The imposition of the sales tax and the reduction of funds could halt the progress of renewable energy on the Island.
The solar panel sector anticipates a slowdown in activity due to the possibility of a Sales and Use Tax (IVU) being imposed on solar systems and the reduction of federal funds that helped low-income families install them.
Specialists consulted by EL VOCERO agreed that, if the new tax scenario materializes, there would be a considerable drop in installations and, consequently, a significant decrease in sales.
Although there is consensus that there would be an initial decrease in demand, specialists differ regarding the duration of the impact. Some believe the decline would not be prolonged, given that Puerto Rico continues to seek energy resilience, which would allow for stabilization after two or three months. Others, however, believe the effect would be more lasting, arguing that taxing these systems is tantamount to penalizing those who seek more reliable energy alternatives.
The most recent data on solar system installations with batteries on the Island indicates that approximately 200,000 residences already have these systems.
According to Borintek President José Miranda, if consumers were required to pay the tax, installation requests would slow down in the first few months, with the cost of a residential system estimated to increase by around $2,000. However, he believes that, given the deficiencies in the electrical system, demand would pick up again.
“On average, people would lose $2,000 in savings because the exemption for renewable energy equipment is being eliminated, but as with many things, initially there will be a slowdown, not much business, but then things will adjust on their own and it will pick up again,” Miranda commented.
For his part, Carlos Santiago, administrative assistant at Olympus Home Solutions, stated that even the public discussion about a possible tax has already had an impact on the market. He indicated that sales have decreased between 20% and 30% compared to months like September, October, or November of last year.
“When people start talking about these kinds of projects that represent increased costs, they get scared,” Santiago commented.
Javier Rúa Jovet, Director of Public Policy for the Puerto Rico Solar and Energy Storage Association (SESA), emphasized that a jurisdiction’s taxing power also carries with it the ability to slow down certain activities. In his view, the power to impose taxes “is best used to tax activities that you want to slow down for some reason.” However, he maintained that, in cases like this, the usual approach would be to promote incentives to continue the sector’s development.
It is estimated that the cost of a residential system would increase by around $2,000.
Rúa emphasized that, in Puerto Rico, the installation of solar systems with batteries addresses a critical need.
“The primary reason people install solar and battery systems in their homes and businesses is to save their lives in the face of the aftermath of Hurricane Maria and the constant power outages,” Rúa commented.
Furthermore, he warned that any change in the economic equation that allows families to access these systems could generate a ripple effect, particularly among those who make sacrifices to afford them. He explained that SESA conducted an analysis of the socioeconomic profile of families who have installed solar energy with batteries on the island, originally prepared in the context of the net metering debate, but applicable by analogy to the potential impact of a tax.
The study used data by zip code for existing installations—99% of which are residential—and compared them with the most recent census data, classified by income levels according to the definition of the U.S. Department of Housing and Urban Development (HUD). The report concluded that 58.5% of solar systems in Puerto Rico are located in homes classified as low- and moderate-income (LMI) and middle-class. It also summarizes that “the rates of lower-income households installing solar energy in Puerto Rico are between 27% and 37% higher than the national average in the United States.”
In light of these findings, Rúa argued that “imposing solar taxes could significantly reduce the adoption of solar energy and storage, disproportionately harming the most vulnerable families and communities; causing hundreds of thousands fewer families to adopt solar energy by 2030 in Puerto Rico, equivalent to 144,000 of them in the lowest income brackets. It also represents approximately $5.7 billion in accumulated economic losses for Puerto Rico by 2030; resulting in over 1,000 fewer megawatts of distributed solar energy and nearly 3,000 fewer megawatt-hours of installed battery storage by 2030; and causing the loss of up to 8,000 jobs in Puerto Rico.”
“In lower-middle-class and lower-income households, any change in the economic equation that allows people to install solar systems has a significant impact,” Rúa added.
Santiago agreed with that assessment and warned that, if the effects of the sales tax on these systems are not carefully evaluated, jobs could be lost and some companies could face bankruptcy.
“Here you’ll see the problem that many companies are going to go bankrupt, they won’t continue providing the service, and there will be more unemployment. It’s a major chain reaction,” Santiago pointed out.
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