The words ‘Trump’ and ‘tariff’ have become common sights in news headlines this year. But even as global markets quiver with fears of potential trade wars, many commercial property owners continue to wonder what the Trump Administration’s so-called ‘Solar Tariff’ means for their solar projects.
The solar tariff measures, which went into effect in February, place a 30 percent tariff on solar panels from China. Anything that makes solar more expensive generally means that it is less financially attractive, with longer payback periods.
At first glance, the outlook doesn’t look good. The tariffs are predicted to reduce the projected pipeline of new solar construction in the United States by 7.6 gigawatts over the next five years, according to Greentech Media Research. And some U.S. states will get hit harder than others.
As the country’s largest solar market, California stands to lose the most from the 30 percent tariff, with an expected 1,079-megawatt decline in new solar capacity between 2018 and 2022. California is followed by Texas and Florida, which are expected to lose 674 megawatts and 513 megawatts, respectively. However, recently the Golden State sent a clear signal that rooftop power is moving beyond a niche market and becoming the norm when it recently became the first U.S. state to require solar panels on almost all new homes.
But don’t despair just yet. While the solar tariff policy isn’t helpful from a climate perspective, the rooftop solar project you’ve been evaluating for your commercial property is still competitive if your long-term goal is financial savings.
Here are five reasons why:
- Photovoltaic (PV) panels account for only 5-10 percent of project costs — Solar PV is but one part of a rooftop solar system. The total installation cost also includes inverters, racking equipment and the installer’s fee. When you actually look at total project cost, the solar PV panels account for only about 5 to 10 percent. Typically, this small margin isn’t a deciding factor for building owners considering solar projects. While the tariff might hurt some marginal solar projects across the industry, solar should still be on the table if your long-term goal is financial savings.
- 30 percent will soon fall to 15 — The full tariff is a temporary measure. The 30 percent figure this year will drop to 25 percent next year, 20 percent the year after, and 15 percent in 2021. Many companies in the U.S., including Carbon Lighthouse, pre-purchased panels last year as they waited to see the result of the petition before the U.S. International Trade Commission. In other words: we already have enough hardware to see us through near-term installations at pre-tariff prices.
- The tariffs don’t apply to all imported solar PV panels — When you take a closer look at the tariffs, you’ll notice that they aren’t as potent as they seem. They don’t apply to the first 2.5 gigawatts’ worth of imports per year, for example. This means that the tariffs will impact utility-scale users the most, while being significantly less painful for smaller rooftop users.
- Solar is getting cheaper everyday independent of policy — Solar costs have been dropping precipitously over the past decade. And this trend isn’t expected to change anytime soon. Bloomberg New Energy Finance predicts a solar module price drop from 62¢/watt in 2015 to 21¢/watt by 2040 – and that was with an assumption of no technological breakthroughs.
- Improving energy efficiency reduces PV costs — Advances in data collection and analysis are making it easier to tap into your building’s Efficiency Reserves through the process of Efficiency Production. At Carbon Lighthouse, we’ve already shown that pairing solar with energy efficiency can amplify energy savings. We use our CLUES® software to find your building’s Efficiency Reserves. That makes it possible to reduce the number of solar panels you’d need to install, like we did for SEW-Eurodrive, an East Bay-based manufacturing company that saved $2.36 million over the lifetime of their project.
Anything that makes clean energy more expensive isn’t good for the planet or a sustainable economy. But long term, the Trump Solar Tariffs will be more of a thorn in the side of a burgeoning business rather than a death knell.
If you’re a commercial building owner who has been considering a solar project as a means of reducing costs and increasing building value, today still is just as good as any to get started. What are you waiting for?