US solar PV costs will rise, but not enough to materially alter its relative economics

Overview

The report assesses whether new US solar PV import protection measures will significantly slow the energy transition. It concludes that US solar PV project costs will increase and their relative economic appeal will marginally decline, but the advantage created by long-term technological cost reductions has not been eliminated; global markets will face a more limited price impact because of substantial manufacturing overcapacity.

Core views

The report first draws on calculations published by HSBC's Asia Energy Transition team on August 7, 2026, to analyze the combined impact of minimum import prices and an additional 15% tariff. The measures are expected to raise US silicon-based solar PV module prices by 33% to 53% from current levels, increasing total utility-scale solar PV project costs by about 10%. HSBC incorporates this change into its Net Zero Transition Conditions Framework (NZTCF), introduced on June 10, 2026, focusing on the first driver—the economic attractiveness of clean technologies relative to incumbent fossil-fuel alternatives. It concludes that the cost advantage of US solar PV will weaken, but an approximately 10% increase in project costs merely erodes part of the advantage created by technological cost reductions over the past decade or more and is insufficient to materially alter the economics of solar PV relative to fossil fuels. Historical experience shows that US trade barriers more often reroute supply chains than halt solar PV deployment. Antidumping and countervailing duties on Chinese solar products date back to 2012, followed by Section 201 safeguards in 2018. After direct Chinese supply was restricted, US import sources shifted to Vietnam, Thailand, Malaysia, and Cambodia; when these markets subsequently faced stricter measures, the sourcing structure changed again in 2025, with Indonesia, Laos, and the Philippines becoming markedly more important. Over the same period, annual US solar PV installations rose from about 10GW in 2018 to 48GW in 2025, while cell and module imports increased from about 7GW to 55GW. Although 2025 import volumes were below their 2024 peak due to tighter restrictions, they remained far above the level recorded when Section 201 measures were introduced in 2018, indicating that the market continued to expand primarily through source substitution. The report also acknowledges that historical data cannot show how much deployment might have occurred without these interventions. The current measures are more difficult to circumvent than previous country-specific tariffs because minimum import prices directly establish a price floor for imported products. However, citing BloombergNEF estimates, the report notes that imported components would remain cheaper than fully integrated US production even under the new minimum-price regime. The new policy therefore narrows the cost advantage of imports rather than eliminating their economic basis; US imports are expected to continue, although the US market may absorb fewer modules. Markets outside the US are expected to experience a smaller impact. The IEA estimates that global solar PV manufacturing capacity exceeded 1,100 to 1,350GW in 2024, more than twice the annual deployment of solar PV systems worldwide. Oversupply has already driven module prices sharply lower, while China continues to dominate every manufacturing stage of the solar PV value chain. If the US absorbs less demand, more modules may be redirected to compete in other markets, but because global capacity already substantially exceeds demand, the diversion of supply is unlikely to raise prices elsewhere. The report therefore concludes that the relative economic attractiveness of solar PV globally should remain broadly intact, with module pricing continuing to reflect ample supply and intense competition among manufacturers. To assess where additional supply might flow, the report compares annual incremental solar PV installations and imports of finished Chinese modules across the G20 and a group of middle-income economies. Incremental installations represent the scale of market demand, while imports of Chinese modules indicate whether suppliers already have established market-access channels. Brazil and Saudi Arabia have both sizable annual incremental installations and substantial imports of Chinese modules, giving them the most readily available channels to absorb additional supply. India has a particularly large market, but its rapidly expanding domestic manufacturing capacity will intensify the local competition faced by Chinese suppliers. Germany, Türkiye, Japan, and France also have large deployment volumes relative to their current imports of Chinese modules, although whether additional supply can enter will still depend on local manufacturing capacity, trade policies, and other market conditions. Overall, US protection measures will marginally weaken the first driver of the NZTCF but will not materially alter the relative economics of solar PV and fossil fuels, nor are they likely to significantly slow the global transition.

Analysis framework

HSBC first translates the new import measures into changes in module prices and total project costs, then uses the Net Zero Transition Conditions Framework to determine whether they are sufficient to alter the economic attractiveness of solar PV relative to fossil fuels. The report then reviews changes in US trade restrictions, import origins, and installation volumes since 2012 to distinguish supply-chain rerouting from demand contraction. Finally, it combines global capacity-demand dynamics with a comparison of incremental installations and Chinese module import channels across countries to analyze price transmission outside the US and potential destinations for redirected supply.

Methodology notes

• Macroeconomic framework

  Net Zero Transition Conditions Framework (NZTCF)

  This framework is used to determine whether the conditions supporting the net-zero transition are strengthening or weakening. The report focuses on the first driver, namely the economic attractiveness of clean technologies relative to fossil-fuel alternatives, and uses it to assess whether an approximately 10% increase in project costs is sufficient to alter the pace of the transition.

• Industry/sector analysis frameworkSupply-demand framework

  Comparison of global solar PV capacity and deployment demand

  The report compares global manufacturing capacity with annual solar PV deployment, using the fact that capacity exceeds demand by more than twofold to explain why redirected modules are unlikely to raise prices in other markets after US demand declines.

• Event games and behavioral financeEvent-driven analysis

  Impact analysis of new US trade measures

  The report treats minimum import prices and additional tariffs as policy events and sequentially analyzes their transmission to imported module prices, total project costs, import competitiveness, supply-chain routes, and energy-transition conditions.

• Industry/sector analysis framework

  Cross-market comparison of incremental installations and Chinese module imports

  The report uses annual incremental installations to measure demand scale and imports of finished Chinese modules to measure existing market channels, combining the two indicators to identify markets outside the US that are more likely to absorb additional supply.

Key data

• Additional tariff15%Together with minimum import prices, this constitutes the new US trade measures
• Increase in US module prices33%-53%HSBC's Asia Energy Transition team estimates the increase from current levels
• Increase in US utility-scale solar PV project costsAbout 10%Estimated pass-through from higher module prices to total project costs
• Annual incremental US solar PV installationsAbout 10GW to 48GWChange from 2018 to 2025
• US cell and module importsAbout 7GW to 55GWChange from 2018 to 2025; 2025 was below the 2024 peak
• Global solar PV manufacturing capacityMore than 1,100-1,350GWThe IEA's estimate for 2024, more than twice annual solar PV system deployment

Impact & implications

The report argues that the new measures will raise the cost of US solar PV deployment and narrow the advantage of imported products, but imports will retain an economic basis, making continued supply-chain adjustment more likely than disruption. Reduced US absorption may intensify supply competition in other markets; against a backdrop of severe global overcapacity, this redirection is more likely to lower or constrain prices than to raise solar PV costs outside the US.

Risks

• Minimum import prices and additional tariffs could raise US module prices by 33% to 53% and total project costs by about 10%, weakening solar PV's economic advantage over fossil fuels.
• Whether additional Chinese modules can enter markets such as India, Germany, Türkiye, Japan, and France is constrained by local manufacturing capacity, trade policies, and other market conditions.

What to watch

• Monitor changes in actual US module prices, import volumes, and utility-scale project costs after the new measures take effect.
• Monitor whether US import origins shift again and whether solar PV installations can sustain the growth seen under previous trade restrictions.
• Monitor how Brazil, Saudi Arabia, and other large deployment markets absorb redirected module supply.
• Monitor the extent of global manufacturing overcapacity and its impact on module prices outside the US.