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Six years ago, an executive at Suniva, a bankrupt solar panel maker, warned a packed hearing room in Washington that competition from companies in China and Southeast Asia was causing a “bloodbath” in his industry. In the past five years alone, more than 30 U.S.-based solar companies had been forced to close their doors, he said, and others would soon follow unless the government supported them.
Suniva’s advocacy helped push the Trump administration to impose tariffs on foreign-made solar panels in 2018, but that didn’t stop the flow of industry jobs from going abroad. Suniva’s U.S. factories remained closed, with poor prospects for reopening.
That is, until now. Last month, Suniva announced plans to reopen a factory in Georgia, backed by tariffs, protective regulations and, crucially, generous new tax breaks for Made-in-America solar production that resulted from President Biden’s signature climate law, the Inflation Reduction Act.
Solar companies have long been the beneficiaries of government subsidies and trade protections, but in the United States they have never been the subject of so many simultaneous efforts to support the industry – and so much government money to support them.
The combination of billions of dollars in tax breaks for new facilities and tighter restrictions on foreign products appears to be causing a wave of so-called reshoring of solar jobs. These efforts are succeeding where more modest approaches have not, although critics argue that the gains come at a high cost to taxpayers and may not last in the long run.
In the year since the climate law was passed, companies have announced nearly $8 billion in new investments in solar factories in the United States, according to data from the Massachusetts Institute of Technology and the Rhodium Group, an independent research firm. That is more than three times as much as the total investment amount announced between 2018 and mid-2022.
Suniva plans to reopen and expand a solar cell manufacturing plant in Norcross, Georgia, in the spring. REC Silicon will this month restart a polysilicon plant in Moses Lake, Washington, that closed in 2019. Maxeon, a Singapore-based maker of solar cells and modules, will break ground on a $1 billion site in New Mexico next year.
In each of these cases, executives cited the incentives in the climate law as a driving factor in their investment decisions.
“It was exactly what we had in mind in terms of what it would take to advance these types of manufacturing initiatives,” said Peter Aschenbrenner, Maxeon’s Chief Strategy Officer.
China has loomed large in the sector for more than a decade. U.S. demand for solar energy has grown sharply since 2010 — about 24 percent per year in that time, according to the Solar Energy Industries Association, a trade group. But much of that spending went to cheaper foreign solar panels, often made by Chinese companies or with Chinese components. That raised concerns about U.S. over-reliance on China, which limits supplies of other key products and whose solar energy production has been plagued by human rights concerns.
U.S. solar manufacturing employment peaked in 2016, with just over 38,000 workers. By 2020, almost a fifth of those jobs had disappeared.
Solar factory jobs are starting to grow again.
E2, a nonprofit environmental organization, estimated that new investments announced in the first year of the climate law would create 35,000 temporary construction jobs and 12,000 permanent jobs across the solar sector in the coming years. Thousands of these permanent jobs are related to manufacturing, including an expected 2,000 at Maxeon’s planned factory in New Mexico.
Economists and executives said the increase was largely due to government subsidies that tilted the economics of the solar industry in favor of domestic production.
Mr. Aschenbrenner said Maxeon’s costs for domestic solar production would fall by roughly 10 percent just from a new production tax credit in the climate law that targets the production of both solar cells and solar panels. That’s enough to offset higher labor and construction costs at U.S. factories, he said.
The law also provides credits for customers, such as homeowners and utility companies, who install solar panels and use them to generate electricity. If the customer buys panels from the United States, as Maxeon plans, the value of that credit will grow by 10 percent.
These incentives could be enough to build an American industry that within a few years could be large and efficient enough to compete with China even without subsidies, Mr. Aschenbrenner said.
Others are more skeptical. Analysts at Wood Mackenzie, an energy consultancy, estimate that nearly half of the solar panel capacity announced by 2026 will not materialize as some manufacturers announce long-term plans to gauge feasibility and interest.
The recent embrace of subsidies and tariffs by politicians from both parties also irritates some economists, who say that while such programs can save or create jobs, they do so at extremely high costs.
A 2021 study by the Peterson Institute of International Economics on past industrial policy programs found that the Obama administration’s 2009 investment in Solyndra, a solar company that ultimately went bankrupt, cost taxpayers about $216,000 for every job created, more than four times the prevailing industry wages. Other programs were even more expensive.
“With certain types of technology, you can subsidize and protect the path to factories,” says Scott Lincicome, who studies trade policy at the Cato Institute, a libertarian think tank. “The question is always: at what price?”
In addition to the cost to taxpayers, protections for U.S. industry make solar products more expensive in the United States than in other countries, Mr. Lincicome said. That slows down the adoption of solar technology, contrary to climate goals.
Trends in the global solar industry are often closely linked to government action. The industry began to boom more than a decade ago when Germany and Japan began providing subsidies for solar energy.
In recent years, China has overtaken foreign competitors through massive government investments, allowing it to build factories ten times the size of American ones. Since 2011, China has invested more than $50 billion in the sector, ultimately accounting for more than 80 percent of the global share at every stage of the production process, according to the International Energy Agency.
Tariffs have also shaped the evolution of the industry. The United States imposed tariffs on Chinese solar products in 2012. The following year, China retaliated with tariffs of up to 57 percent on American polysilicon, a raw material for solar panels.
That proved to be the death knell for the plant that REC Silicon, a Norwegian polysilicon manufacturer, operated in Washington state, said Chuck Sutton, the company’s vice president of global sales and marketing. With few companies operating outside China, REC Silicon “basically ran out of customers,” he said.
REC Silicon worked with the Trump administration to push China to buy more American polysilicon as part of a 2019 trade deal. But China never made these purchases.
The turnaround for REC Silicon came, Mr. Sutton said, with the new tax credits this year. The manufacturer struck a deal with Qcells to supply its polysilicon to Qcells’ planned U.S. factories. The deal allowed REC Silicon to reopen its Washington facility, Mr. Sutton said.
To compete with China, the industry needed “a whole-of-government approach,” Suniva’s Mr. Card said, which included both tariffs and tax credits for domestic production.
“They are not opposing forces,” he said. “They work together and make each other stronger.”
