WoodMac: Lifting US Import Tariffs Would Eliminate 30% of the Cost of Solar

Greentech MediaFebruary 5, 20201003


The cost of solar power systems has fallen by nearly 90 percent over the past decade, but the decline was tempered by American trade tariffs, making the cost of solar in the U.S. 45% higher than those in Europe and Australia.

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Lifting US Import Tariffs Would Eliminate 30% of the Cost of Solar

The cost of solar power system has dropped 90 percent over the last nine years, but the decline was tempered by American trade tariffs, leaving U.S. prices 45 percent above those in Europe and Australia, according to new research from Wood Mackenzie Power & Renewables.

Solar power products shipped from China to the U.S. face Section 201 and 301 tariffs, plus anti-dumping and countervailing duties. Those policies have helped shift solar power manufacturing into Southeast Asia, while constraining the amount of lower-cost product available to U.S. developers.

The Trump administration is currently undertaking a midterm review of the Section 201 tariffs and has wide latitude to determine whether and how tariffs will continue. The U.S. Trade Representative is also soliciting comments on the tariff exclusion for bifacial solar panels, with the potential for that exclusion to be removed — again.

WoodMac found that a complete removal of tariffs — an unlikely outcome — would result in an immediate 30 percent drop in the cost of solar power systems. Without tariffs, cost of solar for large-scale solar panel installations would fall below $1 per watt (DC) this year, a price it’s not expected to reach for another two years under current policies.

If the U.S. extends tariffs for four more years, on the other hand, the price gulf between the U.S. and other countries would grow. Under those circumstances, by 2026, solar panels imported into the U.S. could cost twice as much as those imported into Europe and Canada.

Muted cost reductions in the U.S. impact the ability of solar energy to compete with other resources in the power mix. Even so, solar energy is beating cost declines for other technologies. Costs for utility-scale solar panel installations engineering, procurement and construction fell by more than 50 percent from 2013 to 2019 in the U.S., while onshore wind and natural-gas combined-cycle plants fell by 38 percent and 2 percent, respectively.

Those projections spurred the U.S. Energy Information Administration last month to forecast that renewable energy — led by solar panels — will finally overtake electricity produced by natural gas in 2045.

“People pay a lot of attention to the levelized cost of solar, where the hardware cost is a major component,” said Xiaojing Sun, a senior solar analyst at WoodMac. “The general consensus is, were there no tariffs, there would probably be more solar.”

WoodMac analysts expect continued advancements in solar power output and manufacturing in the decade to come, while the solar energy industry gets more creative, building projects in new configurations and with add-ons that move beyond solar-plus-storage.

Countries in the Middle East and Europe will likely emphasize floating solar panel installations, sometimes called "floatovoltaics," while agriculture-paired solar panels is set to take off in a bigger way in the U.S. and China. Building-integrated PV will also play a bigger role in the global market, WoodMac predicts.

Meanwhile, the growing trend of pairing solar power plants with solar batteries will continue to gain steam, Sun said. WoodMac expects the U.S. alone to add more than 12 gigawatts of solar-plus-storage over the next five years.

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