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Flush with a fresh injection of generous federal incentives, the U.S. solar industry is betting billions on scaling up homegrown manufacturing and reversing its reliance on foreign suppliers.
Solar is the fastest-growing form of electricity generation in the U.S., but that pace of growth has only been possible with the help of tens of millions of imported solar panels. Most of these panels are manufactured (at least partially) in China, a country the U.S. is increasingly at odds with and which Democratic and Republican lawmakers alike want to reduce dependence on — especially when it comes to the rapidly unfolding energy transition.
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A robust and vertically integrated domestic solar industry would allow the U.S. to have reliable suppliers “that we can count on, where your supply isn’t going to be disrupted every two to three years in a major way,” said Justin Baca, VP of markets and research at the Solar Energy Industries Association. Today’s solar industry is intermittently immobilized by tariff-driven trade squabbles, Baca said, like last year’s back-and-forth over potential punitive tariffs affecting the Southeast Asian nations from which the U.S. sources most of its solar panels.
In a dramatic policy turn last year, the Biden administration put a two-year pause on imposing any new import tariffs on solar products, which would have stopped U.S. solar deployment in its tracks. Months later, the administration also provided the carrot of the Inflation Reduction Act’s billions in incentives for domestically manufactured solar hardware.
But there’s still a bipartisan appetite in Congress to impose tariffs on solar panels from Southeast Asia as soon as next year — a move that only makes sense for the energy transition if the U.S. is able to meet all of its own solar manufacturing needs by then.
So can homegrown solar production, turbocharged by the Inflation Reduction Act, supplant that imported hardware anytime soon?
The solar supply gap
Here’s the problem: Right now, the U.S. cannot manufacture anything close to enough solar to meet its own installation needs.
In 2022, the U.S. produced a paltry 5 gigawatts of solar panels or modules, according to the National Renewable Energy Laboratory, while importing 29 gigawatts of modules from China, Malaysia, Vietnam, Cambodia and Thailand.
And with the pace of solar installations projected to surge, the challenge of scaling manufacturing to match that demand isn’t going to get any easier.
While 17 gigawatts of total solar capacity was installed in the U.S. last year, according to the Department of Energy, a whopping 358 gigawatts of new solar capacity is expected to be deployed between 2023 and 2030, driven by the incentives in the Inflation Reduction Act, according to the latest New Energy Outlook from BloombergNEF. Annual installations could balloon to more than 100 gigawatts per year by 2030, according to some projections.
Some help is on the way, thanks to the Inflation Reduction Act. Since the landmark law was enacted last August, 27 new solar manufacturing facilities have been announced in the U.S. But in the best-case scenario, these announcements still won’t close the gap between projected supply and demand for solar panels in the coming years — and the best-case scenario is rarely the one that unfolds.
Challenging Chinese solar dominance
Although America’s IRA-inspired solar manufacturing plans are ambitious, they’re absolutely put to shame by the scale of China’s solar manufacturing.
The U.S. was the first to commercialize solar panels, but over the last two decades, its solar-production expertise migrated to Japan, then Germany and ultimately to China, despite protectionist tariffs imposed during the Obama, Trump and Biden administrations. (This is a good case for the ineffectiveness of trade tariffs.)
Now, China is the dominant global solar supplier by far, and home to 70 to 98 percent of the world’s production capacity for the silicon-based materials and components in PV panels, according to S&P Global. Meanwhile, the U.S. currently has just over 2 percent of the world’s photovoltaic module production capacity — 11 gigawatts out of a global total of more than 500 gigawatts in 2023, according to energy consultancy Wood Mackenzie.
And while the heftiest solar-manufacturing additions in the U.S. are coming in 3-gigawatt chunks, new facilities in China are orders of magnitude larger, with numerous 20- and 30-gigawatt factories in the works from vendors such as Longi, Jinko and Trina.
The country’s dominance poses a significant problem for the U.S. energy transition as politicians on both sides of the aisle step up anti-China rhetoric, both in general and specifically about the solar supply chain.
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