Solar tariff is a term you might be familiar with or have heard for the first time. Many think these tariffs benefit society since they boost domestic solar production, but that usually comes at a cost. This article will tell you all about solar tariffs and what they entail.
What Are They?
Like tax, solar tariffs are charged by the government when different types of solar power equipment are imported. The imported equipment can range from module components, raw materials for the modules, solar panels, or other components.
Solar tariffs encourage domestic production, essentially local purchases from your own country rather than importing that equipment from another country. There are some tools to counteract the prices of imports that are deemed below the fair market rate. This low price has been known to harm domestic production.
Countervailing is when solar equipment producers benefit from a subsidy or financial assistance from a foreign government to ramp up their export, production, and manufacturing.
This is a foreign producer selling their solar products in a domestic market at a lower price than their production cost.
The Significance Of Tariffs On Solar Cells
By adding additional costs to any solar equipment, solar tariffs accomplish their primary objective; increasing domestic sales. Imported items seem less appealing, and customers switch to domestically produced goods.
The main principle behind solar tariffs is that they increase competitiveness between domestic sellers and jobs. Rather than importing goods and paying another country, this healthy competition can raise domestic sales and benefit the country. More jobs mean more revenue which can ultimately contribute to a stable economy.
Not everything is positive about solar tariffs. The first one is painfully obvious. After cheaper goods are sold out, customers will be forced to spend more. With increasing prices, some attractive solar adopters might be kicked out of the market entirely.
Solar panel system buyers might spend more on that specific equipment and less elsewhere, which is a significant loss for that specific industry. Tariffs can be relatively harmful to countries that they're imposed on.
Tariffs on goods contributing to a large chunk of a country's gross domestic product will harm the economy. Solar tariffs involve major trade-offs, and organizations are built specifically for this.
Supporters of solar tariffs argue that they offer time which is the best thing for a country that wants to be stable enough to compete globally in the solar supply chain. With stability, the country can completely fulfill the wants of domestic solar installations.
A good example is China. It is the largest manufacturer of solar cells, which keeps the other countries struggling to become profitable enough to add extra facilities to their arsenal to scale production. They are far off from China which is leading the solar cells market.
Proponents also say that solar tariffs increase domestic production of solar cells. They give the famous example of Section 201 solar panel tariff, which was imposed in the U.S, and the industry has seen an exponential increase in sales after that tariff.
People against tariffs say that manipulating the prices to be higher will do more harm than good. They state that the development of U.S. solar manufacturing has come at the cost of U.S. solar installations and higher penetration of solar technology into the marketplace.
Since the U.S has seen a rise in competitiveness due to remarkable domestic growth, installers resort to buying cheap solar panels due to the surge in demand and sell them at high prices. Supporters of solar tariffs argue that imposing such tariffs puts economic pressure on China. However, the other side says it harms the environment more than it does China.
Solar tariffs make companies less innovative since they don’t care about ideas but about saving money. They don’t think ideas are worth investing in since they have a tariff to take care of. Not all countries silently accept tariffs. One example is the trade war between China and the U.S which has shown an exponential increase in retaliatory actions between the two countries since 2018.
Solar Industry And Solar Tariffs
A solar tariff is an essential economic tool any government can utilise to develop its domestic market. However, it shouldn’t be used excessively as this can have dire repercussions. If used correctly, a solar tariff can impact the costs of solar components. Experts are confused about the positives of solar tariffs, but as a reader, you have complete knowledge about their use and ramifications.