Solar energy has made tremendous strides over the last few decades. Once limited to remote areas and tech gurus, solar panels can now be seen on middle class homes in many neighborhoods across the country. However, one dilemma has limited the expansion of this clean energy: lack of domestic production. The number of imported solar panels dramatically increased in 2023, with most of the panels coming from China. This has launched a new international struggle in clean energy leadership. Although China is still a notorious polluter, the nation is the world’s leader in clean energy investment.
Fortunately, a collaboration between U.S. solar panel manufacturer Suniva and Canadian producer Heliene (produced in the United States) has given America a new foothold in domestic solar panel production. This foothold will likely be substantial, as domestic production now allows the two firms to access federal subsidies created by the 2022 Inflation Reduction Act (IRA). The IRA gives tax credits to producers and consumers of solar energy, recently extending the Solar Investment Tax Credit through 2032. Treasury Secretary Janet Yellen calls the cooperation between Suniva and Heliene a major boost for the U.S. solar industry, which has struggled in recent years due to foreign competition.
Most Solar Panels Made Overseas
China is the world leader in solar panels, which creates stiff competition for U.S. rivals. Domestic solar panel producers need time to grow and develop to benefit from economies of scale. In addition to criticizing China’s virtual monopoly on the world’s solar panel production, which exceeds 80 percent of the market share, critics claim that China’s production of these panels itself is, ironically, a significant source of pollution. China produces more solar panels than the United States, but does so less efficiently.
The U.S. should try to bridge the gap between domestic solar panel production and China’s production to protect our energy infrastructure from future trade disputes. If we rely too heavily on imported solar panels from China, what happens when that source is cut off due to conflict? Similarly, our allies in Europe rely heavily on imported solar panels from China. During future political disputes with Beijing, will the U.S. and its NATO allies be left unable to repair solar energy infrastructure?
2022 Inflation Reduction Act Includes Subsidies for Domestic Production
The Inflation Reduction Act is spending over $100 billion to help domestic producers ramp up clean energy production. In addition to manufacturing subsidies, solar producers who build solar farms in low-income areas can qualify for additional tax credits through the Low-Income Communities Bonus Credit program. Now that there are domestic solar panels available, solar producers can access even more tax credits by using domestic resources. “Stacking” these tax credits makes more investment options profitable, allowing more clean energy development across the country.
Investing in clean energy is expensive, which makes many investors shy away. Fortunately, well-guided public policy, such as the Inflation Reduction Act, can “prime the pump” and lay the foundation for attractive investments. The additional 10 percent tax credit for using American-made solar panels may help generate enough critical mass to grow the domestic solar panel manufacturing industry, giving us the industrial base to start moving toward a clean energy society.
