Inflation Reduction Act Brings Solar Investments to the US. WSJ Unimpressed.

The Inflation Reduction Act (IRA), which provides a historic boost to domestic renewable energy production, has brought in numerous new solar company investments to the U.S. The latest, reported in July by PV Magazine, is Heliene, a Canadian solar panel manufacturer. Heliene said it will expand in the U.S. to go from around 800 megawatts of solar panel capacity to 1 gigawatts of solar panels and 1.5 gigawatts of solar cells in a new facility in Minnesota.

Heliene plans to invest about $145 million in the new facility, driven by the additional production tax credit and domestic content adder available through the Inflation Reduction Act.

Enphase, manufacturers of solar microinverters, an important part of the solar industry supply chain, is expanding because of IRA incentives.

Enphase is expanding production for microinverters with at least two U.S.-based contractors in Columbia, South Carolina, and Mount Pleasant, Wisconsin.  Their U.S. manufacturing footprint now totals $60 million in capital investment and is expected to lead to 1,800 direct jobs, making some 18 million microinverters per year.

Heliene is part of a handful of big solar investments announced since the IRA law was signed in August 2022.

Q Cells announced a massive $2.5 billion investment in solar in January. The money will go to domesticate large parts of the solar supply chain, opposed to only solar panels.

Q Cells’s new facility in Bartow County, Georgia will have the capacity to manufacture 3.3 GW of solar ingots, wafers, cells, and finished solar panels. As it is, the majority of solar cells come from Asia, with Chinese companies dominating that market. Solar ingots, the early starting material for making solar cells, is almost entirely made in mainland China.

Q Cells’ new Georgia site will be the sister site to their Dalton, Georgia facility where they assemble around 2GW of solar panels. Q Cells plans to boost Dalton production by another 5.1 GW, with its total production in the state to reach 8.4 GW at some point next year, PV Magazine, a solar industry publication, reported back in January.

Ohio-based First Solar was quick out of the gate to announce its IRA-inspired investment into domestic solar energy. In November 2022, First Solar said it would invest $1.1 billion in a new facility in Alabama.

First Solar was held up as one of the main beneficiaries of the green tech deal by The Wall Street Journal on July 31. The article was critical of the tax breaks and other government support for solar, noting that the company has promised to spend over $2.8 billion on new manufacturing and research facilities in the U.S., including a new factory announced on Thursday. In CPA’s view, the investment by First Solar and other U.S. domestic manufacturers stands in stark contrast to other companies, including Chinese solar producers, that are seeking to exploit tax credits without making any real investment in additional productive capacity. Earlier this year, CPA’s Economics Team released a report that found Chinese companies could end up raking in $125 billion courtesy of the U.S. taxpayer.

First Solar’s technology, cadmium-telluride thin film, is innovative and different from China’s mass-produced silicon-based solar modules. Innovation holds out the hope that new technology will produce a step-change in lower cost for American-made solar. China shows little interest in true innovation, only in cost reduction via scale and subsidy. They have not tried to copy First Solar’s product lines yet.

The Biden administration’s signature climate legislation could ultimately provide $1 trillion in support for clean-energy projects, largely through tax credits tied to benchmarks such as the amount of wind power generated or solar panels produced. So far, it has helped spur around $110 billion in announcements for factories and other facilities to make everything from wind turbines to battery components, according to an analysis by WSJ. The paper has been critical of the government’s singular focus on climate change-related technologies in its criticism of a more nationalistic industrial policy.  President Biden also signed a similar pro-domestic production law last year in the CHIPS & Sciences Act, which helps increase semiconductor production here. That industry, like solar long before it, was moving steadily towards Asia.

Jeff Ferry, chief economist for CPA said the Biden Administration’s policies are necessary to compete with China.

“Ten years ago China seized control of the solar supply chain thanks to huge subsidies and sub-market pricing. Most of the U.S. industry disappeared,” said Ferry. “Without U.S. government action, the U.S. would remain dependent on Chinese raw materials for this vital source of renewable energy. Government action, including the IRA tax credits and the tariffs on Chinese solar, which should be extended to products coming in from Southeast Asia, provides a realistic hope of rebuilding the U.S. industry. And the U.S. industry is more innovative than the Chinese industry, as you see from First Solar’s unique Cd-Te technology. We have startups working on solar innovation from California to Massachusetts and we need a healthy, profitable mass market industry to nourish and support those startups.”

Ferry said that the WSJ’s figures on the cost to the government in providing First Solar’s tax credits do not take into account the additional tax revenue from at least 700 new jobs; new revenue from solar sales; and new business from suppliers serving First Solar.

“You have a glass-making plant up and running in Ohio specifically to supply First Solar. It is the first new float-glass plant in the U.S. in 40 years. One of the benefits of manufacturing business is that it stimulates upstream production of components and parts,” Ferry said.

As the U.S. moves away from fossil fuels under Democratic Party-led governments, the idea that the U.S. would go from mostly fossil fuels independence to so-called “clean technology” dependent would be a massive travesty of energy policymaking. To compete with Chinese multinationals in this space, the U.S. government had to step in rather than let the market decide. The market had already decided that it was best to just let China and Asian supply chains run solar like OPEC runs oil.