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Although the Inflation Reduction Act (IRA) is offshoring solar manufacturing to the United States, rising import tariffs may slow momentum. The actions of the incoming Trump administration are difficult to predict at this point.
With the passage of the Inflation Reduction Act (IRA) , along with the bipartisan Infrastructure Act and the Creating Helpful Incentives for Semiconductor Production (CHIPS) and Science Act , the United States has a strong industrial policy for the first time in about 50 years.
Since the IRA was enacted, more than $265 billion in clean energy investments have been made, with more than 330,000 new jobs projected.
President-elect Trump said on the campaign trail that he would cancel all unspent IRA funds, but $90 billion of the $120 billion available for climate-focused grants had already been allocated by October 2024, according to Biden administration officials. Another $15 billion could be disbursed before January 2025, when the new president takes office.
Some analysts believe the IRA could be protected by its strong performance, perhaps with the early phase-out of investment tax credits (ITCs). A recent Bloomberg Intelligence report predicted the policy could be hit by selective cuts, rather than being completely canceled.
Thanks to this law, annual US solar module manufacturing capacity will increase by more than 10 GW to 31.3 GW in the second quarter of 2024, making the country the worlds third largest producer. About 48% of the new production lines have arrived in the electoral states of Arizona, Georgia, Pennsylvania, Nevada and North Carolina.
“Domestic solar manufacturing has quadrupled under pro-business federal clean energy policies and we will soon have enough American-made solar panels to meet our demand for solar deployment,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA), in a statement released after Trump’s election victory. “Nearly nine in 10 Americans support these policies, which are lifting up communities in states like Ohio, Texas, Georgia and South Carolina with thousands of jobs and billions of dollars in investment.”
Equipment price declines caused solar to comprise 67% of new electricity generating capacity added to U.S. grids in the first half of 2024. The United States added 9.4 GW of solar in the second quarter of 2024.
There has been impressive IRA-driven growth in the transfer of tax credits, “a cornerstone of US energy policy for decades,” according to Alfred Johnson, CEO of consultancy Crux. Johnson told pv magazine that clean energy installations saw significant growth during the first Trump administration. “Repealing the credits would raise the cost of energy and increase taxes on businesses, which is likely unattractive to the administration and Republicans in Congress,” he added.
Bipartisan support
Eighteen members of the House Republican Conference wrote to House Speaker Mike Johnson in August 2024, stressing the need to “prioritize business and market security” over repealing or modifying the IRA.
SEIA’s Hopper and Philip Shen, managing director and principal sustainability research analyst at Roth Capital Partners, estimated in a post-election webinar that 12 to 14 of those ICA-friendly Republicans will not return to Congress. They noted, however, that ICA investing has largely gone to Republican congressional districts.
The carrot and the stick
Tax credits are the “carrot” that could incentivize part of a cumulative 55 GW of annual module manufacturing capacity in the United States by 2024.
Trump and his trade policy guru Robert Lighthizer imposed tariffs – the “stick” of offshoring – from 7.5% to 25% on Chinese products during the former’s first term. Having promised 60% tariffs on Chinese products during the recent election campaign, Trump wants Lighthizer to return as his trade representative in the United States.
Biden retained Trump’s early tariffs to free up the U.S. solar supply chain from Chinese imports, but Jason Kaminsky, CEO of kWh Analytics, said: “The industry’s supply chains have proven incredibly resilient and dynamic in the face of years of prior tariffs.”
If the new Trump administration imposes higher tariffs, the question for the U.S. solar industry will be how to fill gaps left in the supply chain as cell, wafer and ingot manufacturing ramps up at home. |
