President Trump's solar tariff on modules will have a limited impact on commercial solar
In January 2018, President Trump enacted a 30% import tax on solar panels imported to the United States. Many in the solar industry estimate its impact on commercial project prices and installation figures, with the consensus suggesting an approximate net price increase of 5-10%. This is hardly the devastating scenario some had predicted and still must be taken into context. Not only is this price increase based on the already historically-low prices, but Trump's solar tariff will only be in effect for 4 years, with a 5% reduction each year.
The big picture
The charts below illustrate the dramatic price decrease for solar projects installed in the U.S. for the past 12+ years. The average price of Non-residential systems under 500kW approached $3.00/Watt last year, and $2.00/W for systems above 500kW. These prices reflect a 50% decrease within a 5-7 year span. A 5% increase in current prices will be barely noticeable on this scale.
Other price factors
Solar module prices comprise roughly 25% of the total project price. Although that is a significant portion of the system price, other factors, such as labor and customer acquisition costs, comprise the majority. The solar industry is still nascent, and much innovation and efficiency remain undiscovered. According to Bloomberg New Energy Finance, competition and innovations create annual cost reductions of about 12 percent. If this trend continues, the positive impact these innovations will have on prices will exceed the negative impact caused by Trump's solar tariff.
There are also the effects of the new tax law changes, also in effect beginning in January. With business owners now able to capitalize on lower tax rates and 100% expensing of solar assets in the first year, it appears that now is a very good time to lock in lower electricity prices, regardless of the tariff impact.
Solar vs. Utility
In the end, business owners typically justify the cost of solar by comparing it to the price they currently pay to the utility. All factors considered, commercial solar will continue to grow as the cost of electricity is less than or equal to that supplied by the utility. Regional and local utility rates vary dramatically of course, and so, too, will the adoption of solar by business owners. In the end, tariff or not, commercial solar will be a great investment for many businesses seeking to reduce operating expenses.
Helio Micro Utility
Helio Micro Utility has financed and developed commercial solar projects since 2007.
Business owners: Contact us to determine how much your business can save by installing solar. For information on utility bill analysis, click here.
Please contact Tom Selden, Director of Project Finance, at 951.465.5924 or [email protected]