The Trump administration on Monday imposing tariffs on imported solar panels (and washing machines, though not paying much attention) appears to be a direct blow to America’s fastest-growing job offer: a solar PV installer.
Prior to the tariff announcement, the U.S. Bureau of Labor Statistics’s “Solar Photovoltaic Installer” job will grow by 105%, the highest rate of growth for all U.S. jobs over the next decade. The Solar Energy Industries Association estimates that the U.S. solar industry will lose 23,000 U.S. jobs this year.
So why set a tariff and exert pressure on these growing middle class jobs?
The United States installed about 7,000 MW of solar energy in 2017, with the vast majority (about 80%) using imported panels. Trump’s order to relinquish the tariffs on the first 2,500 megawatts of solar panels, then tariffs over 30%. That is only the first year tariffs fell 5% to 15% in 4 years, and then disappear. This is also the same time frame that the Solar Investment Tax Credit (ITC) disappears.
Tariffs apply only to modules, accounting for about 20-30% of the total installed cost of utility-scale solar systems and about 12% of residential systems. According to two graphs from the National Renewable Energy Laboratory (NREL), the module cost for all PV departments is around US $ 0.35 / W, so a 30% tariff in the first year will increase the cost of all types of equipment by 0.11 USD / W or so.
The end result is that a utility-scale project costs about 10% more than it does now, while a residential system costs 6% to 7% more.
These duties are not as severe as the ones initially applied by Suniva and SolarWorld. GTM Research estimates that they could reduce the amount of solar power in the United States between 2018 and 2022 by about 8%, or about 5,000MW.
Tax rates vary with tax laws and may make it difficult for solar to obtain the necessary financing. While it seems to me that it is difficult to object to lower corporate tax rates, changes in tax law may also reduce taxes that can be used to offset solar tax credits. The basic eclipse tax (BEAT), though not so bad, may still limit some investors’ appetite for solar tax credit. In fact, some solar projects were shelved and awaiting the verdict.
Curiously, the kind of protectionism shown by the imposition of such tariffs is a typical example of Republican politics, which is often thought of as taxing consumers.
From a political point of view, the Trump administration’s decision to impose tariffs on solar modules is interesting because, while solar does not support many long-term jobs, it does create significant short-term employment. If Trump hopes to secure credit for one of the fastest-growing job markets in the next three years, he should act to accelerate solar rather than brake.