On Thursday, the Solar Energy Industries Association (SEIA) published a quarterly report that offered surprising results. Despite a 30-percent tariff on solar cells and modules imported to the US, solar installations only fell by about nine percent, year over year.
At the same time, during the first half of 2018, utilities signed more than 8.5 gigawatts’ worth of procurement deals for projects that will be completed before 2020. The effect is that US solar installment growth in 2018 and 2019 will likely remain flat year over year compared to 2017. That’s better than most analysts expected.
There are a few reasons that President Trump’s tariffs haven’t had as much of an effect as they could have. According to Abigail Ross Hopper, SEIA’s president and CEO, “the solar industry is simply too strong to be kept down.” That’s perhaps an overly rosy way of looking at it. The report itself notes that a lot of this growth comes from the fact that the US offers a 30-percent investment tax credit on solar installations that are completed before 2020. Tariffs or no, companies wanting to build panels stand to save a significant amount of money if they start building before the end of 2019 and snag that tax credit.
Obviously, the 30-percent tariff and the 30-percent tax credit don’t necessarily cancel each other out, because they’re levied on different things. But the two line items do seem to have a moderating effect on each other that has lessened the blow of the tariff. Interestingly, the tax credit phases out nearly in tandem with the panel tariff. The 30-percent tariff on solar imports only lasts for a year, much of which has been completed by now, and then in years two, three, and four, the tariff drops to 25 percent, 20 percent, and 15 percent.
The tax credit has another year and a quarter until it expires, and then it drops “to 26 percent for projects that begin construction in 2020 and 22 percent for projects that begin in 2021,” the SEIA notes. After 2021, the residential credit will drop to zero, while the commercial and utility credit will drop to a permanent 10 percent.
Another factor that will likely play in to a decent year for solar: even cheaper solar panels from China than were available before. Part of the reason that the Trump administration imposed tariffs in the first place was because cheap solar panels from China were crowding out solar panels manufactured in the US. But earlier this year, China decided to cut subsidies for domestic solar installations, according to Reuters. As Chinese buyers stopped buying as many solar panels, suppliers have been selling those panels to the US for even less than before, eroding the effect of the US import tariff.