You’ve probably read the headlines and seen the news reports about President Trump instituting a highly-unpopular tariff on imported goods, including solar panels. While the President believes this will spur sales of American-made panels and thus boost manufacturing, creating jobs, many experts in the renewable energy industry believe that this will actually cost more jobs than it will create by inflating the cost of purchasing solar panels.
And there’s a good chance that this cost increase will impact you as a home or business owner who’s considering switching to solar as well. To help you better understand how this works, here is the low-down scoop on what to expect from these tariffs.
President Trump ran on a strong message that US jobs were disappearing overseas, specifically to China, because of a business climate that’s friendlier to manufacturing. China has become a major player in the global renewable energy landscape, but they’re not nearly as big today as they were just a few short years ago. In 2011, nearly one out of every three solar panels sold in the United States came from China, where as today that number’s closer to just one in ten. In fact, both Malaysia and South Korea produce more panels sold in the United States than China.
Because the panels that are imported are of acceptable quality while still boasting a significantly lower price tag, these are often the go-to panels of choice for solar sales and installation companies who wish to keep costs low in order to entice more customers to switch to renewable energy. To combat this and make American panels more attractive to buyers, the President has levied a tariff on these panels: 30 percent in the first year, and declining five percent until its final year at 15 percent.
The President believes that by putting a tariff on these imported panels more of these installation and sales companies will choose to buy American panels because there’s no longer a financial incentive to do otherwise. The logic would be that buying more American panels would keep more dollars here in the United States rather than sending them abroad, which would then spurn business expansion and create more jobs. However, as we’ll likely see, that probably won’t happen, and many experts believe more jobs will be lost on the sales and installation side due to slowed business than will be created in manufacturing.
The Harsh Reality
When all things are considered, inflating the price of these inexpensive, imported panels is only going to drive up the cost of solar panels everywhere, making all panels less enticing, not just foreign-produced ones. The costs of solar panel installations will rise to compensate for this added cost, which places an added burden on consumers who were looking to make the switch to clean, renewable solar energy. As a result, more home and business owners may be priced out of the market and unable to make the purchase, which then leads to slowed sales in the renewable energy industry, causing limited or stunted growth, and eventually leading to job loss.
The price increase also comes at a poor time when you consider the tax incentives, credits, and other enticing financial benefits of switching to solar. For starters, the Federal Investment Tax Credit is only in full effect for less than another two years, 2018 and 2019. Starting in 2020, the credit will shrink to 26 percent before eventually fading away entirely for homeowners and shrinking to just ten percent for business in 2022, the same year the tariff is set to expire. So therefore, the price increase on solar installations comes right as some of the biggest financial relief options and incentives to make this huge investment start to disappear, which many people fear will only exacerbate the damage to the solar panel and renewable energy industry.
Your Solar Installation
So let’s bring this a little closer to home: how is it going to impact you and your panels? If you’ve been looking to make the switch to solar, there’s no question the cost to do so will go up; some estimates say that the average cost of a large solar array will increase by as much as ten percent, but smaller and residential installations will likely be closer to three percent.
That might not seem like a whole lot but let’s do some quick estimate math. The average cost of a solar panel installation before the tariffs was around $25,000. A ten percent increase would bring the price up to $27,500, meaning your monthly payment jumps by about $22 if you paid the system over 10 years. That might not seem like much, but when you consider how much longer this might mean it takes before you reach the point where your savings have paid off your system, you can see why the incentive for homeowners becomes less enticing.
That being said, now is still an excellent time to make the switch to solar, even with the price increase from the tariffs. The Federal Investment Tax Credit is still in full effect, allowing you to claim up to the maximum of 30 percent of the cost of your solar panel system as a credit on your tax return for the year you installed your panels. If you were to install that same average panel system, that means your tax credit will be bumped from $7,500 to $8,250, which puts more money back in your pocket, thus helping offset the price increase. Between that and the local and state incentives you may be eligible to receive, the cost increase will be a much easier pill to swallowIf you’d like to learn more about making the switch to solar, speak with the New Jersey solar installation experts at Sea Bright Solar today by calling (732) 253-4052!