The Manufacturing Of Solar Panels In The US Is Soaring Thanks To IRA Policies – CleanTechnica

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The Solar Energy Industries Association (SEIA) reported on September 9, 2024, that the policies and incentives promoted by the Inflation Reduction Act of 2022 have spurred the growth of solar panel manufacturing in the US. This year, the total output of US-made solar panels will be four times greater than it was before the IRA was passed. According to the US Solar Market Insight Q3 2024 report released yesterday by SEIA and Wood Mackenzie, the solar industry has added 75 GW of new capacity to the grid, representing over 36% of all solar capacity built in US history. Nearly 1.5 million American homes have installed solar since the IRA passed.

Solar module manufacturing capacity in the United States now exceeds 31 gigawatts (GW) — a nearly four-fold increase since the Inflation Reduction Act became law, the report says. In August 2021, one year before the IRA became law, the US produced just 8.3 gigawatts of solar modules. The nation installed 32.4 gigawatts of solar in 2023, meaning the country’s solar manufacturing capacity is now close to matching its pace of solar deployment.

“The solar and storage industry is turning federal clean energy policies into action by rapidly creating jobs and powering economic growth in all 50 states, particularly in battleground states like Arizona, Nevada and Georgia,” said Abigail Ross Hopper, the CEO of SEIA. “We are now manufacturing historic amounts of solar energy in America, and soon we will have enough domestic module production to supply nearly all U.S. demand for years to come.” Texas continues to dominate the solar market, leading the nation with 5.5 GW of solar capacity installed in the first half of 2024. States with closely watched elections this November, including Texas, Florida, Nevada, Ohio and Arizona, are among the top 10 solar states in 2024.

“The solar industry had a great second quarter, mostly due to growth in the utility-scale segment,” said Michelle Davis, head of global solar at Wood Mackenzie and lead author of the report. “But future solar growth is being hindered by broader power sector challenges — interconnection backlogs, electrical equipment shortages, and constraints on labor availability. The industry also faces uncertainty related to newly proposed tariffs and the presidential election. There is currently a lot to navigate in the solar industry.”

Solar Panels & Solar Cells

Most solar modules are constructed with photovoltaic cells based on polysilicon wafers. While the US has roughly enough polysilicon capacity to meet its needs, it still has no operational facilities that can turn that raw material into the solar wafers and cells that transform light into power. That could change early next year, when Hanwha Qcells starts manufacturing wafers and cells at its end-to-end factory in Cartersville, Georgia. In the meantime, China still makes most of the USA’s solar wafers.

Nevertheless, US solar panel manufacturing capacity continues to expand faster than the rest of the domestic supply chain. Last quarter, production started up at a new Qcells factory in Georgia, at a Sirius PV facility in Georgia, and at a Meyer Burger plant in Arizona. Since the IRA was signed, the big names in Chinese module manufacturing, along with more than 30 other companies, have announced plans to launch US factories or grow their current capacity. This rush to produce solar panels in the US has been spurred by the IRA’s cleantech manufacturing incentives, which shows that the carrots provided by the IRA are far more effective than the sticks approach of imposing tariffs on Chinese goods taken by prior administrations.

In fact, the US solar manufacturing boom could be big enough to allow the country to soon become a net exporter of solar panels for the first time in decades, Canary Media says. If  all the announced growth plans are realized, the US could expand its module capacity to 53.9 gigawatts by the end of 2024 and 139.5 gigawatts by 2027, according to the report, more than the country is likely to need itself.

Even if that turns out to be true, China has left American solar in the dust. Its solar panel manufacturing capacity at the end of last year was over a terawatt — 25 times more than America’s current total. Jenny Chase, the longtime solar analyst at BloombergNEF, points out that solar module factory capacity is often 1.5 to 3 times greater than annual installed capacity in this overheated, underutilized market. BloombergNEF recorded 428 gigawatts of global solar installations in 2023 and forecasts that nearly 600 gigawatts of solar will be installed by the end of this year.

As positive as SEIA is about the growth of solar in the US, others are sounding alarms about an over-reliance on Chinese made solar panels. Their concerns echo those about an influx of cheap Chinese made electric cars. In the Chinese version of a managed economy, there is no penalty for producing more solar panels than there is a demand for. Oversupply leads to lower prices which delights some but threatens domestic industries.

