Solar - Made In The USA: Takeaways From The Concluding Session

The concluding session of the RE+ 2024 physical conference, titled Solar – Made in the USA, focused on the current regulatory challenges, supply chain issues, and the establishment of manufacturing facilities in the US. The session was followed by a panel discussion. Participants included Markus A.W. Hoehner, President & CEO of EUPD Research; Thomas Koerner, Senior Vice President at Canadian Solar; John Smirnow, Principal at Smirnow Law; and Elissa Pierce, Solar Module Supply Chain Analyst at Wood Mackenzie.

Markus A.W. Hoehner from EUPD Research opened the session with a brief overview of the demand side of the US PV market, sharing an analysis of the PV installation landscape through the first half of 2024. After surpassing other energy sources by contributing up to 52% of total new utility-scale capacity additions in the US in 2023, California became the largest PV market with 46.5 GW DC of installed capacity, followed by Texas, Florida, North Carolina, and Arizona by mid-2024. Hoehner noted that, of the total 204 GW DC installed PV capacity as of mid-2024, utility-scale systems account for the largest share at 66%, followed by residential systems at 19%, and community solar at 5%. He also pointed out that California leads in PV installations across the utility, residential, and commercial & industrial (C&I) segments, while Florida leads in community solar installations in the US.

On the supply side, Hoehner highlighted the impact of the Inflation Reduction Act (IRA), enacted in 2022, on the solar and storage sector. Key impacts include increased investment, tax credits and incentives, job creation, a boost in domestic manufacturing, and support for energy storage. He detailed the IRA’s extended and expanded investment tax credit (ITC) of up to 30% through 2032 for both solar and storage systems, along with additional incentives for projects in low-income areas that meet domestic content requirements. The IRA allocates up to $369 billion for clean energy initiatives, including significant investments in domestic PV module and storage manufacturing, supported by a product tax credit (PTC). These measures are expected to strengthen the supply chain, create jobs, and enhance grid resiliency, all while reducing reliance on imports. Furthermore, the IRA’s impact on US households with solar-plus-storage systems can be summarized as reducing upfront costs through the 30% ITC and additional state-level rebates and incentives. According to Hoehner, the IRA, described as the largest climate investment in history, has already created 330,000 jobs and generated $265 billion in investment in the US clean energy sector, including solar and battery manufacturing.

The next speaker, Thomas Koerner from Canadian Solar, shared his company’s experience in commercializing PV module factories in the US, from inception to mass production. Driven by the IRA, Canadian Solar sought suitable sites and cell technology to achieve a return on investment (ROI) within 2 to 3 years. This process included forming local partnerships, educating local officials about the project, and training the local workforce to generate jobs. A critical challenge in establishing a local PV module factory is securing long-term off-take agreements to ensure business visibility. For example, Canadian Solar signed a long-term off-take agreement with EDF through 2028. After overcoming numerous challenges, Canadian Solar commenced production in December 2023, with a throughput of 20,000 modules per day. According to Koerner, one must be competitive internationally as well as domestically to operate a profitable module manufacturing factory. The subsidies provided by the IRA help bridge the cost gap between Southeast Asian manufacturers and their US counterparts.

Regarding the upcoming 5 GW TOPCon cell factory in Indiana, Koerner emphasized several key parameters for making cell production profitable in the US. These include proper site selection with access to cheap, reliable electricity, a reduction in import duties on cell production equipment, and strong local networking.

