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The future of solar remains bright despite new tariffs

The solar industry is poised for further growth as China changes strategy, resulting in lower-cost solar panels that counteract the impact of tariffs imposed on imported solar components into the United States.

In recent years, solar energy generation has grown as a viable, mainstream contender in the energy space with steadily increasing adoption. More companies are installing solar to provide on-site sources of energy, generate new revenue streams, and boost the sustainability of their businesses. In fact, 18% of all electricity in the U.S. was produced by renewable sources in 2017, up from 15% in 2016 and doubling since 2008.

The U.S. imposes tariffs on imported solar components

At the beginning of 2018, the U.S. government imposed a 30% tariff on solar components imported into the United States. The tariff covered solar cells – which are a component used in the manufacturing of solar panels – as well as solar panels. The tariff is planned to last for 4 years, dropping 4% annually and ending at 15% in 2021.

Tariffs generally raise the price of the goods on which they are levied. This will likely have a short term impact on solar pricing, however this may leave forward thinking businesses and energy managers asking: Is solar power still an economical energy solution?

China curtails domestic incentives for solar

The first few quarters of 2018 were a time of uncertainty for the solar industry in the U.S., with some projects delayed or canceled due to the tariffs. Given a large percentage of solar panels are imported from China, the tariffs have had the most noticeable impact on this trade exchange.

However, solar project economics in the U.S. received a boost from an unexpected direction: China. The Chinese government recently announced that it will cut subsidies for in-country solar development by 30–40%. This substantially cut the demand for solar cells and modules, leading to a fall in module prices and helping to counteract the solar tariffs.   

Abigal Ross Hopper, SEIA’s president and SEO, is looking ahead and projecting accelerated growth in the market:

The data shows us that the tariffs have dampened solar’s growth, as previously announced projects were canceled or delayed due to the tariffs. Yet, this report also reveals that the solar industry is simply too strong to be kept down. Procurement numbers show that solar is poised for substantial growth.”
Abigal Ross Hopper, President and SEO of SEIA

With low prices and available incentives, the investment case for solar remains strong

As the solar industry adapts to meet the changing needs of customers and evolves with the global trade environment, the time to evaluate solar for your business is now. Stable low equipment prices along with various incentives, including the 30% Business Energy Investment Tax Credit (ITC) and 100% Year-One bonus depreciation, are still available to businesses who invest in solar energy. However, these incentives will not last forever: The ITC begins stepping down at the end of 2019, eventually settling at 10% after 2021. When creating your strategic energy plans, on-site solar is a solution to reduce operating expenses, increase sustainable energy use and reduce your business’ impact on the environment.

To learn more about solar energy and how it can benefit your company, here are some resources:

  • Centrica Business Solutions – Our website and Knowledge Center have a ton of information on everything solar energy from planning to implementation, management and price assessments.
  • Solar Energy Industries Association (SEIA) – With an abundance of information, SEIA is a great platform from which to gain insight into the potential of solar energy.

Solar power continues to be an good investment for any business despite tariff concerns. Contact us to learn more about creating a bankable solar solution for your business. We can help you navigate solar incentives and financing options that will maximize your investment.