Let the Sun Shine - Impacts of the Solar Tariffs

by Spilman Thomas & Battle, PLLC
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Spilman Thomas & Battle, PLLC

In fulfilling his campaign pledges to American manufacturing and fossil fuel energy companies, on January 22, 2018, President Trump approved a 30 percent tariff on imported silicon solar cells and modules. Solar cells are the individual units or wafers that convert sunlight directly into electricity, while a sealed and packaged group of interconnected cells is called a solar module or panel. The panels, along with other hardware, are installed for residential or commercial applications.

The tariff, citing a rarely used section of the Trade Act of 1974, is focused on the largest manufacturers of solar cells, primarily China, and decreases from 30 percent to 15 percent over a four-year period, in equal 5 percent step annual reductions, with elimination the following year. Surprisingly, the tariff is not across the board for all exporting manufacturers, as countries like Indonesia, are exempt. 

Domestically, the tariff is pitting solar cell manufacturers against solar energy system installers. The manufacturers welcome the tariff's protections, which reduce the cost gap between domestic cells and the cheaper foreign cells. However, the installers are concerned about the tariff because of the rise in cost of solar panels.

Projections about the effect of the tariff on the industry vary widely, depending on whether the source is an installer or a manufacturer. The following seems to be consistent across all reported sources:

  • The industry, as a whole, lost approximately 10,000 jobs, or about 3.8 percent, in 2017, sliding from 260,077 to 250,271 jobs;
  • About 78 percent of the solar energy jobs are on the construction side - installation, sales, and project development, while about 15 percent of the jobs are on the manufacturing side;
  • Overall, solar employment is expected to rebound by 5 percent, to approximately 263,000 jobs;
  • Estimates are that costs for the average $10,000 to $20,000 rooftop solar power installation will increase by three to five percent, but commercial solar farms will have a greater increase in installation costs.

Overall, manufacturers and installers maintain a positive long-term outlook regarding the growth of the solar industry both worldwide and domestically. However, analysts project new activity will fall by 11 to 13 percent from 2018 to 2022 as a direct result of the tariff.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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