Please Note: This file was posted for search engines to find the article.
To see the article as it appeared in print, please go to Solar Manufacturing Costs in the U.S.A.
It is a sad fact, but the United States has fallen far behind China in the manufacture of goods for renewable energy and related fields. At one point, China was reported to be making up to 95% of all solar panels, and this meant the growth of solar installations in this country was all done to some benefit of Chinese businesses.
President Trump famously started a trade war with China, ostensibly because of unfair competition in the solar energy field (among other things). Unfortunately, this very much hurt American solar installers and customers because it made solar systems more expensive, but it did nothing to benefit solar photovoltaics (PV) makers in this country.
Solar businesses in the U.S. were not the only ones held back by an American disdain for renewable energy and for a move away from fossil fuels. However, the problem with solar power is particularly important because solar power is a key resource for dealing with greenhouse gasses.
The Inflation Reduction Act (IRA) was passed and signed into law to create a robust manufacturing base for renewables in the U.S. Its provisions made incentives dependent on the sources of components. To get the full incentive for something, the parts have to be made, as much as possible, in this country. So the incentives for a rooftop solar system depend on the panels, mounts, inverters, charge controllers, and other equipment being made in the U.S.A.
The effect of this law, which was signed on August 16, 2022, has been profound. Since it was passed, we have seen what seems to be an astonishing amount of investment in this country by foreign businesses. The investments are happening so those businesses can make their goods in the U.S.A. to avoid paying import duties and to preserve the incentives for customers. The investments are often very large, billions of dollars, and they lead to a huge number of jobs, both for building and for operating the plants.
One example of this is a factory built by Qcells in Dalton, Georgia. Qcells was started as a German company, and its engineering is still done in Germany, but the company is now owned by Hanwha, and it is based in Korea. It built its first plant in Dalton in 2019. To take advantage of the IRA, it expanded that plant, and it can now turn out 30,000 solar panels every day. Though the plant is highly automated, it employs 800 workers.
Qcells is extending its investment further, with another $2.3 billion to build a larger factory in Cartersville, Georgia. This factory will start up in January, building solar panels and other materials, many of which are the components used to make solar panels. These materials start with the silicon itself, including ingots, wafers, and the actual cells that get assembled into panels. Together, the two plants will produce 45,000 solar panels per day.
We should note that Qcells’ plants in Georgia, are just two among many that have been built to produce renewable generation products under the Inflation Reduction Act. Many different renewable energy plants are being built throughout the country. They are making not just solar PV products, but other things ranging from wind turbines and electric vehicles and batteries. These have come into being because of the Inflation Reduction Act, the effects of which are already being felt across the country. The Wikipedia article, “Inflation Reduction Act,” says this about its effects so far:
“Research from climate policy analyst Jack Conness has revealed that $101 billion worth of 134 climate-friendly tech manufacturing investments within the United States, have been announced by companies since the passage of the Inflation Reduction Act, creating 81,400 projected jobs as of November 30, 2023.” (bit.ly/WikipediaIRA)
That should feel quite good, of course, and we would think everyone would feel uplifted by the success. But that is not quite what has happened. Many people who are involved in the solar industries are pointing out worrying trends.
The solar market in the U.S. is not simple, and the issues that are raised in it can be complicated. Part of the problem is that the market can be overcome by an imbalance between supply and demand, an issue that might take years to be addressed by the market itself. Part of the problem is a difference of opinion. Some companies want the government to take a protectionist position, and other companies want the opposite.
Such problems are not confined to the U.S. market. They affect the entire world. Part of the cause is that China has been producing far more solar panels than the market needs. According to an article in the New York Times, market researcher Wood Mackenzie reported that China has invested $130 billion to “maintain its control over solar panel components,” and this “has created enough capacity to meet annual global demand until 2032, with a cost of production that is 65% cheaper than it is in the United States.” (bit.ly/TimesSolarManufacture)
Clearly, a shakeout in this market is likely. With experience and efficiencies of scale, American production of solar panels will doubtless lead to less expensive solar panels in this country, and that could lead us to long-term success. We will see how that develops.