It is nearly impossible to have a conversation about developing a solar project without someone using the phrase: “American Made.” Following the passage of the historic Inflation Reduction Act (IRA), there is more focus on domestic solar manufacturing than ever before, and companies across the supply chain are pivoting production to American shores in order to capitalize on domestic incentives. Seeing the phrase thrown around so loosely, it’s easy to wonder: what exactly does American made solar mean? And where is the industry headed?
As it stands, very few projects meet the Inflation Reduction Act’s (IRA) domestic content requirements as they are currently written. Given the significant percentage that panels contribute to total project cost, it is critical that solar panels, and their various components, be manufactured domestically to achieve the incentives contained within the IRA. As such, many new U.S. solar manufacturing facilities, representing billions of dollars of economic activity, have been announced this year.
While further guidance is required, one thing is crystal clear: the domestic content incentives included in the IRA have already sparked the American solar supply chain, with even more substantial growth expected over the next five years.The U.S. has a successful track record with regard to its technical manufacturing prowess, and there is immense opportunity for almost all elements of solar manufacturing to happen domestically. While the shift from foreign to domestic content will not happen overnight, there is good reason to believe that it will benefit the industry over the long run.
The benefits of American-made solar
Domestic solar production has obvious benefits, like decreased reliance on volatile foreign partners and good-paying American jobs. The transition will also offer advantages to the industry itself. An important and often overlooked advantage is an increase in product transparency and the quality that developers and their customers can expect from solar modules manufactured domestically.
Companies currently buying solar components produced overseas largely have to trust what suppliers tell them. Procurement professionals do their best to source ethically-produced, high-quality materials, but promises from suppliers are often unverified. In addition, solar components produced overseas endure long, carbon intensive and often bumpy journeys to make it to the states, where tariffs create additional costs for U.S. buyers and ultimately their customers. Manufacturing solar in the U.S. would increase access and transparency during the procurement process and dramatically reduce shipping risks and time tables.
Additionally, stricter regulations in the U.S. significantly reduce the potential for human rights and environmental violations. The clean energy transition is absolutely vital to our shared future, but it needs to be done as safely and ethically as possible. Sourcing materials from the U.S., where labor and environmental regulations are more easily monitored, will ensure more consistent quality and greater peace of mind about our industry’s impact.
From diminished reliance on foreign powers, to greater certainty about product quality and supply chain ethics, the American solar manufacturing boom will benefit developers and the industry on the whole. While production isn’t yet to the scale required for our current pace of clean energy development, the next few years will see the U.S. solar manufacturing industry come into its own.
Supporting American-made solar
The IRA’s domestic content adders represent a massive step forward in creating a vertically integrated American solar supply chain, but they aren’t the whole story. In order for the industry to thrive, developers need to encourage domestic production and innovation.
While American solar manufacturing is maturing, it will carry a cost premium above the IRA domestic content investment tax credit adders. Analyzed over the course of product lifetime and the risks carried, however, American-made solar products will be the best choice. Companies and procurement professionals will need to balance cost with the long term benefit of bolstering American manufacturing and having technical support closer to home.
American solar manufacturing will need the industry’s support to reach its full potential. Established developers in the distributed generation space, such as Encore Renewable Energy, have a unique opportunity to support the early days of American made solar. While manufacturing facilities get off the ground, their production output will be lower, creating the perception that their products are insufficient for large-scale orders.
There is still a need for further clarification on the qualifications for domestic solar manufacturing. As we look to deploy the 1,000 GW of solar required to meet the Biden Administration’s goal of solar comprising 40% of the U.S. energy mix by 2035,one thing is clear: realizing the full potential of American-made solar and growing the domestic supply chain is critically important to advancing the U.S. clean energy transition.
About the author: Colin Diamond is director of project estimation and procurement for Encore Renewable Energy.
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