The U.S. solar industry is a success story by almost every metric. From record installations on a quarter-over-quarter basis, to employment numbers that now top a quarter-million Americans.
Numbers like these have continued despite the headwinds of the pandemic, trade challenges and shifting political winds.
However, the industry is now facing supply chain constraints.
All those who examined these constraints for their companies in recent months have come to the same startling conclusion: No matter where panels are assembled, key components used to make solar modules are sourced from China. Now that upstream components face cost increases and sourcing interruptions, the industry finds itself with nowhere else to turn.
Between 2010 and 2020, U.S.-produced solar panels dropped in market share from 6% globally to 1%. More jobs have been lost in the U.S. solar manufacturing sector than currently exist, despite recent investments that now have U.S. solar manufacturing at approximately 5 GW of capacity with several more gigawatts of capacity planned.
To date, the United States government’s response to help protect U.S. manufacturing has been tariffs, which are generally unpopular with the U.S. solar industry. That’s because inexpensive imports have fueled explosive growth in U.S. jobs in the “downstream” part of the solar industry, such as installing panels on American rooftops and connecting solar power to our grid.
The inconvenient reality is that those downstream jobs are all dependent on a foreign supply chain. Now we know they are at risk.
Many developers have projects in a development queue that use an aggressive, downward price curve on components. However, with global supply chain issues impacting everything from the glass to polysilicon, the costs of solar panels are actually increasing.
Solar dilemma
The Biden administration has signaled its support for solar energy’s continued growth with ambitious deployment goals.
However, opponents of this plan are now alleging that U.S. government support uses U.S. taxpayer money to fund companies that have repeatedly violated trade agreements. And the U.S. government is considering imposing further trade actions tied to allegations of forced labor in the upstream solar supply-chain.
With the winds of Washington still blowing toward hawkish trade policies, U.S. solar policy will likely include continuation of import tariffs or other trade actions.
This raises an important question: Do new import tariffs make sense as a mainstay of pro-solar policies for America?
That has left the domestic supply chain at the mercy of imported goods. Over the last few years, China has cornered the global market of ingots and wafers with a market share of 95% and 99%, respectively.
In short, even with increased domestic production of solar modules, every U.S. solar job is still subjected to the risks of a non-U.S. based supply-chain.
Different way, better way
Senator Jon Ossoff (D-GA) introduced the Solar Energy Manufacturing for America Act on June 21. This bill proposes a long-term manufacturing tax credit based on the content that comes from a U.S.-anchored supply chain. Each step of the supply chain is incentivized, from polysilicon to ingot, wafer, cells, and finished panels. The tax credit places market and technology risk on the private sector, and it provides price buoyancy for what is produced. That way, domestic manufacturers can invest and compete on a global level.
More importantly, a manufacturing tax credit doesn’t create further market barriers for the importation of products needed to hit America’s ambitious solar deployment goals. It incentivizes scale, innovation and consumption of a domestic supply chain.
Rebuilding our domestic solar supply chain won’t happen overnight, and we need long-term solutions. The Solar Energy Manufacturing for America Act is an excellent start.
Industry veteran Brian Lynch leads U.S. solar business development for LG Business Solutions, the B2B division of LG Electronics USA.
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As someone who has worked for now bankrupt US solar manufacturers, I strongly agree with Brian’s “carrot rather than stick” approach to supporting US solar panel manufacturers. This idea makes local companies more competitive without killing solar projects by making them more expensive with tariffs.
But why limit the tax assistance to solar panel manufacturers when the inverter and racking sectors of the solar industry are similarly situated and could benefit as much if not more? There are precious few inverters being built in the US now, and we need each sector of the industry to thrive here if we are going to meet the demands of the climate crisis.
Yes I agree, we should be producing most of the equipment here. And a whole lot of other electronics and textiles, etc too. But it’s like all the rest of what Americans buy from Asia – we’re spoiled to death with very low prices due to their very low labor costs. Where are the Americans who are going to work for those tiny wages? And even if they would, how could they afford housing and everything else here? We’re highly privileged due to possessing the world’s reserve currency which has allowed us to live far beyond our means for many decades by borrowing and borrowing from our future. We can’t even pay the interest on our debt – we borrow that too. I wonder how much farther we can kick the can down the road as our debt spirals out of control, exponentially skyrocketing to the moon. It is plainly unsustainable. Something has to give. I wonder what that’s going to look like.
Solindra, in Fremont, California, next to the Tesla plant, and 4 other companies were put out of business by China dumping solar panels below cost in 2010 and Americans buying them because the Chines made panels were cheaper, not better. Without price protection, the high labor costs, business expenses and taxes imposed on companies in the USA, it is hard to compete with the Chinese Government backed solar industry of China. Only Tesla’s Solar Glass Roof solar tiles are made in USA because of big money and tax breaks given by New York State to put the plant there but all the other parts, in a Tesla Solar Roof, including the plain glass tiles are made in China because that is how to keep the costs down for Americans to buy them. In china, they can “Tool UP” in just weeks but in the USA it takes 2 years to pass through all the hoops that governments make you jump through to build a plant, install equipment and hire people and then, you have to market your product in heavy competition from cheap Chinese Products.
Capital comes for profit, and they don’t care about who will benefit halfway. As long as a socialist country can create a good market environment, it will not hesitate to abandon its ideology.
It’s true, we do have a lot of hoops a business has to jump through to build a factory, etc. but how are we going to keep a relatively clean and safe environment to live and work in if we let things go back to the way they were when corporations could ignore safety and pack people into sweat shops and could simply dump their poisonous wastes anywhere they wanted? But even given the gov’t regs, a lot of businesses are planning on bringing their manufacturing plants back here.
WARP SPEED is what we did for the Vaccine and we can work faster at getting things permitted and pre-approved with known technology that has already been approved rather than starting all over from scratch. Getting industrial zones pre-approved for hundreds of future tenants rather than one site at a time. pre-planning rather than upgrading after the fact. Not letting a field mouse habitat stop progress but move the mouse.
Using engineers, programmers, technicians, and robots, we can out build, lower costs per unit and make great paying skilled union jobs. Pre-plan industrial sites to accommodate everything you need and then invite in tenants to fast track project labor agreements, low taxes and great infrastructure to feed the industry. Don’t let real estate moguls become mayors and council members because they drive up real estate prices and line their real estate industry pockets and lower the profitability of every business that comes after. We just had one for a US President and that put us 4 years behind China.