Tariffs have the potential to make the US the highest cost solar market globally, says a new Wood Mackenzie report that looks at 2 scenarios to ascertain the impact of the US tariff policies on the cost of power generation technologies.
In its report titled All aboard the tariff coaster: implications for the US power industry, the market intelligence firm looks at the trade tensions scenario under which the US effective tariff rate will settle at 10% by the end of 2026, with a 34% tariff on China. The other is the trade war scenario where the US maintains an aggressive tariff policy and implements reciprocal tariffs to an effective tariff rate of 30% through 2030.
Under the trade tensions scenario, Wood Mackenzie estimates the cost of a utility-scale solar facility to become 54% costlier than those in Europe and 85% more expensive than new builds in China.
“The tariffs that have been in place on solar modules along with an inefficient transmission policy that exacerbates interconnection costs have made construction costs for solar higher in the US than in most other markets,” said Wood Mackenzie’s Vice Chairman, Power and Renewables, Chris Seiple. “An increase in tariff levels will only worsen this premium US energy consumers need to pay to access renewable energy.”
The uncertainty created by the US tariffs will likely also slow down the project development activity, leading to potential delays and a rise in power purchase agreement (PPA) prices.
“In a business with 5-to-10-year planning cycles, not knowing what a project will cost next year or the year after is disruptive and causes massive uncertainty for US power industry participants,” added Seiple. “The severity depends on what scenarios play out.”
These tariffs will not just be limited in their impact to the solar sector alone, but will also impact other technologies, with energy storage seeing the biggest hike of 12% to more than 50% for utility-scale storage projects, due to its dependence on Chinese imports, according to the research.
China supplied nearly all battery cells used in utility scale storage projects in the US in 2024 due to a lack of domestic manufacturing, which could change in the future, but not in the short term.
“In 2025 we estimate there is sufficient domestic manufacturing capacity to only meet about 6% of demand and by 2030 domestic manufacturing could potentially meet 40% of demand,” according to Seiple.
The complete Wood Mackenzie report can be purchased from its website for $3,000.
Industry analysts had earlier echoed the same sentiments saying that while stockpiled inventory may delay the impact of US-initiated tariff war on the country’s solar supply chain costs, prices will rise as supplies deplete (see Tariff War To Impact US Solar Industry Supply Chain).
