U.S. President Donald Trump on Jan. 22 issued new import tariffs on foreign-made solar cells and modules. While the tariffs may briefly disrupt the U.S. solar industry, the announcement provides much-anticipated certainty for future solar development costs.

As discussed in detail in a Nov. 7, alert, “ITC Makes Recommendations in Solar Trade Case,” Georgia-based solar panel manufacturer Suniva Inc. in April 2017 filed a petition with the U.S. International Trade Commission (ITC) pursuant to section 201 of the Trade Act of 1974. Suniva later was joined in the case by SolarWorld Americas Inc. Both companies alleged that they have faced financial hardship as a result of foreign competitors inundating the market with less-expensive panels. The ITC agreed — finding unanimously on Sept. 22 that the increased quantities of foreign solar panel imports are a substantial cause of serious injury to domestic solar panel manufacturing.

On Oct. 31, the commissioners announced their recommendations to remedy the injury caused by imported solar cells and modules. Although the commissioners were divided on the precise remedy to apply, they generally recommended an initial increase in duties of between 30 and 35 percent for all imported solar cells and modules above a certain threshold.

President Trump’s decision to impose tariffs is largely consistent with the ITC’s recommendations. While the first 2.5 gigawatts of imported solar cells and modules will not be subject to the new duties, all imports beyond that threshold will have a 30 percent tariff for the first year. The tariff will decrease by 5 percent each year for the subsequent three years.

It remains to be seen what impact the tariffs will have on the domestic solar panel manufacturing industry. The initial 30 percent tariff is expected to increase the cost of foreign solar cells and modules by approximately 10 to 12 cents per watt. This is significantly lower than the 32 cents-per-watt tariff that Suniva and SolarWorld had requested.

While providing some relief to domestic solar panel manufacturing, the increased cost of solar cells and modules may create a slight disturbance in the rest of the U.S. solar industry, potentially slowing the immediate development of new solar projects.

The overall outlook for the U.S. solar industry is still strong, however. The announcement of solar panel tariffs, while sure to initially increase prices, also provides a level of certainty for solar developers that has been missing for the better part of a year while the ITC case moved toward resolution. In anticipation of a potential tariff, 2017 saw a spike in solar module demand that drove up module prices by nearly 15 cents per watt. As a result, the increased cost from the tariffs has, to some extent, already been reflected in current module pricing.

Now that the tariff is implemented, module costs are likely to stabilize at approximately the same prices seen in late 2016 and early 2017. Even with new tariffs on imported solar panels, solar development costs are likely to continue their downward trend over the next several years, resulting in increased development.