Elon Musk says tariffs make solar artificially expensive in the U.S. But there is much more at play: Op-ed

Earlier this year, Elon Musk was direct about what comes next for the global economy: the need for abundant energy. With the expectation that AI, robotics, and advanced manufacturing scale, he signalled that growth will increasingly be constrained by access to affordable, reliable power. Arguing that solar is essential to removing that constraint, and that in the United States, in particular, the cost remains a barrier. 

So why does the U.S. still struggle to deploy it affordably?

Many in the industry have witnessed various global markets take a step forward in clean energy adoption through regulations and incentives that support a green energy future. However, the United States isn’t advancing at the same momentum, held back by rising costs, regulatory friction, and slow deployment.

China´s large domestic solar market has helped drive manufacturing at scale, pushing global panel prices down. In the U.S., however, trade restrictions and tariffs reintroduce costs, leaving developers to pay more for largely identical technology.

At the same time, the biggest drivers of American solar pricing are no longer panels at all, but “soft costs”, where permitting delays, interconnection backlogs, fragmented local rules and slow site identification translate into higher costs.

Basically, leveraging old strategies to build modern energy infrastructure, creating a growing mismatch in which U.S. developers pay more, wait longer and assume greater risk to access the same technology. 

If experts like Musk believe that solar energy is a necessity to maintain the demand fueled by innovation and a necessity to sustain our planet, it’s worth asking: why is the cheapest energy source on paper not so affordable to scale in the U.S.? 

Global prices are falling, but the U.S. doesn’t fully capture them

In a competitive global market, fractions of a cent per watt matter.

The scale in which China has been manufacturing solar panels over the past decade has given the country a unique strong hold in the sector. A combination of vertically integrated supply chains, production volumes and aggressive competition has pushed model prices down to levels that would have seemed unattainable ten years ago.

With panel capacity and efficiency continuing to evolve year after year, we’re seeing more power generated with fewer components, making solar fundamentally cheaper and more accessible on a global scale. 

According to international energy data, utility-scale solar LCOE in China is now achieving roughly $0.03-$0.04 per kilowatt-hour, with total installed costs near $600 per kilowatt. Rates similar to what one would find across Europe. India is even lower, at approximately $500-$550 per kilowatt. In the United States, by contrast, comparable projects routinely exceed $1,000 per kilowatt, with levelized costs clever to $0.07 per kilowatt-hour. 

In other words, solar in the U.S. can cost nearly twice as much to build and operate as it does in the world’s most active solar markets, despite relying on much of the same technology to build and run it. This reflects an underlying issue in which higher costs are an accumulation of other factors. 

The quiet material costs of building at scale

Panels are only one piece of a solar project. Steel and aluminum underpin nearly everything else needed, including mounting systems, racking and structural supports; materials that are essential, non-negotiable and highly sensitive to price swings. Those prices have been pushed higher by recent trade policies. 

Section 232 tariffs on steel and aluminum, along with subsequent enforcement measures, have raised costs for balance-of-system components across the energy sector. Canada remains its largest foreign supplier of aluminum and steel to their neighbour, with 90% of those exports flowing south of the border. As of early 2025, many of these material imports have been subject to tariffs ranging from 25% to as high as 50%, including on certain derivative products. 

While Canada has been shifting aluminum exports to non-U.S. markets, the cost of those tariffs has largely been absorbed by U.S. buyers. 

Another essential material is Copper, which is needed for wiring, inverters, transformers and grid connection. It too has become a growing cost pressure as electrification, including electric vehicles, data centers and large-scale grid upgrades, competes for the same limited supply. 

Unlike solar panels, which can sometimes be designed, subtitutide or sourced differently, these metals offer few short-term alternatives. Solar developers who build projects at scale need these commodities, and when their cost increases, so does the cost of their projects. 

Tariffs explain part of the gap, but they don’t explain most of it

As Elon Musk recently put it, ¨the tariff barrier for solar are extremely high,” making the economics of deployment “artificially high”.

But tariffs only account for a portion of the underlying systemic issues that play a bigger role in cost. Increasingly, U.S. solar pricing is driven by what the industry refers to as ¨soft costs¨. This ranges from permitting to inspections, interconnection studies, and legal reviews, all the administrative steps required to begin and complete a project. Although hardware prices have fallen, these non-equipment expenses have quietly become primary drivers of total system cost. 

The impact of this fragmented workflow is felt early and often. Permitting rules vary not just by state, but by country and sometimes municipality, creating a patchwork of timelines and expectations, governed by bureaucracy. Interconnection queues can stretch for months or even years, while grid studies stack up behind them. Each delay introduces additional financial costs and risk premiums, which are ultimately reflected in the project’s economics long before a solar panel is even installed. 

Labour adds another layer of pressure, due to the fact that U.S. skilled trade wages and associated employer costs like workers’ compensation premiums and liability insurance are higher than in many global markets. In construction alone, workers’ comp insurance costs can run significantly above other industries, reflecting higher risk and insurance burdens that teams face. 

The result is a system in which time, risk and labour-related overhead, rather than technology, have become one of the most expensive inputs in solar deployment. In other regions, tighter margins and faster timelines compress these costs. In the U.S., unpredictability is built into the process, forcing developers to price in higher buffers simply to move forward. 

When cheap energy becomes a growth constraint

Energy demand in the U.S. is rising, driven by data centers and AI computing, which has made access to affordable, reliable power a deciding factor in where companies choose to build. Solar should be an advantage in that equation. But when projects face these types of barriers and weakened incentives to build solar capacity, solar stops functioning as an enabler and starts acting as a constraint. 

What we are witnessing is a growing mismatch in which solar is abundant and globally cheap, yet domestically slowed by cost, delay and policy uncertainty in the U.S. Solar does not need to be reinvented. It needs fewer barriers, so the Americans can join the rest of the world in treating clean, affordable energy as essential infrastructure, and in doing their part to secure a sustainable future.

Article authored by Daniel Domingues, Founder and CEO, Planno