The solar energy industry is booming. According to new data out this week, the U.S. solar industry installed five gigawatts of new capacity in the first quarter of 2021, a new first-quarter record and a 46% increase over the first quarter of 2020. Public utilities are the majority of these installations, with a first-quarter record of 3.6 GW. Residential solar sales rose 11%.
Beyond the skyrocketing demand, there’s more good news. Analyst firm Wood Mackenzie is forecasting a total of 24 new gigawatts coming online this year, surpassing all previous estimates and making this the best year ever for installations of solar power in the U.S.
“The federal government should capitalize on the huge demand for solar power by taking action to help the U.S. solar manufacturing industry rebuild capacity,” said CPA chief economist Jeff Ferry. “A program of tax credits for investing in solar manufacturing capacity throughout the supply chain is the best policy option to stimulate investment and ensure the U.S. regains the lead in this industry and won’t be dependent upon China for any parts of the solar supply chain.”
This is particularly important as nearly half of the raw material used to make solar panels, polysilicon, comes from the Xinjiang province of China, where Biden administration officials and other national leaders have said the Chinese government is using genocide and forced labor against the Uyghur population.
The recent G7 agreement to collectively remove forced labor could put that supply in the crosshairs. Federal support to help the U.S. industry rebuild its production capability would enable the U.S. to protect human rights standards and support the administration’s ambitious objectives for shifting the country towards renewable energy and away from fossil fuels.
See: Reclaiming the Solar Supply Chain from China, by CPA chief economist Jeff Ferry
In 2018, when the Trump administration imposed Section 201 safeguards tariffs on imported solar panels. we heard from importers that rising prices would hurt demand. As CPA documented in a White Paper published earlier this year, not only have prices fallen, but demand has boomed.
Tariffs didn’t kill imports. But tariffs did help U.S. based solar panel manufacturers. If not, we would see total domination of the American solar industry by Chinese multinationals spread out throughout Asia. Take a look at Europe. They have no solar industry anymore.
The U.S. solar market has now surpassed 100 gigawatts of installed electric generating capacity, doubling the size of the industry over the last 3.5 years, according to the U.S. Solar Market Insight Q2 2021 report, released this week by the Solar Energy Industries Association (SEIA) and Wood Mackenzie.
Now importers are back to worrying about price increases in their latest report, as bottlenecks in the supply chain are holding back some deployments. Demand for solar remains strong, as numerous industry reports continue to reveal.
The commercial sector grew by 19% from the first quarter of 2020 while the residential sector declined 15% from the first quarter of last year.
“The problems in the solar supply chain only reinforce the argument for rebuilding U.S. based manufacturing,” says Ferry. “We’ve seen the same problem with semiconductors and many imported consumer goods. The global supply chain can’t cope with sudden changes in demand, and having a large, reliable share of production on these shores is the best way to guarantee a diversity of supply, resiliency, and competitive prices.”
China is a major player in the world’s solar market. They have pretty much decimated the European solar industry, and came close to dealing a final blow here until the U.S. based solar industry won a landmark anti-dumping case against solar panels from China in 2014.
Despite the tariffs, mainland China is still the main source for polysilicon and the solar cells that go into making solar panels, essentially the final product seen on hillsides and on rooftops.
To date, much of the supply chain constraints that the industry is complaining about all stem from our over-reliance on China for solar.
CPA advocates for long-term investment in more of the solar supply chain by domestic companies, while making sure near-term enforcement actions on forced labor of Uyghur Muslims in Xinjiang specifically watches Chinese solar companies that source from there.
For solar to grow, and for the U.S. to avoid aiding China in becoming our Green OPEC, the U.S. should, at a minimum, require Buy America rules for public utilities using solar power. What people put on their rooftops is their business. But what American taxpayers and consumers spend on solar from the municipal power source should be made in America, from polysilicon to finished solar modules. This would speak to President Biden’s comments, made earlier this year, that when he thinks of climate change he thinks of jobs. Solar importers believe the jobs are mainly on the design and install side. But there is room for domestic manufacturing. And if the White House is serious about supply chain resiliency in new energy, then policymakers will have to make sure that federal and state dollars go to those making solar from ingots to cells to finished product. Clearly, there is enough demand to go around.