Intensified trade measures against China through higher tariffs on imported solar and battery cells are an important policy step, but the impact is clouded by global production shifts, price drops and looming trade complaints from the U.S. Department of Commerce.
The Biden administration has imposed a series of tariffs on hardware imported from China. In the case of the solar module sector, these measures serve more as a warning shot than as a severe punishment. A number of pending anti-dumping/countervailing duty (AD/CVD) cases pose a greater risk for price increases. However, the general price drops for hardware have the effect of softening the impact on energy prices for end users.
According to a White House statement:
The tariff rate for solar cells (whether assembled into modules or not) will increase from 25% to 50% in 2024. The tariff increase will protect against China’s policy-driven overcapacity that depresses prices and inhibits the development of solar capacity outside China. China has used unfair practices to dominate well over 80 to 90% of certain parts of the global solar supply chain, and is seeking to maintain that status quo. China’s policies and non-market practices are flooding global markets with artificially cheap solar panels, undermining investment in solar energy production outside of China.
In addition, the government has increased import tariffs on battery cells from China used in electric vehicles and energy storage systems. In 2024, rates for electric vehicle battery cells will increase to 25%, while rates for energy storage will follow in 2026.
Direct imports of solar cells from China were less than 1% in 2021, underscoring the limited direct impact on solar cells that these tariffs could have in the US market. Instead, the majority of solar cells used in the US come from regions like Southeast Asia, which offer comparable prices without the tariffs imposed on Chinese products.
While the tariff increases appear substantial, their actual impact on the overall U.S. solar industry is likely to be muted, as importers have already diversified their supply chains away from Chinese manufacturers.
If you were to import solar cells from China today, they would cost a few cents to a nickel per watt. With this increase from 25% to 50%, the rate for a solar cell priced at five cents per watt would increase from $0.0125/Wdc to $0.025/Wdc.
Meanwhile, solar panels in Spain are available for less than ten cents per watt, while in the United States they can be purchased for about double that.
For energy storage, while a tariff increase to 25% for cells is notable, its impact could be mitigated by broader shifts in the sector, particularly sustained and further expected price reductions. Last summer, battery cell prices in China ranged from $120/kWh to $130/kWh are expected to drop to $40/kWh or less this summer.
A 25% tariff on a battery cell priced at $130/kWh would increase costs by $32.50/kWh. But now that prices are around $40/kWh, the same rate results in an increase of only $10/kWh. This increase remains modest compared to the overall price reduction of almost $100/kWh, highlighting how dynamic global market conditions can mitigate local policy impacts.
Further complicating the financial landscape for solar panels, there are broader uncertainties surrounding trade regulation. Notable discussions include potentially ending the Trump-era 15% bifacial tariff exemption for solar panels a pending petition that could escalate tariffs on solar panels and cells from Southeast Asiaregions that are the main alternative production locations for Chinese companies previously hit by tariffs.
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