Solar Energy Tariffs and Installation Costs

The financial equation for commercial solar projects in the United States is shifting rapidly. While the long-term trend of solar energy has been one of declining prices, recent trade policies and tariff adjustments are introducing new variables to the cost structure. For business owners and facility managers, understanding these changes is necessary to accurately project Return on Investment (ROI) and secure the best pricing for installation.

The End of the Tariff Moratorium

The most significant recent change in the solar market involves the expiration of the two-year tariff moratorium in June 2024. In 2022, the Biden administration paused tariffs on solar panels imported from four Southeast Asian nations: Cambodia, Malaysia, Thailand, and Vietnam. This pause allowed the US solar industry to keep moving while domestic manufacturing ramped up.

However, that window has closed. The US Department of Commerce found that some manufacturers in these countries were circumventing duties on Chinese goods. Now, solar modules entering from these nations are subject to Antidumping and Countervailing Duties (AD/CVD).

This is critical because these four countries have historically supplied roughly 80% of the crystalline silicon solar panels used in the US. The reimposition of these duties creates immediate upward price pressure on imported hardware. If your commercial project relies on modules from these regions, procurement costs are likely to rise unless the importer can prove the supply chain does not use Chinese wafers or other restricted components.

Section 301 and the "China Factor"

Beyond the Southeast Asia specific duties, the broader trade war with China continues to impact hardware pricing. Under Section 301 of the Trade Act of 1974, the US government has increased tariffs specifically on Chinese solar imports.

In 2024, the tariff rate on solar cells (whether or not assembled into modules) imported directly from China increased from 25% to 50%. While most US installers do not buy directly from China due to existing restrictions, this aggressive rate signals a tightening of the global supply chain. It forces manufacturers in other countries to source polysilicon and wafers from non-Chinese sources to avoid being hit with related penalties, which often comes at a higher production cost.

The Bifacial Panel Exemption Removal

For years, “bifacial” solar panels were exempt from Section 201 safeguard tariffs. Bifacial panels collect light on both sides and are commonly used in utility-scale and large commercial ground-mount projects. This exemption made them a cost-effective choice for large installations.

Recent policy updates have removed this exclusion. Now, imported bifacial panels face the same 14.25% tariff (as of 2024 schedules) that applies to standard monofacial panels. For a large commercial installation requiring thousands of panels, an immediate 14.25% cost increase on the hardware portion of the bill is a substantial line item that affects the overall project cap rate.

Balancing Costs with the Inflation Reduction Act (IRA)

While tariffs are pushing hardware prices up, federal tax incentives are working to pull the net cost down. The Inflation Reduction Act (IRA) remains the primary counterweight to rising installation costs.

The Investment Tax Credit (ITC) currently offers a base credit of 30% for projects that meet labor requirements. However, the tariffs highlight the importance of the “Domestic Content Bonus.” Projects that use 100% US steel and iron, and a required percentage of US-manufactured components (40% for most projects), qualify for an additional 10% tax credit.

This creates a split market for commercial buyers:

Option A: Buy cheaper imported panels, pay the tariffs, and claim the standard 30% ITC.
Option B: Buy more expensive US-made panels (from manufacturers like First Solar, Qcells, or Meyer Burger), avoid tariffs, and claim a 40% total tax credit.

The math often favors Option B, but it depends heavily on the availability of domestic supply. US factories are expanding, specifically in states like Ohio, Georgia, and Alabama, but supply is often sold out months or years in advance.

Impact on Power Purchase Agreements (PPAs)

Many businesses prefer not to buy the system outright. Instead, they use a Power Purchase Agreement (PPA), where a third party owns the system and sells the power to the business at a fixed rate.

Tariffs affect PPAs directly. When the cost to build the system goes up due to duties on panels or steel, the PPA provider must charge a higher rate for the electricity to maintain their margins. According to market data from LevelTen Energy, PPA prices have seen quarterly increases correlating with trade uncertainty. While PPA rates are still generally lower than utility rates in many states, the gap is narrowing.

Navigating the Procurement Strategy

To mitigate these rising costs, commercial entities are adjusting their procurement strategies.

Early Lock-in: Developers are encouraging clients to sign contracts and order equipment earlier than usual. Locking in hardware prices before potential new duties are finalized (such as new AD/CVD petitions filed in mid-2024) protects the budget.

Diversified Supply Chain: Smart installers are no longer relying on a single brand of panel. They are maintaining relationships with both domestic suppliers (like First Solar) and diversified importers (like Canadian Solar) to pivot based on which product offers the best landed cost at the time of installation.

Inverter Considerations: While panels get the headlines, tariffs also apply to inverters and battery storage systems. Section 301 tariffs on lithium-ion batteries for non-EV applications (grid storage) are set to increase from 7.5% to 25% in 2026. Businesses looking to add storage to their solar project should consider accelerating those timelines to beat the 2026 hike.

Frequently Asked Questions

How much do solar tariffs add to the cost of a commercial project? While it varies by project size, tariffs can add between 10% to 15% to the hardware costs. Since hardware represents about 40% to 50% of a total commercial project’s cost, the overall price increase is typically in the single digits, but this can still amount to tens of thousands of dollars.

Are there any solar panels that are tariff-free? Panels manufactured entirely in the United States are free from import tariffs. Additionally, panels imported from countries with free trade agreements that are not subject to specific AD/CVD orders (such as certain imports from Singapore or South Korea, depending on current rulings) may have lower or zero duty rates.

Does the 30% tax credit offset the tariff costs? In most cases, yes. The 30% Investment Tax Credit (ITC) provides a dollar-for-dollar reduction in federal income tax liability that usually outweighs the added cost of tariffs. However, the project ROI is maximized when you can utilize the tax credit and source cost-effective equipment.

Will solar prices go down in 2025? Hardware prices are expected to stabilize rather than drop significantly in 2025. The combination of trade barriers and high demand for domestic products keeps a floor on pricing. However, as US manufacturing capacity increases over the next two years, domestic supply constraints should ease.