America’s Incentive-Driven Solar Manufacturing Boom
Last year’s Inflation Reduction Act tasked the federal government with investing billions to jumpstart domestic solar manufacturing, aiming to gain an edge over market-leading China. Nearly a year later, the supply chain is finally beginning to add the much-needed capacity.
Nearly a year after the Inflation Reduction Act (IRA) was signed into law last August, dozens of solar technology companies across the U.S. are taking advantage of unprecedented federal incentives to expand their domestic production capacity.
First Solar manufactures its Series 6 thin film photovoltaic solar panels. Image used courtesy of First Solar
Earmarking over $300 billion for clean energy and electric transportation programs, the IRA has fueled a flurry of manufacturing expansions, with domestic module capacity now projected to rise from less than 9 gigawatts (GW) today to over 60 GW by 2026. The National Renewable Energy Laboratory (NREL) estimates that companies have announced nearly 110 GW of manufacturing capacity across the solar supply chain since the IRA’s passage, including 26 manufacturing plants. The Solar Energy Industries Association (SEIA) projects that the legislation will grow the solar and storage manufacturing workforce to 115,000 people, up from tens of thousands today.
Meanwhile, domestically produced solar components remain in high demand while the industry recovers from supply chain constraints. With delayed utility-scale projects finally coming online, 2023 welcomed the best first quarter in the industry’s history, per recent SEIA data. At 6.1 GW, solar capacity additions grew 47% compared to Q1 2022. The Energy Information Administration estimates solar projects will claim 54% of the 54.5 GW of new utility-scale electric capacity joining the power grid this year. If developers’ plans to install 29.1 GW come to fruition, 2023 will have the most new utility-scale solar capacity added in one year, more than double the record 13.4 GW in 2021.
The IRA offers an investment tax credit (ITC) for solar and other clean energy facilities, covering a minimum of 6% of the project cost. But this is only the base level—credits increase by five times for projects meeting wage and apprenticeship requirements and up to 10% for those following domestic content rules for steel, iron, and other products. Another bonus is offered for sites in dedicated energy communities. Solar photovoltaic (PV) and concentrating solar-thermal power (CSP) generation technologies that were placed in service in 2022 or later and begin construction before 2033 can also get a 30% ITC or a 2.75 cents per kilowatt-hour production tax credit (PTC) if they’re under 1 megawatt (MW) and meet labor requirements.
The U.S. is subsidizing domestic solar manufacturing to compete with China, which accounted for over 95% of last year’s new facilities throughout the global supply chain. The International Energy Agency (IEA) expects China to retain its lead in the short term as Europe and North America catch up. The world’s solar manufacturing capacity is slated to double in 2023 and 2024, but the IEA reports China will claim over 90% of this expansion. The U.S. is just one country investing billions in this area, with a 120% increase in new solar PV manufacturing projects announced worldwide from November 2022 to May 2023.
Announced solar manufacturing capacity by region and component in 2022 and 2023. Image used courtesy of the International Energy Agency
America’s latest manufacturing capacity announcements cover a diversity of components and segments since the IRA’s passage. Modules lead with 19.1 GW of planned capacity. (For scale, the U.S. only produced around 5 GW of PV modules in 2022, according to the NREL.) Other categories include 11.5 GW of wafers/ingots, 9 GW of integrated technologies (three or more processes in a single plant), 7.5 GW of polysilicon, 6.1 GW of thin film, and 3.3 GW of cells/modules.
Snapshot of the Latest Manufacturing Expansions
The SEIA estimates that around 16 GW of module manufacturing facilities are under construction nationwide as of the end of the first quarter. The organization’s solar and storage supply chain database shows dozens of manufacturing projects expected to begin commercial operations in the coming years. Another report from American Clean Power tracks 46 new or expanded solar facilities between August 2022 and July 2023.
Some of these projects involve investments in the billions. Qcells, a subsidiary of South Korea-based Hanwha Group, is investing $2.5 billion to add 8.4 GW of solar panel production in Georgia by 2024, including a 3.3 GW solar ingot/wafer/cell factory and an expansion of its existing plant. Meanwhile, Italy-headquartered Enel plans to spend over $1 billion to build a 3 GW plant in Oklahoma for bifacial PV modules and cells. Enel expects construction to begin this fall, with the first panels available by late-2024.
A few notable expansions are taking place in Ohio: Invenergy and China-based LONGi will build a 5 GW plant for monofacial and bifacial solar panels targeting utility-scale and rooftop solar customers. Invenergy will invest $600 million in the project and plans to start production lines by the end of 2023, reaching full capacity in late-2024.
NREL’s Spring 2023 Solar Industry Update tracks recent project announcements after the passage of the Inflation Reduction Act. Image used courtesy of NREL page 70
First Solar is investing $185 million to expand its manufacturing capacity and add a third facility in Ohio. The Arizona-based company has made several factory expansions over the last year, aiming to produce over 10 GW of advanced thin film PV solar panels annually in the U.S. by 2025. A fourth, $1.1 billion factory in Alabama is slated to be commissioned in 2025.
California firms SEM Wafertech and Solar4America will invest $65.9 million to build a solar wafer production facility in South Carolina. The partners plan to start producing the first wafers later this year at 2.4 GW of capacity, then expand to 3 GW by 2024. In another South Carolina project: California-based Hounen plans to invest $33 million in a 1-GW crystalline silicon PV panel facility in Orangeburg between Columbia and Charleston.
OMCO Solar, which produces solar trackers and fixed-tilt technologies, plans to build its fifth manufacturing facility in Indiana. With 7 GW of annual capacity across four states, the company is committing $5 million to expand its footprint. To date, its total equipment/tooling investments top $75 million.
A new factory in Tennessee manufactures steel torque tubes for Nextracker’s solar tracking systems. Image used courtesy of Nextracker
Solar tracker developer Nextracker and MSS Steel Tubes USA recently commissioned a new Tennessee factory to manufacture steel torque tubes for projects across the Southeast.
Two companies still haven’t selected locations for their latest projects: Canada-headquartered Silfab raised $125 million this year to execute the first phase of its third U.S. solar manufacturing facility, expected to be operational in 2024 with an annual output of 1 GW of cell production and 1.2 GW of PV solar module assembly. Also, Massachusetts-based CubicPV raised $103 million in equity financing to support its tandem product development and its plans to build a 10 GW wafer production plant in the U.S. The company said in June that its planned expansion is a “direct result” of the IRA, and it has shortlisted its site selection to two locations.