Why Solar Costs Are Rising

Why Solar Costs Are Rising

Solar energy’s clean, renewable, and infinite source made it the energy source of the future. By the early part of the 2000s, the solar energy industry had experienced an average annual growth of 68% and contributed 40 gigawatts of power to America’s power grid. The budding industry powered 6.5 American households and provided jobs to almost 374,000 of the population as solar panel installers.

However, things are about to change in the solar power industry as we enter the end of another decade. The tax exemptions awarded to solar power switchers will be gone in a few years, and the Trump administration has approved additional tariffs on solar panels and equipment. Soon, solar power won’t be as cheap as it used to be and if there is a good time to switch to solar power, that time is now.

Disappearing Tax Exemptions

Solar power saw a steady rise in patrons upon the enactment of the Solar Investment Tax Credit in 2006. Anyone who decided to switch to solar power and outright purchased a module for installation would enjoy a 30% credit on their income taxes. The tax exemptions were originally planned for implementation from January 2006 up to December 2007, but numerous laws were passed to extend the tax exemptions up to 2019. As a result of the multi-year extensions on the tax credit, solar equipment and rates continued to depreciate while technological efficiencies and installation rates improved.

However, there is a glaring development that most people overlook.

As legislators extended the SITC to encourage long-term investments in solar power, the tax exemptions will be reduced by 2019. Any solar project that begins at the start of 2020 will step down to a 26% tax credit. By 2021, the tax credits will reduce to 22% for projects that start within the year. Afterwards, commercial establishments will continue to get a permanent 10% tax credit while residential users will not receive tax credits anymore.

This is why most people have been encouraged to switch to solar power before 2019. Installing a solar module after that would mean an additional 30% cost on the equipment as the tax credit would be completely gone by then.

Additional Tariffs on Solar Prices

While some may have prepared for the impact of the tax credit reductions, a recent announcement by the Trump administration further sealed the inevitable inflation of solar power.

In January this year, President Donald Trump announced a 30% tariff on all imported solar panels plus an additional 25% tariff on Chinese-made solar module imports. The aftermath was expected as Reuters reported in June that solar installation projects worth approximately $2.5 billion had been cancelled because of the tariffs.

The tariffs were implemented after a couple of American solar manufacturers lobbied to impose a 50% tariff on solar imports which they claimed were harming their business, especially the cheap imports from China. Suniva, a Georgia-based solar cell manufacturer, filed bankruptcy in April 2017 and attributed its financial decline to the lower prices of foreign-produced solar panels.

In October 2017, the International Trade Commission released its analysis of tariffs on imported solar panels and suggested tariffs as high as 35%. The Trump administration eventually settled with its own number: a 30% tariff. Because of the new tariffs, analysts at Bloomberg New Energy Finance estimate an increase of up to 3% for rooftop solar panels; while solar farms which contribute energy to a shared grid might hike prices up to 10%.

Consumer Impact

For those who have already invested in solar power systems, they would have to consider the rate hikes in their bottom-line. This might also result in businesses slowing down or even halting production which can be detrimental for the majority of employees in the industry.

An average homeowner who is looking into using solar energy needs to act fast. NOW is the best time to invest in solar energy before the tariffs permanently take hold and raise the prices.

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