Friday, May 18, 2012

Do 31% Solar Tariffs Cripple Or Slow US Solar Development?

The United States Commerce Department yesterday announced a preliminary judgment imposing substantial tariffs on Chinese panel manufacturers for dumping product in the US below cost.  Many companies face a 31% tariff for dumping and up to another 4% for illegal subsidization.  The combined dumping and subsidization tariff could be approximately a total of 35%.

What does this decision mean for the deployment of solar in the USA that hit nearly 2,000 megawatts in 2011?

First, it does send an appropriate message to the Chinese that the US is serious about enforcing international trade law.  Even so, it must be repeated that the Commerce Department action yesterday was a preliminary judgment that many believe will be modified by lowering the amount of the tariffs, as the case moves forward.

But if one assumes no change in the announced tariffs, as the case moves on, a 35% tariff on the panels that are priced currently at approximately $1 per watt would add 35 cents per watt to the total price of a solar installation.  The tariff is on the price of a panel that is now often only 30% to 40% of the total solar system cost.

Many solar installations today now cost a total of $2.50 to $3.00 a watt so a 35 cent per watt tariff would push prices up to $2.85 to $3.35 per watt. Certainly, such an increase would slow solar development this year and would require about 18 months to erase, given the current rate of price declines.  It would delay achieving grid parity in some utility service territories by 1 to 2 years.

But a 35 cents per watt tariff would not appear to be crippling to solar deployment in the US.  And again the 35 cent tariff may yet be reduced.

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