Shortly after President Joe Biden took office and began to develop his Build Back Better plan, leading solar companies formed the Solar Energy Manufacturing for America Coalition, or SEMA, lobby for industry-wide domestic content standards. But they didn’t have to lobby for long. The Inflation Reduction Act, which included many of the provisions the coalition hoped to see become law, was something of a dream come true — and it happened far earlier than anyone had thought likely.
With the IRA now in force and awaiting some implementation clarifications from the IRS, SEMA’s work, it seems, is just beginning. There’s no shortage of demand for renewable energy, and leading solar companies have begun to roll out major manufacturing expansion plans in the U.S. However, crafting the domestic solar energy supply chains of the future will require ongoing, concerted effort by industry and policy leaders — potentially up to five years before factories are up and running at scale, according to some industry experts.
But after that, domestic solar manufacturers will have an established platform from which they might pursue other goals, such as developing new solar technologies, according to SEMA Coalition Executive Director Mike Carr.
Kicking U.S. manufacturing into high gear
Creating incentives for domestic manufacturing, whether in the form of the IRA or something else, was a critical first step toward building more stable supply chains with less reliance on China, Carr said. Although solar companies had considered the benefits of investing in manufacturing, he said, nobody had any plans prior to the IRA to move forward with major expansions in the U.S.
“The consensus was nothing was to happen, nobody was going to build anything,” he said. As the IRA began to look more certain last year, some companies began to fill in the details of what their own manufacturing facilities might look like. Some had even worked on a bit of site selection and had conditional plans in place. “They were able to say, if this passes we can build X,” Carr said. “And when it finally passed, that’s when everything kicked into high gear and the scramble started.”
The early announcements triggered by companies that had conditional plans in the works prior to the IRA have already exceeded “even my optimistic take,” Carr said. But he indicated that SEMA, through its membership, has a line of sight on even more manufacturing announcements expected to take place throughout the first quarter of 2023.
“Now that the political back and forth is behind us, people can get down to business,” Carr said.
His assertions align with data from the Department of Energy’s Solar Energy Technologies Office, which so far has recorded 18 solar manufacturing announcements representing more than 85 GW of annual capacity in response to the IRA. If realized, that manufacturing capacity would exceed the 50 GW the office expects U.S. solar installers to deploy annually in the years to come, according to SETO director Becca Jones-Albertus. Much of that manufacturing capacity could come online within the next three to five years, she said.
“Today only about 20% of the solar panels installed in this country are made here,” Jones-Albertus said. “We could see that become the majority...within a few years.”
But some manufacturers and financiers are holding off on manufacturing commitments while they wait for the final implementation guidance from the IRS on questions such as just what percentage of domestic content will be required to qualify for the full tax credit, according to Carr. It’s not as though the IRS is dragging its feet — they have a significant job on their plate — but some companies are reticent to announce their plans before the final IRA ink dries, Carr said.
Missing supply chain components
SEMA, too, has taken a keen interest in the IRA implementation outcomes — Carr described it as their current top priority. The goal, he said, is to find a proper balance between encouraging the creation of a fully domestic supply chain, all the way down to the raw components, and acknowledging the reality that even if we assemble panels here in the U.S., we don’t make any of the parts that go into them — or even the equipment required to assemble any of it.
So far, companies that have announced plans to begin or expand manufacturing in the U.S. have focused on one end of the solar supply chain — panel assembly. Some wafer, cell and inverter manufacturing plans in the U.S. have also been announced, according to Jones-Albertus. But there’s still a need for domestic production of upstream components and raw materials, including polysilicon and glass.
“There are parts of the supply chain that could still use some [policy] support — solar glass is one that jumps out at you,” Carr said. “Most of the glass being used in solar panels in the U.S. is imported from China, but it just didn’t quite make it into the legislation. So the question is being asked, what more can we do?”
