A new scenario-based analysis from consultancy firm McKinsey suggests that increasing global tariffs could reduce solar PV and BESS installations in the US and EU by up to 10% by 2035.
According to the report, titled “How might tariffs affect the energy transition?”, growing trade tensions between the US, EU, and China could see solar PV installations fall by 9% in the US and 7% in the EU.
European BESS installations could also decline by as much as 10% in a high-tariff environment.
McKinsey’s high-impact scenario models 60% tariffs on all Chinese imports to the US, 20% on goods from other countries, and a 47.7% tariff on Chinese solar modules and batteries entering the EU.
The report does not account for other recent developments, including cuts to US renewable energy subsidies announced earlier this month.
Despite potential setbacks, McKinsey said solar PV installations in the US and EU “could increase more than twofold,” citing steep price declines in solar technology across 2022 and 2023.
A scenario resembling the late-2024 trade landscape projects the EU as reaching 750GW of solar capacity by 2035, while the US could reach 553GW.
In a “No real disruption” scenario, where tariffs on Southeast Asian modules average 52% and additional tariffs are applied to Canadian, Mexican, and Chinese imports, US installations fall to 512GW, with EU capacity remaining at 750GW.
The report notes that BESS capacity in the EU is likely to grow fivefold due to a more geographically diverse supply chain. “Raw materials for batteries, such as lithium and cobalt, are accessible across Latin America, Africa, and Australia,” the report states.
“Tariffs add uncertainty to the clean energy landscape,” it concludes. “Adoption of clean-energy technologies will likely take longer and cost more the longer tariffs last and the higher they are.”
The most widely reported tariffs have come from the US, with April’s tariffs garnering much criticism across a variety of sectors. These prompted many of the targeted countries to implement tariffs of their own against the US.
