Tariffs on solar panels were finally announced this week and we believe (along with most of the U.S. solar industry) that they are a terrible idea. They will cut solar installation jobs, slow the growth of several parts of the industry, scare investors, and do little to bolster U.S. domestic panel manufacturing.
However, for American homeowners considering a solar installation, the solar tariffs will increase the price of a home solar installation by 4%, at worst. If a solar installer passed all of the tariff-related increases onto the consumer, this would add $720 onto an $18,000 6kw system. Solar will still be worth it for the vast majority of Americans considering an installation. It will still pay itself off in 5 to 8 years, decrease a household’s carbon footprint, and save tens of thousands of dollars on utility bills in the long-term. Let’s dig into why this is.
A couple dozen big bulky solar panels are the most visible part of any rooftop solar system. For most people, they are the system. The surprising thing is, though, that the cost of the panels are only 10 to 15 percent of the total system cost. This number comes from a National Renewable Energy Laboratory report last year on solar panel costs. In that report, they dig into all the details and minutiae of solar installation prices (page 19 is the key part for this analysis).
The majority of the costs associated with solar installations are not related to hardware – they are driven by the supply chain, customer acquisition, installation labor, overhead, profit and so on.
The majority of the costs associated with solar installations are not related to hardware – they are driven by the supply chain, customer acquisition, installation labor, overhead, profit and so on. Of the remaining hardware costs associated with manufacturing and equipment, the panel only comprises about $0.35 to $0.45 cents per watt, or about 10 to 15 percent of the overall installed system price. Since the overall installed cost for a standard 6-kilowatt residential solar installation typically reaches only $2.85 to $3.25 per watt, that means that even a maximum tariff of 30 percent on panels will only increase the overall cost for residential systems by about 3 or 4 percent.
If these tariffs had been imposed in 2010, it would have been a different story (panels were 35% of the total system cost in 2010). Thanks to innovation and competition, this is not the case anymore. The panels themselves just don’t add all that much to the total cost anymore.
While home solar won’t be as affected by the tariff, community, utility, and commercial scale solar definitely will be. The solar panel costs is a much larger part of the total cost 30% to 60% in these cases. Some projects will likely get delayed or cancelled, and fossil fuel plants will be used to make up for the difference.
Some projects will likely get delayed or cancelled, and fossil fuel plants will be used to make up for the difference.
A home solar installation provides silent, clean energy to a household and will save tens of thousands on rising electricity prices over the system’s life. Even accounting for the price increase caused by tariffs, solar is still worth it!
If you’re interested going solar, use our free solar calculator to get an instant solar savings report for your home and multiple competitive quotes from installers.
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