In January, the U.S. government announced that there would be a 30% tariff on imported solar cells and modules.
“Our action today helps to create jobs in America for Americans. We’ll be making solar products now much more so in the United States. Our companies have been decimated, and those companies are going to be coming back strong,” said President Trump at the signing ceremony.
About 95% of solar cells and modules sold in the U.S. in 2017 were made abroad, according to SPV Market Research. The move threatens to disrupt the $28 billion industry that imports 80% of its solar supplies, largely from China.
Abigail Ross Hopper, Solar Energy Industries Association's (SEIA) President, and CEO responded to the tariff stating:
"While tariffs, in this case, will not create adequate cell or module manufacturing to meet U.S. demand, or keep foreign-owned Suniva and SolarWorld afloat, they will create 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.”
SEIA estimates that 23,000 Americans will lose their jobs this year.
At Pulse Electronics Power, the first question that came to mind was: How will this affect the power magnetics for the solar inverters?
Before we can dig into the impact of power magnetics for solar inverters, we should review what you need to know about the solar tariff first.
What You Need to Know About the Solar Tariff
Some believe the tariffs would make things worse for the U.S. solar industry. And, some supporters believe this was needed. President Trump believes he is leveling the playing field for renewable energy manufacturers in the United States. He hopes this will spur manufacturing in the U.S.
But, before you choose sides, get the facts.
Quick facts on the solar tariff:
- The tariff went into effect on February 7, 2018, but will expire in 2021 for a total length of 4 years.
- The tariff is 30% the first year, then decreases 5% each year after that. (See table below.)
- The first 2.5 Gigawatts of imports are exempt from the tariff.
For a deeper dive in the new solar tariff, continue reading the fact sheet from the U.S. Trade Representatives.
The tariff intends to encourage offshore panel manufacturers to build their panels in the U.S. The goal is to increase the number of U.S. jobs in the renewables industry.
We see this already take effect before the tariff was announced.
The most recent solar cell and module facility to open in the U.S. is from Tesla. Tesla confirmed earlier this year that solar panel and solar tile production is now underway at the company's solar manufacturing facility in Buffalo, New York.
And, JinkoSolar stated they will "finalize planning for the construction of an advanced solar manufacturing facility in the U.S."
It's clear that with the right plan, solar energy manufacturers can avoid the tariff and still take advantage of the 30% Business Energy Investment Tax Credit the government provide.
How the Solar Tariff Will Impact Businesses
A solar inverter consists of several components like transformers, inductors, etc. that are ideal for solar applications. The Pulse Electronics Power BU team produces power magnetic components that make up the solar inverters.
This new tariff adds 30% to the cost of solar panels and modules which are paired with solar inverters.
And, according to MJ Shiao, head of America's research for GTM Research, tariff levels are likely to increase solar module costs by 10 to 12 cents per watt. A 10 cent per watt tariff would slow the market by 8.3%.
While this tariff will result in a price increase for some manufacturers, it will only affect a small list of the components that make up a solar system. But, the price increase may delay completion time.
The good news for Pulse Electronics Power BU is the impact for 2018 will be offset by bulk orders that have already been placed this year. The impact to Pulse Power will be negligible in North America.
We will not be affected by the new tariff.
It's no doubt that the solar tariff has significant implications for companies that install solar systems.
What we do know is that the 30% tariff in the first year will be the hardest transition. As it begins to reduce in year two to 25%, then 20%, and finally 15% in year four, manufacturers and engineers will adapt.
With costs rising, the adoption rate of solar power may be lower than it may have been otherwise – but it won't be fatal.
Building solar inverters with power magnetics take time and planning. While the new tariff isn't ideal, solar power innovators will continue to drive the energy industry forward for a more reliable and trusted global supply chain.
To help designers increase their pace of innovation, Pulse Power BU is dedicated to providing efficiency optimized transformer and inductive component solutions for the solar industry. It is our mission to help power our future with Solar.
To inquire about how the experienced team at Pulse Electronics Power BU can assist with your solar project, simply contact product support or use our quote form by clicking the button below.