Tariffs vs. the Unstoppable Market Forces of Solar Energy and Electric Vehicles (EVs)

by Tom McCalmont, CEO, Paired Power

My general view for years has been that solar is an unstoppable market force, regardless of political machinations and the administration. I’ve been in solar for 25 years, and the U.S. market has grown at least 30% every one of those years, regardless of who was President. The U.S. solar market today is at least 250 times larger than it was when I started 25 years ago. (A market that grows 30% per year doubles every three years, and since there have been 8 such doublings in 24 years, 2^8 =  256). I believe the reason for that is that solar is the most democratic form of energy generation.

“Solar is the most democratic form of energy generation.”

– Tom McCalmont, CEO, Paired Power

Everyone — whether you are an individual, a school, a church, a commercial business, or a government entity — can just decide they want solar; and they can buy it and install it. All of those decision-makers make that decision individually, not collectively, so the market train just continues to move down the track.

And prices for solar have come down dramatically — solar panels that were $6.00 per watt when I started 25 years ago are $0.20 per watt today, a 30-fold reduction in price. Even if you add a significant tariff on top of that, the price of solar panels will still be comparable to what it was 5 or 10 years ago. And even if you eliminate or reduce federal tax credits, the overall system price of a solar power plant will be comparable to the system price of 5 years ago because material prices are so much lower today. In other words, if solar was practical and financeable 5 years ago, then it’s still going to be so today even if tariffs and changing incentives take effect.

It’s a bit harder to assess the evolving market dynamics of EVs and EV charging because the market is younger and the adoption rates are lower. However, I am still optimistic. EVs are a better driving experience — the cars are better, more fun to drive, more comfortable, more reliable, cheaper to operate, and last longer. EVs are still slightly more expensive than gas cars, but as economies of scale drive that down (which they already are), then there will come a point soon where most people will decide to buy the cheaper and better option, which is EVs (vs. gas).  

Even if the U.S. sticks its head in the sand and adds tariffs on EVs and removes federal subsidies, the rest of the world will not. EVs in China are already cheaper than gas cars here. China is exporting massive numbers of EVs to Europe and Mexico and South America (BYD is now larger than Tesla). So the rest of the world will continue to drive down the EV cost curve, even if we are slower to get there in the U.S.  

There will be a point within a few years when EVs will be so much less than gas cars that people will simply make their best economic decision and switch.  Plus gas cars will start to depreciate faster as that happens, which means people won’t want to buy one, knowing that it will have a poor resale value.