US solar manufacturing soars, but gaps and uncertainty persist

US solar panel production capacity has more than quintupled since President Joe Biden signed the Inflation Reduction Act in August 2022, according to industry and federal government data, marking a major milestone in the Biden administration's mission to bring home critical clean energy supply chains.

The US now has over 45 GWdc of domestic module manufacturing machines. When operating at maximum output, they could theoretically satisfy most, if not all, anticipated US demand for new solar resources in 2025.

"The United States is really in a period of clean energy manufacturing renaissance," Ray Long, president and CEO of the American Council on Renewable Energy, said in an interview. But it is uncertain how quickly America's fast-emerging fleet of photovoltaic factories might hit their full stride given market realities and risks related to the November election.

"While we've got this massive demand for renewable energy ... it's going to be another two to three years before we see domestic supply even approaching domestic demand," Long said.

The Inflation Reduction Act, the centerpiece of Biden's clean energy industrial policy, includes an estimated up to $1.2 trillion in tax incentives over 10 years to make and deploy clean energy technologies. The IRA's advanced manufacturing tax credit has helped to launch more than a dozen new or expanded US module plants, most of which are in Republican-leaning or swing states.

Yet wide gaps persist across key segments of the domestic PV supply chain, as do concerns over higher costs for US-made solar equipment and the long-term viability of factories fostered by federal incentives.

Since Biden enacted the IRA, solar companies have staked over $34 billion for US factories, according to the Solar Energy Industries Association, with over 39,000 new factory jobs expected. Facilities under construction or already online account for about half of the announced investments.

Assembly of modules, trackers, racking, inverters and other downstream components of the supply chain accounts for most of the investments, while crystalline-silicon ingot, wafer and cell factories largely remain missing links.

Some US solar manufacturers view inexpensive Asian imports as an ongoing threat and are seeking further federal actions to boost their chances of success. Those requests may ultimately fall to the winner of the presidential election.

Both campaigns emphasize the need to bring back domestic manufacturing, though former President Donald Trump has been more explicit about the use of tariffs to do so, proposing a universal tariff on all US imports, with a higher rate on goods from China. Vice President Kamala Harris has criticized Trump's proposal, repeatedly calling it a "sales tax" on Americans.

"I think a lot of people will be looking to this next administration to help define what's possible and how aggressive we can be on accelerating the reshoring and increasing the depth of it and the reach of it," said Mike Carr, executive director of the Solar Energy Manufacturers for America Coalition. "I don't think we necessarily need a Build Back Better or IRA 2.0 to succeed, but we do need a more concentrated effort and consistency throughout the government."

'Success requires continued leadership'

The SEMA Coalition, which represents non-Chinese manufacturers with operations in the US, wants more support for capital-intensive US factories upstream of modules, calling on the Biden administration to incentivize homemade wafers through a bonus tax credit the IRA created for energy project owners who use certain amounts of domestic content.

"We haven't really done industrial policy in this country for half a century, at least," Carr said in an interview. "I think the muscles around that have atrophied a little bit."

The US Treasury Department is trying to reverse that atrophy, however, clarifying Oct. 22 that solar ingot and wafer manufacturing facilities and equipment qualify for a 25% investment tax credit under the 2022 CHIPS and Science Act. The Biden administration is also evaluating "other options" to spur development of the "full supply chain, including solar wafers," the department said in a statement.

"Making wafers in the United States is harder, and that's why there seems to be an expected 100-GW supply gap of domestic wafers," said Davor Sutija, CEO of German company NexWafe, a member of the SEMA Coalition.

NexWafe in January set up a US subsidiary to explore developing an initial 6-GW facility, but it has yet to announce a site. CubicPV, a wafer upstart backed by Bill Gates, in February canceled plans to build a 10-GW US wafer hub, citing a dramatic collapse in wafer prices amid a global oversupply that undermined its production plans.

