The Island’s solar energy industry woke up to a new 30 percent tariff on imported solar panels and related parts today. The Trump Administration announced the tariff Monday. One of the Vineyard’s foremost solar energy contractors saw the handwriting on the wall months ago while the issue percolated within the International Trade Commission, and despite his company’s preparations to counter it, South Mountain energy services manager Rob Meyers said the tariff will still be impactful.
“It has a broad affect across the country, not just here at South Mountain Co.,” he said during a telephone interview.
South Mountain began to place advance purchases of solar equipment and parts from California panel manufacturer SunPower months ago in anticipation of the tariff, he said. While SunPower builds panels in the United States, it imports components to assemble them, and therefore will feel the pinch of the tariff, he said. He added that it’s unclear whether that company in particular will pass those costs on to its customers or attempt to absorb them.
Mr. Meyers said he believes South Mountain customers will not feel the effects of the tariff for about six months. Thereafter residential customers could see a 10 to 12 percent increase in the cost of solar projects. He also said that he believes the diversified nature of South Mountain — not being a company solely devoted to solar energy contracting — will insulate it from any job losses. But other Island companies may not fare as well. “For those companies who only do solar work, it could be more challenging,” he said.
Nationwide, the effects of the tariff will be severe, and translate into thousands of job losses, he predicted. He described the solar industry as a strong “blue collar” trade that requires a “high level of technical competency.” He estimated that the solar industry employs 260,000 people in the United States overall. That not only includes installers, but those who assemble inverters, racks, cells, and metering systems, he said.
Mr. Meyers describes the new tariff as graduated, with 2018 being the highest year at 30 percent. For the next four years, it will decrease by 5 percent annually until it levels off at 15 percent, he said.
A mitigating factor is that by his estimate, panel prices have come down 70 percent since 2010, Mr. Meyers said. Permitting and project administration costs, which include costs passed on or required utilities, are where the next efficiencies are needed in the industry, he said.
David Smith, sales and product manager at Fullers Energy, said his company makes an effort to use American-made solar products. Their go-to company was Solar World “until about six months ago, when we couldn’t access panels.” He said Solar World ran into financial trouble, and added that Solar World was one of two solar manufacturers that complained to the federal government about cheap Chinese imports and triggered the current tariff.
“We’ve actually gone to LG’s, which is a South Korean company,” he said.
An American company would be preferable, but the LGs fit the bill for quality, and have a 25-year warranty, he pointed out. Many cheap panels on the market will only give a warranty for a decade, he said. The inverters and racking Fullers uses are made in America, he said.
Smith said he believes the tariff will have a knock-on effect on big commercial jobs, but not on residential ones.
“There’s going to be a slight [residential] cost increase,” he said. “But panels are just one component of an overall system. We’ll absorb a little of that cost to remain competitive. I don’t foresee a huge increase for our customers.”
Bill Bennett, owner of Bennett Electric and Solar Invictus, said he felt bullish about the solar market: “I see a mini-boom regardless of what Trump does.”
To illustrate his point, he said, new incentives called SMART came a week ago from the commonwealth. The SMART incentive mandates utilities provide an energy-production incentive, he said. For an average home this is about $400 per megawatt-hour in savings. An average home system will generate 8-plus megawatts of electricity per year, he said. And the mandate has a 10-year lifespan. That translates into big savings, he said: “That will more than make up for increased costs.”
There is a federal tax credit of 30 percent on any solar project, he said. The credit was not affected by the recent tax act.
A typical residential system that generates 7,000 watts costs approximately $33,000. The tariff would add about $1,500 to $1,800 to that figure, he said. Much of that figure isn’t materials.
“A lot of the cost is permitting and labor,” he said.
Like Smith, Bennett said large commercial and industrial systems will feel more of a sting from the tariff.
Like Meyers, Bennett stockpiled panels in anticipation of the tariff. Last fall he stowed some 650 kilowatts of panels, he said.