Sweet Mess

“Miss Protectionist Policy, please meet our friend Mr. Market Forces, you two should make an entertaining couple.”

Average commercial module prices in the US at end of 2017 were $0.45 per watt, decreasing 5-6% per year.

Source: https://www.seia.org/research-resources/solar-market-insight-report-2017-q4

Tariffs on solar modules announced by the Trump administration in January went into effect Feb 7.  They have caused companies to cancel or postpone $2.5 Billion in large installation projects (utility scale). Mostly in the Carolinas, Texas and Colorado.

Source: https://www.reuters.com/article/us-trump-effect-solar-insight/billions-in-u-s-solar-projects-shelved-after-trump-panel-tariff-idUSKCN1J30CT

Fortunately, the tariffs are expressed as a percentage of price, not in absolute currency.

The industry employs more than a quarter million people, three times more than coal, according to the US Energy Information Administration.

While the cancellation of projects reported is limited to utilities, by nature resistant to technologies competing with their existing plants, and therefore easily convinced to wait, the impact on small and medium sized business has yet to be quantified.

Tariffs work to protect nascent national industries; there are no US manufacturers of panels left capable of handling the current demand. Most analysts thought these tariffs would not revitalize a moribund sector, but would encourage foreign companies to buy the few US manufacturers left, or build new plants in the US.  

Until last week.

The Chinese government announced last Friday it would curtail its solar growth in utility scale projects and place caps on distributed generation resulting in a revised forecast of 30 to 35GW installed in 2018, versus 53 GW installed in 2017.  This should translate into manufacturing overcapacity that will lead to a decrease in price of modules of 35% in 2018 according to BNEF.

Source: https://www.pv-tech.org/news/solar-module-prices-set-to-fall-35-in-2018-bnef

In parallel, last week India announced that it was increasing its renewables target from 175GW to 227GW by 2022. It currently stands at 70GW installed. This includes offshore wind, rooftops, ground mounts and floating solar.

Source: https://cleantechnica.com/2018/06/10/india-increases-its-massive-2022-renewable-energy-target-by-28/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+IM-cleantechnica+%28CleanTechnica%29

With prices of Chinese modules expected to drop by a third, and Swanson’s law still in effect (price of modules decrease by 20% every time global shipments double) the financial calculus to postpone projects is upended.

Estimated impact of tariffs on solar system costs before China/India volume effects, assuming 5% avg annual decrease

Estimated impact of tariffs after price decrease from overcapacity {assuming a rate of price decline halved each year from-35% yr1 to – 4.35 % yr4)          

In other words, the expected decline in price weakens the impact of the tariffs in 2018, and blunts it by 2021.  The impact on total system cost is minor and temporary, from 4 to less tan 2%.

Tariffs cannot stop market forces from reacting to accelerating demand.

The fall of 2018 should see robust activity in solar construction.

To find out how converting to clean energy will affect your energy bills, call Staten Solar 408.780. 2889

By |2018-06-13T11:32:25+00:00June 13th, 2018|Blog|0 Comments