Harris Beach PLLC
January 20, 2018
With President Trump’s recent announcement of import tariffs on solar panels, the domestic solar energy industry now faces an additional challenge – how to continue to reduce the cost of the power it produces in order to gain even greater energy market penetration.
In recent years, U.S. solar developers have successfully achieved economies of scale, making the electrical energy they produce not only competitive with, but in many instances actually cheaper than, the retail cost of fossil fuel-generated electricity.
Just ten years ago, the cost of generating electricity through solar panels was in the neighborhood of $600 per MWh, while generating the same amount of power through traditional fossil fuels cost roughly $100. Due to a variety of factors, most significantly, the continued lowering of solar panels and related solar farm components, the equation has flipped.
In mid-January, it was widely reported that the very same solar power that used to cost $600 per MWh was now being produced at or below the cost of fossil fuel-generated electricity, a striking reversal of the energy market, particularly at a time when the cost of natural gas and coal has plummeted. Solar power, which had struggled for years to gain acceptance on a purely cost basis, is rapidly becoming the most cost-effective energy option.
The historically (and continually declining) cheap price of solar energy, as well as evolving social policy related to climate change concerns, has encouraged the rapid development of solar power. In New York, for example, Governor Cuomo is promoting policies to enable the state to achieve 50% of electricity generation from renewable sources by 2030 – the so-called “50 by 30” Clean Energy standard. And it’s not devised as a simply end-loaded objective where all of that renewable power comes on line in the late 2020’s. This policy has an aggressive phase in schedule over the next several years, requiring 26.31% of the state’s total electricity load last year, growing to 30.54% in 2021 and reaching 50% by 2030.
Successfully promoting and siting utility-scale projects can be challenging. While society at large is rapidly embracing the need for greatly expanded renewable power, these projects can still meet resistance at the local level. Gaining local support for projects requires a savvy developer team, comprised of attorneys and scientists who understand the process at both the state and local level, and can navigate the many challenges to gaining project approvals.
While local barriers have perhaps slowed the rapid growth of this industry, the President has now erected a much more significant federal barrier by increasing the cost of imported solar panels, the source of the vast majority of panels being installed in the U.S. As a result, the cost of solar farms is predicted by some economists and industry experts to increase substantially, by as much as 10%. Such an increase could be significant in an industry where margins were already close, even before the tariff was announced.
There are many (including members of the President’s own party) who are forecasting significant damage to what has been in recent years a burgeoning industry of solar installers and related businesses. Last August, for example, 16 members of Congress from both sides of the aisle sent a letter opposing a solar tariff to the President, citing the solar industry’s significant contribution to the national economy and job growth. Recognizing the potential damage that the President’s tariff could inflict on the solar industry, an even broader group of legislators have begun plotting strategy to offset this executive action. This will bear scrutiny as the situation unfolds.
This article is being provided for informational purposes only and not for the purposes of providing legal advice or creating an attorney-client relationship. You should contact an attorney to obtain advice with respect to any particular issue or problem you may have. In addition, the opinions expressed herein are the opinions of Mr. Kelly and may not reflect the opinions of Synergy Environmental, Inc., Harris Beach PLLC or either of those firms’ clients.