Solar Panel Tariffs – Six Months Later

It has now been six months since the doom and gloom announcement rattled the Solar Industry.  As you remember, back in January 2018, President Donald Trump announced his 30% tariff on all solar panels and cells not manufactured in the US.  The tariff turned out to be just a first strike with many tariffs on other products to quickly follow.  It quickly transitioned from a bad dream to a reality, and the Solar Industry and potential customers were sent scrambling.  So what exactly has happened since?

To start with, a quick look at how it affected us, Tandem Solar.  We are happy to report that we were able to retain all our employees, first and foremost.  The impact on our wholesale business was felt in two ways.  Immediately following the announcement, our early winter panel sales went through the room and way beyond normal business.  We held our pricing firm in the near term, and our inventory went very quickly.  Then, looking at late Q1 and early Q2, the industry went quiet.  We saw installers that typically do 4-5 jobs per week now doing a couple per month.  The industry slowed way down.  The typical seasonality of the Solar Industry, paired with consumers learning about tariffs in the news, put a ton of projects on hold.  However, now that we are through June and into July, we are seeing sales back to expected levels, which gives us all a big sigh of relief.  It appears we are through the storm ourselves – but what about the rest of the industry?

EMPLOYMENT IMPACT FROM SOLAR TARIFFS

Let’s start with jobs, which was the main focus of the solar tariffs to begin with.  On the positive side, a few solar panel companies have decided to take up residency in the United States.  Hanwha Q-Cells announced that they are planning to open a factory in Georgia, and Jinko has plans to open a manufacturing facility in Florida.  SunPower, through SolarWorld, has plans to increase capacity in Oregon.  While it’s still unclear the number of jobs that will be created, as solar panel factories are largely automated, the panel tariffs seem to be bringing manufacturing capacity into the United States.

However, unfortunately, there is a negative side as well.  According to several reports, over 10,000 solar industry jobs have been lost between last year and this year.  These jobs are mainly in the skilled labor and technical side, which is a big loss for the industry.  In fact, this is the first year of the past 7 that hasn’t shown employment growth.

Employment within the Solar Industry is very important, but there are other considerations as well to see how we are doing with the solar tariffs.

INSTALLATION IMPACT FROM SOLAR TARIFFS

As mentioned previously, we definitely experienced a slowdown in March-May, partially due to the solar tariffs.  We also have friendly competitors in the industry whom also confirmed the unusually slow period.  Reuters had a recent report citing an estimated $2.5 Billion in jobs have been postponed or cancelled due to the tariffs.  We are still early in the tariff impact period, and we don’t have a lot of concrete data that we have found that can be shared.  This chart from SEIA shows a 2018 consistent with 2017 performance:

It makes sense that California would continue a positive trend, as the cost of energy is so high that even a price increase from the tariffs doesn’t impact the ROI (return on investment) very much.  They do project other states to slightly decrease, but again, we are very early with the data here.  I think it can be stated with confidence that the general public heard about solar tariffs and end price increases, and it has not helped the solar industry.  We will continue to measure the impact.

PRICING IMPACT FROM SOLAR TARIFFS

The public perception is that solar got more expensive with the tariffs, but is it true?  Here’s one analysis, courtesy of Energy Sage (A wonderful collection of data in everything solar):

They are suggesting price increases to the end user on an average sized system about $700 on premium components.  How about another chart with Q1’18 data from SEIA:

They are seeing the same thing – very minimal price increases.  This actually corresponds with what we are seeing from the solar panel manufacturers as a wholesale company.  Many of the large manufacturers held their pricing firm, choosing to absorb the tariffs, or only passed along minimal increases.  Of course, the days of very inexpensive Chinese modules flooding the US market and driving down pricing seem to be gone.  But we still have product from China and other low cost regions, and the pricing is only a few percentage points higher than where we ended 2017.

We found it interesting in talking to our installation base that they had mostly absorbed the costs.  An owner of a mid-sized installation company in Southern California put it to us like this, “I had quotes from 2017 that customer asked us to honor in 2018 post-tariff.  Looking at all the numbers, we were able to do it for the most part.  It just forced us to be better with our spending, like with advertising, and we had to become more efficient.  Overall, our pricing has stayed pretty constant.”

GOING FORWARD WITH SOLAR TARIFFS

After going through the early impact, which is the most significant per the tariff %, it seems the Solar Industry is going to be just fine.  In the end, going solar just makes financial sense for most homeowners, as long as the right provider is used.

Thank you for reading and for visiting Tandem Solar.