Tariffs On Solar Panels Are A Double Edged Sword

A new report by The Guardian says that while the Biden administration claims the IRA is responsible for a booming new industry that is curbing the effects of the climate crisis and creating high paying jobs across the country, the more complicated truth is that the US is mired in a long running trade war with China, which is flooding the market with artificially cheap solar panels that carry an uncomfortably large carbon footprint and threaten to obliterate the domestic industry. The price of solar panels has plummeted 50% over the past year, largely because of deliberate Chinese overproduction of key components and a game of international cat and mouse over trade rules, industry insiders say. Chinese companies have proved skillful at moving their manufacturing plants to other countries and shifting strategies to work around US tariffs and other deterrent measures.

The fear, shared by a number of US solar panel manufacturers who have managed to survive a turbulent market over the past few years, is that the boom in renewable energy being touted in Washington might in fact be helping China to strong-arm its way to a global monopoly. It already manufactures more than 80% of the world’s solar panels. “China has dominated the solar manufacturing sector for a decade, using a familiar playbook to those of us who’ve watched what the OPEC cartel has done to oil markets,” Mike Carr, executive director of the Solar Energy Manufacturers for America coalition, wrote recently. “OPEC has demonstrated again and again that you can either join them or be run over. Now China is doing the same thing in solar to stifle our manufacturing renaissance before it gets a chance to take off.”

If this threat is not more widely known, it is partially because such prices are highly attractive to wealthy investors and installation companies interested in slapping as many solar panels on houses and businesses as possible, no matter the source. The SEIA has argued that policing China more rigorously could strangle growth and put jobs at risk to the detriment of the Biden administration’s climate goals.

US manufacturers and trade experts argue that low prices for solar panels are only temporary and that bowing to Chinese interests is no solution. In the words of Tim Brightbill, a lawyer representing several US manufacturers in a formal trade complaint, if Chinese manufacturers succeed in taking over the US market and force domestic manufacturers into liquidation, it won’t be long before they “jack up prices without fear of competition.”

Mark Widmar, CEO of First Solar, agrees. In testimony to Congress in March, he made reference to the many US solar companies that have gone out of business over the past two decades because they were priced out of the market. “The relentlessness of the Chinese subsidization and dumping strategy threatens the viability of many manufacturers who may never be able to get off the ground or have the ability to finance the startup or growth of their operations.” Brightbill added, “Chinese companies don’t have any comparative advantage, only artificial advantages. They rely on government subsidies, and on lack of enforcement of labor and environmental laws.”

The Biden administration and Congress have now lifted the moratorium on duties, removed the tariff exemption for bifacial panels, doubled tariffs on solar panel components imported directly from China, encouraged further investigation of unfair Chinese trading practices, and proposed cracking down on a domestic tax exemption that is inadvertently benefiting Chinese manufacturers operating on US soil. New restrictions on China and other South Asian countries that are circumventing international trade rules are expected to be imposed over the next few months. US solar panel manufacturers hope this will make it easier to take advantage of tax and other incentives included in the Inflation Reduction Act.

SEIA is continuing to lobby against many of these moves, arguing that they risk slamming the brakes on a booming industry. US manufacturers, however, see an opportunity to establish themselves more solidly and make cleaner, greener, higher quality panels that have their own appeal to consumers. “We strongly believe you can have solar deployment continuing to increase and fight climate change while at the same time having a strong domestic manufacturing industry,” Brightbill said. “All we’re asking for is a chance to compete against these giant Chinese companies that have come to dominate the market in the last decade.”

The Takeaway

For all the gains made in US solar manufacturing over the last two years, its future — and the thousands of good paying jobs it is expected to create — remains vulnerable not only to industry dynamics like interconnection delays, equipment shortages, and labor shortfalls, but also to a potentially radical shift in federal energy policy in a second Trump administration. What it all boils down to is that the solar revolution in America is far from assured and being in the business of manufacturing solar panels in the US is fraught with economic and political danger. Keep your hands inside the vehicle and your seat belt fastened until the ride comes to a complete stop.