Clarifying trade-offs between tariffs and distributed solar sales

Solar Equipment Import Tariffs and Off-Grid Electrification

Duke researchers are partnering with leading solar home system companies in East Africa to understand price sensitivity of bottom-of-the-pyramid consumers

For millions of rural and peri-urban households located far from the utility grid, solar home systems are the most affordable and most reliable option for gaining access to electricity and all the benefits that come with it. Improved technology, increasing availability of mobile money, and support from private and public sector investors have led to explosive growth in distributed renewable energy. The Global Off-Grid Lighting Association (GOGLA) estimates that over 100 million people  currently use off-grid solar technology to gain access to basic services like lighting, phone charging, and connectivity to the world. In many cases solar technologies obviate the need for polluting and dangerous substitutes like kerosene lamps, which are – ironically – subsidized by some governments. Solar home system sales also create direct jobs for sales agents and other workers, which helps to facilitate wider economic development. Yet taxes on imported solar equipment approach 40 percent of retail prices in some markets, putting the price of these systems out of reach for large segments of society, hindering energy access for the poorest consumers, and slowing the growth of a potentially foundational industry.

Duke researchers are partnering with leading solar home system companies in East Africa to understand price sensitivity of bottom-of-the-pyramid consumers in order to quantify more precisely the ramifications of import tariffs and other policies that have direct impacts on system prices. The project aims to produce an analysis of the costs and benefits of import duties on distributed solar home systems and associated appliances in the East African Community (EAC). This analysis supports EAC governments to design optimized tariff policies for facilitating desired electrification rates and development outcomes, while meeting obligations for national revenue generation.

The Debate over Solar Panels

The Trump administration’s solar tariff announcement has spurred lively debate in the U.S. around whether these trade barriers are good or bad for businesses and workers, and to what extent cost increases will soften solar demand in the U.S. But on the other side of the globe, Duke University Energy Access Project director Jonathan Phillips and Hannah Girardeau write in Devex that there is a similar debate roiling around the treatment of solar panels and related equipment in trade policy that could make the stakes even higher for energy consumers across sub-Saharan Africa.

Funding