Tariffs on solar components increase project costs through higher equipment prices and supply chain disruptions, potentially eroding solar’s cost competitiveness with alternatives like natural gas. Here’s the breakdown:
1. Direct Cost Increases
- Panel prices: Hardware constitutes ~50% of utility-scale solar costs, with tariffs on imports (particularly from Southeast Asia and China) pushing prices up. Recent announcements indicate 3-4¢/W increases for panels and 2-3¢/W for balance-of-system components due to tariffs.
- Storage systems: Batteries face 20-30%+ price hikes due to China’s dominance in the battery supply chain.
- Manufacturing pressure: Domestic producers face “cost-price squeezes” as tariff-driven import price cuts force U.S. manufacturers to slash prices.
2. Policy Risks
The Inflation Reduction Act’s (IRA) tax credits currently offset some tariff impacts, but eliminating these subsidies—combined with tariffs—could raise solar power purchase agreement (PPA) prices to $73/MWh, eroding solar’s cost edge over natural gas.
3. Economic & Market Effects
- Lost investment: Past tariffs led to $19B in lost solar investments and 62,000 fewer jobs.
- Daily losses: Current tariffs cost the U.S. $10.5M/day in unrealized economic activity.
- Consumer impact: Home solar installation costs rise, though long-term savings often remain viable.
4. Competitive Landscape
Even with 15-50% tariff-driven cost spikes, solar often remains cheaper than grid power over time. However, prolonged tariffs risk narrowing this gap, especially if natural gas prices stabilize or policy support wanes.
For homeowners, locking in current rates before tariffs fully materialize is advised.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-tariffs-affect-the-overall-cost-of-solar-energy-projects/
