January 25, 2018 - Madison, WI. This past week, President Donald Trump went ahead with an anticipated import tariff that tacks a 30% increase onto the cost of imported solar photovoltaic modules. While this has created some big national headlines, those in the solar industry have been adapting to the situation for the last eight months. Generally speaking, this is a negative development for the vast majority of the solar industry in the United States, but it is not as bad as many believe. The future of solar in the United States is still quite bright.
This past year – well ahead of this week’s tariff announcement – procurement costs for standard polycrystalline solar modules rose from $0.38/watt in Q2 to around $0.53/watt in Q4. This was primarily driven by supply and demand of inventory that was already in the United States, as large developers bought up what they could before any tariff could be implemented. The end result was an increase in acquisition cost, well ahead of any tariff. Further increase in cost is likely to be minimal from here and may even recede as some projects at the utility-scale get canceled.
To put this into perspective, the price of solar modules just ten years ago was $3.65/watt, nearly seven times the cost of today’s post-tariff pricing.
It is worth noting that this week, after the announcement of the tariff, stock prices for publicly traded U.S. solar developers increased sharply on the news. It was not as bad as it could have been.
There is more to a solar system than solar modules, which often goes overlooked. A complete system requires mounting equipment, inverter technology to convert the electricity to a useable form, and a host of additional materials including monitoring equipment, wiring, conduits and fasteners. When coupled with installation labor costs, engineering services, permitting, electrical upgrades for the facility and utility interconnection costs, the solar modules only represent 30% of the total turnkey cost of an installed commercial-scale system.
Therefore, keeping all other factors constant, this week’s announced tariffs will have a temporary 5% negative impact on solar system pricing this year, and will slowly phase out over the next four years. However, all factors are not constant. The solar industry is making good progress on reducing major equipment costs beyond the solar module, and greater efficiencies on the other so-called “soft costs” of solar deployment continue to improve.
Even with the higher module prices last year, SunPeak and many of its industry peers enjoyed a record year. 2018 is already setting up to be another great year. While there is a lot of negativity in the news this week regarding this issue, we’re as bullish as ever on the future of solar in this country.
Chad Sorenson is the CEO and founder of SunPeak, a Midwestern solar developer focused on commercial and industrial-scale systems.
SunPeak
SunPeak is a turnkey developer of commercial solar systems, handling feasibility studies, financial payback analysis, system engineering, installation, and ongoing maintenance. Projects typically range from 100 kW to 5 MW and offer significant cost savings relative to conventional utility rates. The company was founded in 2014 by Chad Sorenson and a team of leading global solar developers who have completed more than 450 MW of installations on three continents over the past decade, including projects in Canada, Germany and Japan. More information at www.sunpeakpower.com or 608-535-4554.
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