The following speaker, John Smirnow, Principal at Smirnow Law, discussed the key issues, successes, and challenges associated with the IRA policy. He praised the IRA’s focus on manufacturing facilities in local communities and emphasized the importance of federal and state investments, such as the 45X advanced manufacturing tax credit. Mr. Smirnow described the IRA as a 3-pronged tool, consisting of a 30% tax credit, ITC, and incentives for domestic content. He also fact-checked about major drawbacks to enhancing domestic content in US-made PV modules due to the lack of polysilicon, ingot, and wafer manufacturing capability in the US. He cautioned against the dumping of Chinese PV modules, sold at $0.10/W below the production cost of $0.16/W, and stressed the need for policy adjustments. Mr. Smirnow predicted that, regardless of the outcome of future elections, the US government would continue taking steps to decouple from China. These steps include insulating US producers from the adverse effects of overcapacity, maintaining the Uyghur Forced Labor Protection Act (UFLPA), and supporting initiatives like 45X and the Foreign Entity of Concern (FEOC) Act, which protects American solar manufacturing interests by curbing Chinese companies' ability to take advantage of US ITC.

Following the presentation by Smirnow Law, Elissa Pierce, Solar Module Supply Chain Analyst at Wood Mackenzie, provided a brief overview of the supply chain challenges facing the US solar manufacturing industry. She began by highlighting the significant growth in PV module manufacturing capacity in the US, driven primarily by the IRA, which has expanded from 8 GW in 2022 to 32 GW in 2024. With more module fabrication units expected to be announced by 2027, however, a growing discrepancy between upstream and downstream manufacturing capacity remains a concern. Pierce noted that the absence of polysilicon, ingot, and wafer manufacturing facilities in the US is largely due to the overcapacity of upstream manufacturing in China. She cited the diversification of Chinese polysilicon production bases, moving from Xinjiang province to other regions such as Mongolia and parts of Asia, following the enactment of the UFLPA by the US. Despite this, she pointed out that there is still very limited polysilicon production capacity available outside of China.

Pierce explained that the current low prices of Chinese polysilicon, combined with the significant price gap between Chinese and non-Chinese polysilicon – driven by high demand and limited availability – reduce the likelihood of new, energy-intensive manufacturing units, such as polysilicon production, being established in the US. Pierce also advocated for the inclusion of wafer manufacturing facilities under the Domestic Content Act. She predicted that in comparison to the addition of cell and module manufacturing capacity, wafer manufacturing growth in the US would be much slower. After the implementation of additional antidumping (AD) and countervailing duties (CVD) tariffs on PV cells from Southeast Asian countries, including Cambodia, Malaysia, Thailand, and Vietnam, she forecasted that PV cell manufacturing in the US would become more competitive, leading to the development of more US cell factories. However, Pierce cautioned that up to 21% and 27% of operating and announced US cell and module manufacturing capacities, respectively, could be affected by proposals to restrict Chinese companies from receiving 45X manufacturing tax credits.

Panel Discussion
The panel discussion, featuring representatives from ROTH Capital, Smirnow Law, Wood Mackenzie, and Canadian Solar, explored both the opportunities and challenges facing US-made solar products.

Philip Shen, Managing Director at ROTH Capital, expressed concerns about potential changes to the ongoing IRA policies that could impact the US solar industry if there is a change in government following the election. He believes that the ITC is likely to be eliminated if the government shifts.

John Smirnow, Principal at Smirnow Law, took a more cautious tone, offering a tempered outlook for the US solar industry in the event of a government change. While he expects slower progress, he believes that the IRA will not be fully repealed.

Elissa Pierce from Wood Mackenzie provided insights into the demand side of the US photovoltaic (PV) sector. She highlighted the continued strength of the utility-scale segment, which still has a robust pipeline, despite challenges such as interconnection issues, equipment backlogs (including transformers and switchgear), and labor shortages. Pierce noted that PV demand forecasts will largely depend on the election results and subsequent trade policies. In the commercial and industrial (C&I) segment, she anticipated a slight contraction due to California's net billing transition.

Markus A.W. Hoehner, President & CEO of EUPD Research, observed that the residential segment is performing well, but the finance sector is taking a "wait-and-see" approach ahead of the upcoming election. He also advocated for further efforts to stimulate growth in the C&I segment.

A representative from Canadian Solar maintained an optimistic stance, emphasizing a willingness to adapt regardless of the election outcome. He underscored the importance of creating local jobs as a key factor in the industry’s growth.