Other manufacturers are forging ahead, however, most notably thin-film specialist First Solar and crystalline-silicon PV company Hanwha Q Cells USA, an affiliate of South Korea's Hanwha Solutions known as Qcells.

Both are adding thousands of jobs at new and expanded factories in Midwestern and Southern states.

First Solar in late September opened a $1.1 billion, 3.5-GW panel production hub in Alabama, pushing its domestic manufacturing footprint to nearly 11 GW -- more than all US module capacity combined just two years ago. Another First Solar factory is on track to start production in Louisiana next year.

Qcells committed to invest $2.8 billion in Georgia, where it recently expanded a panel assembly facility in Dalton to 5.1 GW and is completing a 3.3-GW complex for ingots, wafers, cells and modules in Cartersville, backed by a conditional debt deal with the US Energy Department. The company also has a deal with REC Silicon for solar-grade polysilicon from a revived factory in Moses Lake, Washington, though technical challenges have delayed commercial deliveries.

"Qcells' massive commitment to manufacturing in the United States comes with support from local to federal leaders who all agree that we need to make things in America," Qcells spokesperson Marta Stoepker said. "But our industry's success requires continued leadership. With the right tax and trade policies that build on the IRA and similar state laws, we can create the space for emerging US solar manufacturers to compete on a global scale."

Tariff tug-of-wars

First Solar, Qcells and several other US PV makers in April petitioned the Biden administration to impose new tariffs on cells imported from Cambodia, Malaysia, Thailand and Vietnam, largely linked to producers based in China, the world's dominant PV manufacturer. The Commerce Department on Oct. 1 unveiled preliminary countervailing duties on solar cell imports from the four Southeast Asian countries.

A final decision is scheduled for next year, followed by initial antidumping determinations in late November. The petitioners have also filed allegations that wafers, polysilicon and other materials are receiving substantial subsidies from the Chinese government.

Regardless of whether Harris or Trump wins in November, either administration "would likely tighten trade policy and strengthen tariffs," according to a recent S&P Global Commodity Insights report. Given investments in Republican-leaning states, the biggest election-related risk for both solar and energy storage industries is "not how the IRA could be altered, but rather how the trade and tariff landscape could change to further bottleneck supply," the report said.

Despite "fundamental agreement" between the parties on the need to counter China's command of clean energy supply chains, their approaches are "different enough to create a lot of uncertainty," Carr said.

The US solar industry, like the candidates, is split over the details of tariffs.

"We are creating jobs in the US," said Martin Pochtaruk, president and CEO of Ontario-headquartered Heliene, which makes panels in Mountain Iron, Minnesota, and is building a new cell and module factory in the Minneapolis-St. Paul area. "For the investment that we are making right now, when the equipment comes in we will again need to pay 25% import duty."

The US Trade Representative in September justified the use of tariffs on certain goods from China under Section 301 of the Trade Act of 1974, including lithium-ion batteries and some solar products. The agency declined to adopt several exclusions for solar manufacturing equipment, noting availability outside of China.

"That is ridiculous," Pochturak said in an interview, "because on one side, everybody is incentivized and pushed to create jobs, but on the other side, they're penalizing ... because the only place in where you can get Tier 1 -- the best equipment in the world -- is taxed."

"This pattern of just continuing to go after these tariffs is so problematic and counterproductive relative to the evolution of the domestic supply chain," said Jim Murphy, president of renewable energy developer Invenergy.

Invenergy and China-based PV production giant LONGi Green Energy Technology, through their joint venture Illuminate USA, started commercial operations at a 5-GW solar panel assembly facility in Ohio in February.

Following supply chain disruptions from the coronavirus pandemic and US Customs and Border Protection panel detentions under the Uyghur Forced Labor Prevention Act, "we said we don't want to do that anymore, we want to have our own supply here, which was rightly incentivized by the IRA," Murphy said in an interview. "And so, we, as a rare developer, got into the manufacturing business because we wanted to control our own supply chain."