How Have Solar Tariffs Impacted the Industry–and What Can We Learn?

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Concerned about solar tariffs? You’re not alone!

Given that there have already been three tariffs introduced this year that affect the solar industry, it’s understandable if you’re concerned over their impact on your business.

In today’s article, we provide an overview of each of the 2018 solar tariffs to date and explore the extent of their impact so far. We spoke with David Dunlap, Vice President of Operations at Baywa r.e. Solar Systems, to get a distributor’s perspective on the impact of these tariffs on contractors.

Tariffs have definitely caused some pain in the industry, but thankfully the repercussions have not been as dire as many initially expected–at least for solar contractors and customers. And, there may just be some lessons to be learned from the experience!

The Context

When the first solar tariff was announced in January 2018, there was a great deal of uncertainty about how it would impact the industry, but many feared the worst. An initial industry response predicted a loss of approximately 23,000 jobs in the solar sector. Indeed, cancellations of more than $2.5 billion in large installation projects by solar developers have resulted in a loss of thousands of jobs this year.

There were a lot of factors at play, however. M.J. Shiao of Wood Mackenzie Power & Renewables highlighted the multitude of forces impacting the economics of the solar market, in addition to the tariffs, in a GTM podcast. Among these were the upcoming reduction of the Investment Tax Credit in 2020, lower interest rates in general, the repeal of the Obama-era Clean Power Plan, and individual states’ efforts to drive their own pro-renewable policy agendas in response. Some of these elements have tempered the extent of the tariffs’ impact, particularly for residential and commercial installers.

Today, after some short-term turmoil, module prices have largely stabilized and the impacts of tariffs on other solar components are expected to be less severe. Dunlap explains, “Entering Q4 2018, PV module prices to installers are flat to 10% below [prices before the first tariff was applied in February 2018].”

The Solar Tariff on Panels and Modules: Section 201

In January 2018, the Trump Administration announced a 30% tariff on imported crystalline silicon PV panels and modules, imposed under Section 201 of the Trade Act of 1974. The decision came after two module manufacturers, SolarWorld and Suniva, argued they could not compete with the lower-priced imports. The tariff, which went into effect in early February, will be reduced by 5% a year over four years. The first 2.5 gigawatts of imported cells are exempt.

Though there was quite a bit of concern about the impact of this particular tariff, so far there has not been a dramatic market shift. Dunlap explains that “while there was a temporary spike in prices from the 30% tariff (effectively anywhere from 0% to 20%), we have since recovered to end of 2017 pricing while the manufacturers are still paying the 30% import tariff fee.”

Stockpiling and Supply Chain Pain

In anticipation of this tariff, many solar firms stockpiled their supplies. As Dunlap explains, “Manufacturers and distributors saw a huge spike in sales leading up to the tariff date (Q4 [of 2017] was huge, and January plus some of February were way above normal). This means that project development companies and large and medium installers stuffed their warehouses, and maxed out their cash reserves and credit lines to lock down inventory.”

“By April and May, sales slowed down dramatically, because the entire channel was stuffed with all this product purchased in advance. If we were to look at the total excess inventory bought by installers in Q4 + Q1 and spread it out over Q2 and Q3 2018, the total net sales to installers would be right in line with overall market expectations for 2018, which was flat to maybe only 10% up year over year.”

He says that only later did it become apparent that the module price increase caused by the tariff was temporary because manufacturers were ultimately forced to reduce prices to stimulate demand (while still paying the 30% import fee). However, Dunlap does point out that many installers who stockpiled are struggling with resulting challenges around cash flow, storage costs, and credit lines.

Dunlap also notes that in many cases residential customers were insulated from a net price increase. This is because many installers who had to absorb the temporary 10%-15% spike chose not to pass on the price increases to the customer.

Other Factors Influencing Module Prices

Another global policy factor which seemed likely to impact U.S. panel prices was China’s mid-year decision to halt the majority of it’s solar development, which eliminated 20 GW of global demand for solar and shifted the panel market to one of oversupply. According to Dunlap, however, that ultimately the policy change had little impact in the U.S. because earlier anti-dumping tariffs had shifted module imports from China to Southeast Asian countries like Malaysia and Thailand,

However, he does predict additional price reduction due to the expiration of the Minimum Import Price for Chinese modules in Europe. This has “opened the floodgates for excess Chinese capacity to go to Europe at far lower prices than had previously been allowed.” Already prices have dropped 30% in four weeks. Dunlap says this will remove European demand for Southeast Asian products, leaving the U.S. as the only real market for their modules–driving prices down even further.

Solar Tariffs on Additional System Components: Sections 232 and 301

In March, the Trump Administration imposed a 25% tariff on steel and 10% tariff on aluminum under Section 232 of the Trade Expansion Act of 1962, increasing prices for racking, wiring, and ground mount posts.

Then, in August, a 25% tariff implemented under Section 301 of the Trade Act of 1974 was placed on a host of imported Chinese goods – including solar cells and modules. Another tariff was added to Section 301 on September 24 that includes solar inverters and non-lithium batteries; it starts at 10% and increases to 25% in January.

Once again, the impact of these tariffs is not thought to be dire. As Dunlap mentioned, Chinese cells and modules make up a small fraction of U.S. solar imports (11% reports PV Magazine). Plus, most new factories planned for the U.S. will not be affected because they use materials that do not come from China.

Dunlap believes that “Looking ahead to the Section 301 tariff affecting certain Chinese-manufactured inverters, the net impact to the overall system will be much lower than in the Section 201 tariff on PV modules, because inverters are a lower portion of the total system equipment cost than PV modules.” Plus, “it won’t even affect all manufacturer brands, so therefore won’t affect all installers and homeowners.”

He also notes that since equipment prices have dropped so much over time, hardware now represents a much smaller piece of the overall system cost.


The 2018 solar tariffs have certainly had an impact on the American solar market. Amanda Levin, a policy analyst for the Natural Resources Defense Council, recently noted that the solar market would almost certainly be growing more rapidly if the current administration had not imposed these tariffs.

Cory Honeyman of GTM Research, whose organization lowered its prediction for additional U.S. solar generating capacity for the next five years by 11%, stated, “There’s just a lot of demand that could have happened that is not going to ultimately be realized because of these tariffs.”

But although the solar industry could be growing faster if tariffs had not been imposed, the prediction continues to be for rapid growth for solar in the U.S. The SEIA Solar Market Insight Report 2018 Q3, released in September, showed some positive numbers including the prediction that total U.S. installed PV capacity will more than double over the next five years. As of July, there has only been a loss of 8,000 solar jobs.

For Dunlap, the industry’s response to tariffs offers some lessons for the future. “In retrospect, I think our collective industry fear about the potential negative impact on the consumer market caused us to act somewhat irrationally to “safe harbor” more product than we actually needed… and caused financial stress on all organizations…. All of that stress and effort resulted in very little change to the rate of new installations in the end.”

“As our industry grows up, I hope we can manage cost changes in healthier ways.” He concluded his remarks by noting that “there is very little room for additional cost reductions in solar equipment with current technology, and as an industry, we need to focus our value-engineering efforts on non-hardware costs, which have much more room for improvement.”