Following his presidential campaign’s promises of targeting China and other nations that he believed conducted unfair trade practices, President Donald Trump has imposed a 30% tariff on imported solar panels.

Although the signal is not positive for American solar developers, who have been heavily relying on imported panels, industrial and financial players expect the tariffs to have a larger impact on rooftop solar and distributed solar energy generation than on utility-scale projects.

Large-scale projects represent roughly 80% of the US market, which means that the real impact of the tariffs should be limited, according to people who work both on the solar project development side and in financing these projects.

The power of petition

The government’s decision followed the US International Trade Commission’s (ITC) recommendations. The ITC determined that “increased solar cell and module imports are a substantial cause of serious injury to the domestic industry” and recommended the tariffs.   

The safeguard tariffs on imported solar cells and modules will start at 30% and will be reduced by five basis points every year, reaching 15% on year four. The first 2.5GW of imports each year are exempt.

The import tariffs are the result of a petition filed by Suniva and later joined by SolarWorld asking for an investigation on whether increased imports were a substantial cause of serious injury to the domestic industry. From 2012 to 2016, the volume of solar generation capacity installed annually in the US more than tripled. In the same period, imports grew 500% and prices dropped 60%.

According to ITC numbers, since 2012, 25 American companies have closed, with only two producers of both solar cells and modules and eight module producers that use imported cells.

A solar developer, who preferred not to be identified, said that the fact that the companies who filed the case at ITC only work in smaller projects indicates that utility-scale projects should not be impacted. A banker agrees with the limited impact on utility-scale projects, arguing that the growth had already slowed down with many utilities meeting their renewable portfolio tagrets. 

Although there is a general sentiment that it is too early to understand the real impact on final costs of greenfield projects, the main impact is expected to be on the cost of equity. In terms of total cost, the impact will be diluted throughout the length of PPAs.

An own goal

The Solar Energy Industries Association (SEIA) expects the delay or cancellation of billions of dollars of solar investments due to the decision. And this disruption may not have the desired effect on domestic manufacturing. 

The changes are not considered enough of an incentive to create adequate cell or module manufacturing to meet US demand, creating “a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs,” according to Abigail Ross Hoper, SEIA’s president and CEO in a statement.

The largest dedicated provider of solar farms in the US, Cypress Creek Renewables said it was disappointed with the decision to impose tariffs, making solar more expensive in the near-term and threatening to slow the industry's growth. “But we believe in the fundamentals of utility-scale solar and maintain confidence in the long-term benefits provided.”

Both SolarWorld and Suniva issued statements praising the tariffs. "We are still reviewing these remedies, and are hopeful they will be enough to address the import surge and to rebuild solar manufacturing in the United States," said SolarWorld in the statement.