Episode 19 of Factor This! live from RE+ in Anaheim publishes on Monday, Oct. 3. Subscribe wherever you get your podcasts.
This episode of Factor This! is sponsored by Nextracker, the industry’s most advanced smart solar tracking system. Scroll down to see how Nextracker ramped up 10 GW of domestic manufacturing capacity to better serve project developers.
Scott Moskowitz was in the car picking up his daughter from daycare when he first heard the news.
As the director of public affairs at Qcells, a solar module manufacturer with a 1.7 GW facility in Dalton, Georgia, Moskowitz was as close as anyone to the push for federal clean energy and climate change incentives. He had worked alongside the team of Sen. Jon Ossoff of Georgia to craft the Solar Energy Manufacturing for America Act, which included credits for domestic manufacturing throughout the solar value chain.
But a broader climate and social welfare package that included provisions of the SEMA Act, known as Build Back Better, was dead. In fact, it had died several painful deaths at the hands of Sen. Joe Manchin of West Virginia, who wielded outsized power over the package because of the slim margin for Democrats in the Senate.
So Mosckowitiz was just as surprised as everyone else when he heard of the late-night, 700-page deal between Manchin and Senate Majority Leader Chuck Schumer that would forever change the clean energy industry. The Inflation Reduction Act‘s $369 billion investment in clean energy and climate change mitigation would also establish the first clear industrial policy in the U.S. in decades.
“Moving forward, we will always think of our industry in a history of two eras: before and after the Inflation Reduction Act pass,” Moskowitz said during a live taping of the Factor This! podcast at RE+ in Anaheim. He was joined by Lightsource bp Americas CEO Kevin Smith and Luke O’Dea, Cypress Creek Renewables’ vice president of engineering.
The solar industry is now better equipped to tackle simultaneous challenges caused by supply chain constraints and trade disputes that contributed to a dark cloud over the sector just a few months prior.
But the clock is ticking to ramp up production capacity before familiar headwinds reemerge.
In June, President Joe Biden paused for two years any new tariffs on solar modules imported from Southeast Asia, which currently accounts for about 80% of module supply. But the Commerce Department’s investigation of the Auxin Solar tariff petition could still result in additional tariffs.
Separately, gigawatts of solar modules tied to forced labor in China are stuck at the border due to the enforcement of the Uyghur Forced Labor Prevention Act and Withhold Release Orders.
Are incentives in the Inflation Reduction Act enough for the U.S. to meet solar module demand with American-made products?
Solar supply chain moves
The Inflation Reduction Act won’t solve these issues overnight, Moskowitz said. But it will “create the possibility of solving these issues” in the long-term, which seemed unlikely before the bill passed.
Qcells and parent company Hanwha have announced plans to increase manufacturing capacity at their Dalton, Georgia facility (pictured right) from 1.7 GW to more than 3 GW. Last year, the company made an investment in polysilicon manufacturer REC Silicon, which plans to restart operations at its 6 GW facility in Moses Lake, Washington by the end of next year.
First Solar plans to invest up to $1 billion in a new, 3.5 GW module factory in the Southeast, while an additional $185 million will be dedicated to adding nearly 1 GW of new manufacturing capacity to the company’s facility in Ohio.
Toledo Solar, meanwhile, said it would increase its domestic solar module manufacturing capacity to 2.8 GW by 2027 in response to the Inflation Reduction Act.
All told, the solar industry expects around 20 GW of new module manufacturing capacity to come online in the next several years. With around 10 GW of domestic manufacturing capacity online today, the expansion is still likely to fall far short of U.S. demand.
Lightsource bp’s Kevin Smith expects it will take 3-5 years before U.S. manufacturers can meet a significant portion of domestic demand. His company has been insulated from some of the supply chain and trade risks that have plagued the industry over the past 18 months due to a 5.4 GW supply contract with First Solar. First Solar panels are sold out through the end of next year.
Smith believes the Inflation Reduction Act will attract new manufacturers to the U.S. and increase capacity, but he is concerned about other components of solar’s value chain, like polysilicon supply.
“You’re going to see some major players who are going to do (module) assembly here, but the poly supply is going to take a while,” Smith said.
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The snowball effect
The U.S. solar industry hopes the Inflation Reduction Act will create a “snowball effect” that will lead to a quicker increase in manufacturing capacity and cost declines.
Cypress Creek Renewables aimed to induce that momentum even before the historic legislation passed, with the help of industry partners AES Corporation, Clearway Energy, and D.E. Shaw Renewable Investments.
The group formed the U.S. Solar Buyer Consortium and collectively committed to sourcing up to 7 GW of American-made solar modules per year starting from 2024. The announcement aimed to provide certainty to domestic manufacturers that may have been wary of making capacity investments.
Luke O’Dea, Cypress Creek Renewables’ vice president of engineering, believes the expansion of module manufacturing in the U.S. is likely to lead to growth in other components of the value chain, too.
“As you get more module plants in the U.S., you’ll start to see other bill of materials items, hopefully, starting to spin up in the U.S. and the other parts of the supply chain that aren’t cell-related also being produced here and not needing to be imported, like glass,” O’Dea said on the Factor This! podcast.
And manufacturers are ready to move quickly, Moskowitz of Qcells added.
A new module assembly facility takes 8-10 months to come online, while it can take a bit longer — around two years — to launch new ingot, wafer, and cell operations.
While the U.S. may not be able to completely meet demand with domestically-manufactured modules in the next two years, the solar industry is used to surprising itself and surpassing expectations.
Typically, installations and demand in this market grow faster than people expect and prices “usually fall faster than people expect,” Moskowitz said. “I’m hopeful that the same is true with domestic manufacturing investment.”
About our sponsor:
Episode 19 of the Factor This! podcast is sponsored by Nextracker.
The Inflation Reduction Act is a game changer for American solar manufacturing.
But even before the landmark legislation passed, Nextracker was betting big on Made in America, ramping up 10 GW of domestic manufacturing capacity while others waited out the pandemic, supply chain constraints, and tariff risks.
Nextracker, the industry’s most advanced smart solar tracking systems.
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Author: John Engel