Recently, a US solar manufacturer organization urged the Biden administration to tighten tax incentives for solar project developers that use domestically produced components. They argued that these developers can still benefit from tax breaks without using American-made solar panels.
On Monday, the Solar Energy Manufacturers for America Coalition (SEMA) submitted a statement to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, pointing out loopholes in the guidance on “domestic content” under the Inflation Reduction Act (IRA) that need to be “updated promptly”.
SEMA is a diverse group composed of solar manufacturers dedicated to rebuilding the US domestic solar supply chain.
SEMA posted on social media platform X, stating, “The current guidance on domestic content tax incentives under the Inflation Reduction Act weakens the government and Congress’ goal of establishing a robust and sustainable American solar supply chain.”
The Biden administration has been seeking to expand investments in clean energy, and the 2022 Inflation Reduction Act provides tax breaks to encourage reducing reliance on Chinese-manufactured goods.
In May 2023, the US Treasury issued guidelines on “domestic content” tax incentives, requiring that 40% of a project’s manufacturing costs must be American-made, including solar panels, inverters, or battery packs. Developers could then receive a 10% tax reduction, boosting demand for solar panels, batteries, and raw materials used to make these products.
However, SEMA noted that even if the solar panels are manufactured overseas, a project could still meet the 40% threshold by using American-made racking to install photovoltaic panels and inverters to regulate solar-generated electricity.
SEMA Executive Director Mike Carr stated, “The current guidance undermines Congress’ intent, neglecting components like polysilicon and silicon wafers crucial for localizing the solar supply chain and ensuring our country’s energy security.”
SEMA believes this situation weakens the government’s efforts to establish a robust solar supply chain and compete with China, as the manufacture of solar photovoltaic panels is more complex and costly than other components.
Chinese companies are increasing solar manufacturing plants in the US, giving them a dominant position in this emerging industry, while other American factories, despite federal subsidies, struggle to compete.
According to Reuters, analysis of corporate statements, government documents, and interviews with 8 companies and researchers suggests that next year Chinese companies’ annual solar panel production capacity in the US could reach at least 20 gigawatts, meeting around half of the US market demand.
Reuters’ analysis showed that 7 of these companies are purely Chinese-owned, including Jinko Solar, Trina Solar, JA Solar, Longi Solar, Hounen Solar, Runergy, and Boviet under the Boviet Group.
Compared to their American competitors, Chinese-funded enterprises, supported by the Communist Party, have received substantial subsidies in the supply chain of components like polysilicon and unprocessed solar components, along with low-cost government financing.
The report highlighted the rapid growth of Chinese-funded enterprises in the production of solar photovoltaic panels in the US, which has raised concerns for the Biden administration’s climate agenda.
US domestic manufacturers are finding it challenging to compete with a large influx of cheap imported goods from China and are worried about Chinese-owned enterprises setting up plants in the US. Reuters previously reported that in announced capacity expansions in US factories, as many as half might not materialize.
US-based Convalt Energy planned to build a new factory in northern New York in 2022 with a target production capacity of 10 gigawatts.
However, Hari Achuthan, CEO of Convalt Energy, testified in May at the US International Trade Commission (ITC) that due to a global 50% drop in solar panel prices below Convalt’s production costs, construction on the new factory has halted.
Furthermore, Chinese solar companies are facing allegations of evading US tariffs. In early June, bipartisan federal lawmakers wrote open letters to the Commerce Department and the US International Trade Commission urging the Biden administration to investigate Chinese solar companies’ suspected tariff evasion.
Jason Dymbort, Executive Vice President and General Counsel of the largest US solar panel manufacturer First Solar, stated in a press release that China’s maneuvers with unfair, anti-competitive, and illegal trade practices monopolize the market, depriving US solar manufacturers of the opportunity to compete in a fair environment.
This year, the American Alliance for Solar Manufacturing Trade Committee representing the US solar manufacturing industry also submitted petitions to the government for anti-dumping and countervailing duties to address China’s illegal trade practices.