Following the recommendations of the U.S. International Trade Commission (ITC), which found in October 2017 that imports of inexpensive foreign-made solar panels have caused substantial harm to U.S. solar manufacturers, President Donald Trump has decided to enact steep tariffs on imported solar panels. That sentence might sound scary, and there are certainly a lot of scary headlines out there about how Trump is killing the larger U.S. solar industry by helping struggling manufacturers, but don’t panic.
Yes it’s true that the solar industry employs hundreds of thousands of people, most of whom work in installation, and it’s also true that some people may lose their jobs in the industry because of these price increases. We’re not going to get into the politics of whether this is overall good or bad for the industry or the nation, but we are going to talk about what it means for our core readership: homeowners who want to install solar.
How will the solar tariffs affect homeowners?
When the tariffs take effect, February 7th, 2018, they’ll add 30% to the price of most imported solar panels (aka modules). That’s a pretty huge markup, but because module cost is only a small part of the overall cost of installing a system, the final price you’d pay to a solar installer will only go up by a little.
In an earlier article, we wrote about a typical 5-kW solar system costing $15,000, with solar modules representing about $1,750. A 30% increase in module price would translate to $525 more for the whole installation, which can be erased by about half a year of the electricity produced by the panels. That’s not so bad!
After 2018, the tariff will “step down” by 5% per year, ending at 15% through 2021. So that $500 premium goes down to about $250, and goes away after 2021, but you shouldn’t wait that long to install, because of the “other ITC”.
The other ITC
Yes, ITC stands for “International Trade Commission,” but it’s also the Federal Solar “Investment Tax Credit.” This ITC is a straight-up tax credit that reduces the cost of going solar by 30% as a tax credit the year after installation.
That’s 30% of the whole cost of the system, meaning that $15,525 system earns you a federal tax credit of $4,658 (rounded up, like the Feds do). The ITC is the most important reason to go solar sooner, because it too begins to “step down” as of the end of 2019.
It’s important to remember that date: even though the new tariffs will still be adding a few hundred bucks to your up-front solar costs, the 30% ITC reduces the total cost of your system. Many states also include other solar incentives, like additional tax credits rebates, and performance payments.
If you’ve been thinking about going solar, now would be a perfect time to get quotes from solar installers near you.