President Donald Trump’s approval of a four-year tariff on imported solar panels – starting at 30 percent – will raise costs, cut installations, reduce jobs and slow the decline in greenhouse gas emissions. Despite this bump in the road and other stumbling blocks in the last year, the economic and environmental benefits of solar power remain strong, and governments, businesses and individuals should act now to lock in a low-carbon future.
A Step Backwards in 2017
During the past year, the recent record-breaking growth in the U.S. solar market has slowed. Installations declined an estimated 22 percent from 2016 to 2017, according to GTM Research. The new levy imposes a 30 percent tariff on imported solar cells and modules in the first year, which account for about 95 percent of all solar cells and panels sold in the United States. Because modules account for 17 percent of total system cost for residential projects and 32 percent of utility-scale projects, systemwide price increases will be lower. Analysts predict that they could, however, reduce new installations by around 11 percent through 2022.
But this isn’t the only policy change that could impact the solar industry. The Trump administration is moving to repeal the Clean Power Plan, which would have given a major boost to zero- and low-carbon generation (including solar power) while rolling back vital public health protections that help level the playing field. Meanwhile, tax reforms could impact renewable energy projects by decreasing their appeal to investors. And while the Federal Energy Regulatory Commission (FERC) recently rejected Energy Secretary Rick Perry’s proposal to boost coal and nuclear power plants, this remains an issue before the Commission.
The solar industry now employs more than 260,000 Americans. SEIA predicts that the tariff will translate to a loss of roughly 23,000 solar jobs this year alone. The new tariff is expected to disproportionately hurt burgeoning solar markets, largely in Southern states like South Carolina and Florida.
Thanks in part to sustained innovation and economies of scale, the industry has made remarkable progress in reducing prices. In 2017, the average price of utility-scale fixed-tilt solar power fell below $1/watt, the point at which it is cost competitive with coal and other fossil fuels. That’s why most analysts expect solar power to remain an important contributor to the building of new power plants in coming years.
To avoid the worst impacts of climate change, however, we’ll need much more investment in all forms of zero-carbon generation, and soon. The Obama administration’s Midcentury Strategy concluded that the annual rate at which the nation is building new zero-carbon generation sources needs to increase 50 percent above its high point in 2016 between now and 2035, and nearly triple 2016 levels from 2035-2050. WRI analysis for the Risky Business project found similar ramp-ups in zero-carbon generation will be needed in the decades ahead.
Securing a Low-Carbon Future
How did we get here? Sustained technological innovation has helped shift markets in powerful ways and incentives have been useful, but the majority of U.S. wind and solar generation has been fueled by regulatory requirements and consumer choice. Therefore, it is crucial that businesses and policymakers at the state and local levels continue to engage constructively to drive development of new zero-carbon generation. Regardless of the potential for a modest increase to (currently very low) prices for solar power from these tariffs, investments in clean energy more than pay for themselves when considering the full suite of costs and benefits, such as cleaner air, more resilient grids, good jobs and significant returns for investors and the public.
More than 2,500 states, cities, businesses, universities and other actors have pledged their support for the Paris Agreement goals of reducing emissions in order to avoid the most severe impacts of climate change. Together these actors represent more than half the U.S. economy. Their actions will have a profound effect on emissions, whether through renewable energy standards, carbon pricing, forward-looking integrated resource plans and rate cases, or by directly procuring renewable power. There is no better time than today for states, cities, companies and universities to work together to advance a low-carbon transition, maintaining a cleaner, more affordable and more secure future for all Americans.