Even those raw materials that will receive incentives under the IRA’s advanced manufacturing production tax credit — aluminum for example — face headwinds beyond the competitive barriers that previously discouraged investments in manufacturing, said Lesley Jantarasami, managing director of the energy program at the Bipartisan Policy Center. Relatively common but critical materials like aluminum and titanium are in short supply due to the ongoing conflict in Ukraine, and all the incentives in the world can’t increase production overnight.
And it’s not just manufacturing itself that has trailed off, Jantarasami said. The U.S. lacks the expertise and skilled workers needed to make key materials, especially steel.
“It’s going to be harder to find those folks to do that work here in the U.S.,” she said. Workforce training will be critical, she said, but takes time — automation may be needed to help fill some of the gaps. And then there’s sourcing the minerals themselves.
“Nobody has seriously talked about how do we ramp up mining in this country for a long time,” Jantarasami said.
If the IRS standards on domestic content are too strict, Carr said, these barriers could make qualifying for the tax credits too difficult, which would ultimately limit the number of companies willing to invest in manufacturing. But on the other hand, a higher domestic content requirement might accelerate domestic production of upstream components. Carr anticipates that companies and investors will wait until 2025-2030 to determine if the demand for, say, U.S.-made solar wafers is sufficient to justify a second tranche of manufacturing expansions. Tighter rules from the IRS could move that decision time forward.
“You size a cell plant more or less according to what you expect to consume with module assembly,” he said. “If it looks like you will have to eventually secure a domestic supply of wafers, that would result in a bigger scale of those investments as well. Left to their own devices, investors will approach with a wait-and-see. If government shows full-bore commitment to filling out the supply chain and shows they’re going to turn all the knobs they can, that may be enough to make some of these investors think about moving a little faster on their phase two plans.”
Envisioning the domestic solar manufacturing of the future
For solar developers whose projects have hit supply chain snags, an expansion of U.S. manufacturing could not come soon enough. But parties looking to buy U.S. solar panels will have to wait a couple of years, according to John Smirnow, general counsel and senior vice president of supply chain and sustainability at the Solar Energy Industries Association.
Although some companies were able to get a jump start on the planning process, the reality is many still have to sort through a number of details before they can start manufacturing panels, Smirnow said. Site selection itself can be a two- to three-year process. But companies looking to break into solar manufacturing must also contend with rising energy prices, a shortage of suitable buildings, a labor shortage and, yes, supply chain constraints.
“We still think it will be three to five years before we see a critical mass of factories operating at scale,” Smirnow said. “We don’t make any of the machine tools in the U.S., so all those have to be imported.... There’s currently no cell manufacturing in the U.S., and what has been announced looks like it will be for internal consumption [by the solar companies that own the factories]. You have to think about supply chain issues and are you going to be subject to [penalties] under the Uyghur [Forced Labor Prevention] Act.”
For Carr, this suggests an ongoing role for SEMA in helping to stand up a domestic solar supply chain and continuing to lobby for supportive policies. The coalition’s members, which include companies like QCells and First Solar and represent more than 6,100 manufacturing workers, have found value in having a forum to discuss their challenges and opportunities with one another, and with policy members, he said.
And once the basics of a supply chain are in place, Carr said, SEMA may take on additional roles. The U.S. has already made significant investments in the research and development of new solar and renewable energy technologies — from manufacturing innovations that could cut production costs to new formats for energy generation. Who, Carr asks, will bridge the divide between an existing R&D complex that has never had an outlet, and the budding manufacturing industry?
With the coalition still buoyed by their unexpectedly early success with the IRA, Carr said, the members’ expectations for future collaborations are riding high.
“This is really the first time that manufacturing in these industries, which have been hollowed out for a while, has had the opportunity to speak with one voice and paint a picture of the opportunity here,” Carr said. “Not only did they come together, but Congress really listened and actually came through on a policy that a lot of people not that long ago thought would be impossible. That’s something to watch. If you can have people propose a policy and you get the outcome that you want, it can spark a lot of momentum.”