There are many risks to America’s clean energy goals if the photovoltaic industry continues to rely on imported solar and battery components. To achieve the goals of the energy transition, the U.S. must build a durable and dependable clean energy supply chain, balancing onshoring, nearshoring, and friendshoring.
Onshoring
The process of onshoring (or reshoring) involves building new manufacturing facilities in the U.S. or bringing back manufacturing capabilities that had previously been operating in another country. While the Inflation Reduction Act (IRA) kick-started big investments in manufacturing, many of those are factories that only produce finished modules and assemble battery packs. This is an important first step but must include follow-on investment for upstream and midstream manufacturing, which make the components that go into the modules and batteries.
Nearshoring
Geographic proximity and the U.S.-Mexico-Canada free-trade zone have tightly integrated the economies and supply chains of the three nations, especially in the automotive sector. The U.S., Canada, and Mexico made a collective pledge to relocate the production of 25 percent of the current Asian imports to North America. The Brookings Institution called the push to relocate clean energy manufacturing to Mexico “a golden opportunity to revitalize its industrial platform, modernize its infrastructure, grow its skilled labor force, create well-paid jobs, and significantly decarbonize and boost its economy.”
Friendshoring
The U.S. Department of Energy’s supply chain strategy acknowledges the importance of working with “reliable” foreign partners. Friends can be defined as the nations with which the U.S. has comprehensive free-trade agreements, including Australia, Canada, Chile, El Salvador, Colombia, and South Korea. The Center for Strategic and International Studies advocated for friendshoring the lithium-ion battery supply chain to move away from China’s dominance; it also identified natural partners like Japan (home of battery makers Mitsubishi, Panasonic, and Toshiba) and South Korea (which currently holds 37 percent of the global market share in lithium-ion batteries). Additionally, the Carnegie Endowment for International Peace emphasizes the value of using development finance tools to help developing nations build up their own clean energy manufacturing capacity.
The policymakers who crafted the IRA understood the national security, economic, and environmental imperatives of building a robust clean energy supply chain. By balancing onshoring and nearshoring – and forging alliances – the U.S. will be one step closer to affordably and reliably meeting its clean energy goals.
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