of new jobs and billions in renewable energy revenue. Trump’s tariff may slightly alter the math, but it is not expected to make PV, wind, and increased efficiency more expensive than the power these reactors could generate.
Climate change demands that the march from fossil and nuclear toward renewable energy be accelerated—the tariff can only slow it down.