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.
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?
The Section 201 “safeguard” tariffs have not accomplished investment in the domestic production of ingots, wafers, and cells.
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.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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