This article was written for the official event publication in circulation at the RE+ conference in Las Vegas, Nevada.
In August 2022, the United States made its boldest commitment to the energy transition yet, passing the Inflation Reduction Act (IRA). The Act included a record $369 billion investment in climate and energy measures, much of which is directed to the manufacturing, development, deployment and operation of clean energy assets.
The IRA was met with general praise by the clean energy industry and environmentalists alike. Initial analysis by researchers at Princeton University and Dartmouth College said the act would lead to a tenfold increase in One year after the passage of the Inflation Reduction Act, federal policies help turn the page toward an economy powered by emissions-free technology and domestic manufacturing. By Ryan Kennedy, editor pv magazine USA annual solar deployment from about 10 GW in 2020 to 100 GW in 2030.
Annual U.S. energy expenditures are expected to fall by at least 4% through 2030 under the act, a savings of nearly $50 billion dollars per year for households, businesses and industry. The IRA also mandates a nationwide reduction of carbon emissions by roughly 40% in 2030, moving the nation further away from the worst effects of climate change.
“The solar industry stands ready to invest in our domestic manufacturing capacity, grow the solar workforce, and rapidly scale our clean energy deployment efforts. I look forward to continued collaboration with our leaders to ensure a brighter, more sustainable future,” said George Hershman, CEO of SOLV Energy, in reaction to the passage.
Now, about a year removed from the landmark law passage, private investment in clean energy manufacturing has exploded. Throughout the year the industry has received guidance on the finer details of how various incentives will be administered. As the details come in, the industry moves from evaluation to implementation, bringing renewable energy from a supportive role to center-stage over the course of the next decade.
One of the core goals of the IRA is to lessen U.S. reliance on foreign sources , creating a higher level of energy independence to support national security, economic growth and good-paying jobs. It appears that the goals are being met, as investors have opened their wallets in droves over the last twelve months.
A White House tracker shows that under the Biden-Harris Administration, over $137 billion in private investment in electric vehicles and battery manufacturing has been announced, and $84 billion in private funds has been directed to clean energy manufacturing. Virtually all of these announcements have taken place post-IRA passage.
A survey by the American Council on Renewable Energy (ACORE) found that 100% of its respondents perceive the U.S. market to be increasing in attractiveness relative to other major countries in renewable energy investment. The response, made by executives from 43 leading companies with $100 million in annual revenues or investments, is the first time in the ACORE survey’s history that the United States has unanimously been perceived to be increasing in relative attractiveness to other nations.
Furthermore, more than one-third of surveyed investors, about 38%, reported plans to invest in clean energy manufacturing in the U.S. Traditional investors are not the only ones supporting the domestic content push. About 28% of developers reported plans to open a new manufacturing plant, and 33% said they plan to incentivize their suppliers to open domestic facilities. Furthermore, 11% of developers said they intend to directly invest in domestic manufacturing plants.
The relative strength seen in the U.S. market comes at a serendipitous time, as renewable energy investment globally now nearly doubles that of the fossil fuels. For every dollar invested in fossil fuels, $1.70 is invested in clean energy technologies. This marks a fast divergence from five years ago, when fossil fuels and clean energy investments were essentially even.
Guidance is in
In May 2023, the Internal Revenue Service released guidance on the requirements for the coveted domestic content incentive adder. Solar power projects that use domestic content are eligible for the full 30% tax credit and can increase their tax credit by an additional 10%, to 40% in total, or be credited 0.3 ¢/kWh for projects that use the Production Tax Credit.
The guidance allows developers to take advantage of the domestic content bonus credit for projects that begin construction this year. For projects to qualify for the adder, 40% of the cost of manufactured products used must take place domestically. This threshold will increase to 55% in 2026. Solar trackers, solar panels and inverters are classified under the “manufactured products” designation. Additionally, 100% of steel and iron in the project must be made in the U.S.
“We are encouraged by Treasury’s solutions to meet the manufactured product test, which are consistent with recommendations from ACORE and others, and we look forward to projects moving forward under this guidance immediately,” said Gregory Wetstone, president and CEO of the American Council on Renewable Energy (ACORE).
U.S. can compete
All this investment may lead one to wonder if the United States can achieve its energy independence goals; goals that the nation has largely shared on a bipartisan level for many years. Recent analysis from Princeton University and Dartmouth College suggests that at least from a cost perspective, the U.S. can now compete globally.
The research concluded that with the 45X Advanced Manufacturing Production Tax Credit, components manufactured in the U.S. are now likely to be less expensive than imports across the entire solar supply chain. This lower cost extends from polysilicon ingots, wafers, cells, to module assembly, as well as to inverters.
Before the IRA, domestic production was more expensive than imports for each component. The researchers estimate the cost of solar modules assembled in the U.S. and made from 100% domestically-manufactured components will now be more than 30% less expensive to produce than imported modules. And this 30% cost reduction is before considering any applicable import tariffs, further suggesting that domestic components will be more attractive to purchasers.
“Using U.S.-manufactured parts and materials for clean energy development and paying workers a fair wage has always been the right thing to do. Now it’s also the most economical thing to do,” said Jason Walsh, executive director of the BlueGreen Alliance, a nonprofit that allies labor unions and environmental groups.
The report notes that the degree to which lower domestic production costs pass through to final prices for solar components or installed projects is uncertain. However, when considering the 10% tax credit adder for renewable energy projects employing domestic content, the IRA has the potential to induce significant demand for U.S.-made components.
The Princeton/Dartmouth report said this demand will outstrip current U.S. solar component manufacturing capacity, prompting investment to expand U.S. supply chains. However, it is uncertain that the supply chains will expand without bottlenecks along the way.
The Solar Energy Industries Association (SEIA) estimates the IRA will lead to 47 GW of new module manufacturing capacity, over 16 GW of cells, more than 16 GW of ingots and wafers, nearly 9 GWac of inverters and well over 100 GWh of battery manufacturing. SEIA also estimates that we can anticipate more than 20,000 tons of annual domestic polysilicon capacity coming back online and a multitude of new investments in tracker and racking capacity.
Gaps in the chain
Clean Energy Associates (CEA) shared that while module assembly has a strong presence today in the U.S., ingot, wafer, and cell production plans have not kept pace, and no plans for greenfield polysilicon plants have materialized.
“Despite a host of announcements promising new manufacturing investments, it remains a long way from press releases to manufacturing plants and progress to date is highly uneven along the value chain,” said a report from CEA.
The firm projects that by 2027, there will be a 94% supply gap between ingot and wafer supply as compared to module assembly capacity. It forecasts roughly 17 GW of polysilicon production, 3 GW ingots, 3 GW wafers, 18 GW cell manufacturing, and 40 GW module manufacturing capacities by 2027, suggesting that the U.S. will continue to rely on energy imports and exports for years to come.
Other analysts have agreed that the IRA and the domestic content adder may fail to address critical gaps in the supply chain, preventing the long-term goal of energy independence and security.
“Our competitors already have billions of dollars of infrastructure in place to manufacture each step of the supply chain, which they have subsidized for decades,” said Mike Carr, executive director of the Solar Energy Manufacturing for America Coalition.
He pointed out that the 45X credit can get a factory built and operating for the duration of the IRA, but that there’s no longterm advantage to setting up manufacturing here for any of the part of the supply chain not recognized in the domestic content standard.
“You can simply import pieces and get the same ‘bonus’,” he said. Carr noted that this is even more true for the wafer and polysilicon facilities because they are the most expensive to build.
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