If you’ve been keeping up with the news headlines at all, you’ve probably heard about one of President Trump’s latest actions that will likely have sweeping ramifications on the renewable energy industry. The President recently instituted a new tariff on foreign-produced products, including solar panels, upping their cost in order to de-incentivize people from purchasing them over American-produced ones.
While the President believes these tariffs will increase the number of jobs in solar panel manufacturing, the overwhelming majority of the industry believes they’ll put a serious damper on its rapid growth by increasing costs to the point where it becomes more inhibitive for home and business owners to make the switch. To help you better understand what’s going on, here’s the low-down on what’s happening and how it will impact you if you’re looking to make the switch.
There’s no question who these tariffs are aimed at: China. As little as seven years ago, nearly one out of every three solar panels sold in the United States was produced in China, though today that number is down to just over one out of every ten, with Malaysia and South Korea taking the top two spots. This is largely because American-produced panels, while their quality is demonstrably superior, still cost an abundance more than imported panels where labor and manufacturing costs are significantly lower.
The tariffs are scheduled to last for four years, eventually expiring by the year 2022. For the first year, the tariff will be 30 percent, then dropping by five percent each year until ending with just 15 percent in its final year. The goal is to give American panel manufacturers a leg up to become competitive in the market, prompting more companies to purchase their panels, allowing their operations to expand and keeping more wealth in the American economy. But as we’ll see, there’s a good chance that probably won’t happen.
Even then, panel manufacturing could be described at-best as “small” when it comes to its actual size in relation to the rest of the renewable energy industry. The vast majority of workers are in the sales and installation sides of the business, all of which will feel the impact.
Because of the tariff, high-quality and inexpensive panels are now a thing of the past, which means that the overall costs of solar panel arrays will rise. That means the costs for both down and monthly payments will increase dramatically, meaning it will take longer to pay off these systems, and home and business owners won’t be able to save nearly as much in the long run because of the high cost for the panels in the first place. The higher cost might place a solar panel installation out of reach for some of these potential customers, which means fewer sales and dramatically slowed growth for the industry.
While the President believes this tariff will create jobs that keep the economy booming, industry experts believe that these tariffs may cost the industry more jobs than it actually creates because of the reduced number of sales and installation projects.
This tariff and subsequent price increase also comes at a fairly inopportune time in that many of the federal tax credits and incentives are coming close to reaching their sunset periods. The Federal Investment Tax Credit will remain in full force for this year and for next year, but starting in 2020, new project installations will only be allowed to claim 26 percent of the cost of their system on their taxes, with that number dropping to just 10 percent by the time the tariff expires in 2022 (at which point homeowners won’t even be able to utilize this credit at all anyway). That means the price of solar installations has increased right as one of the largest incentives for installing solar will be expiring. There’s no questioning that in the long run this will lead to slowed sales, job loss, and significant downsizing in an industry that was once booming.
Your Solar Panels
So if you’ve been considering switching to solar, what does this mean for you? Well, right up front this will lead to an increase in the cost of your panel system. Some estimates say that at most the cost will rise by about ten percent for larger installations, with most residential installations seeing even less of a price increase. That might not seem like much, but that brings a $25,000 panel system up to $27,500, which increases monthly payments from roughly $208 to about $230 if you pay off this cost over 10 years. However, this does increase the amount of time you can expect it to take before you reach your payoff point as well, meaning it’ll be quite a bit longer until you truly start to see the savings.
That being said, even with the tariff driving up the prices on panels, now is still a good time to switch, notably because the investment tax credit is still at full strength. In fact, because the new tax code left this credit alone, you can still claim up to the full 30 percent of the cost of your panel system as a credit on your taxes and dramatically reduce your tax burden for the year. In fact, that increases the maximum credit on that standard example system from $7,500 to $8,250. There’s a chance that between the tax breaks, state incentives, and other savings factors, the cost difference will be even less of an impact on your specific project.
For more information about installing solar panels in your home or business, call the Southern California solar experts from Sea Bright Solar at (909) 480-3783!