ORIGINAL REPORTING: How The Solar Industry Muted The President’s Tariffs

How much are tariffs holding solar back? Rising interest rates also raise questions, but the solar industry is fighting back

Herman K. Trabish, April 12, 2018 (Utility Dive)

Editor’s note: Recent data shows the tariff had significant impacts like those described here in delaying growth and temporarily spiking prices.

Solar advocates issued dire warnings about the impacts of tariffs on imported solar cells and modules, ahead of President Trump's January decision to impose the trade penalty. But while the tariffs are having some negative impacts, the industry and its customers now say their concerns were exaggerated. This is largely because solar installed costs have fallen so far and so fast, especially for utility-scale solar, that the relatively small increase in the module price due to the tariffs is having less of an impact than anticipated. That view was echoed by representatives from a variety of investor-owned electric utilities, developers, and installers, who told Utility Dive they are monitoring their markets but have seen few impacts. The tariffs will “shrink the total addressable market for U.S. utility-scale solar,” GTM Research (GTMR) Senior Solar Analyst Colin Smith told Utility Dive. But the industry will still see “consistent increases in new capacity year over year,” he said.

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Recurrent Energy, a leading utility-scale solar developer which opposed the tariffs, has reported no project changes. First Solar, an equally important utility-scale scale developer which endorsed the tariffs, has also announced no major changes. National residential installer Sunnova and California residential installer Spice Solar both told Utility Dive the falling installed cost has offset the tariffs. Without tariffs, 2019 and 2020 were expected to be “big years for utility solar,” Smith said. As the 30% investment tax credit steps down to 26% in 2020, 22% in 2021 and 10% in 2022, the value proposition might be somewhat compromised. But growth could be sustained by solar’s low power purchase agreement (PPA) prices, driven by a wide range of cost and labor efficiencies in the development process and by economic factors. It may be time for solar builders and buyers to start thinking about interest rate increases. GTMR’s Smith said the interest rate question has loomed since the 2008 recession sent rates to record lows. But rising interest rates will also impact all other generation resources and utility-scale solar's falling installed cost will continue to make it a viable alternative to natural gas, coal and other generation sources… click here for more

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