Solar continues to charge ahead!
That’s the main message in a new report from the Solar Energy Industries Association (SEIA) and the Wood Mackenzie consulting firm. As the Inflation Reduction Act (IRA) and other federal tax incentives kick into high gear, solar power generating capacity in the United States is expected to nearly triple by 2028. At the same time, a solid domestic manufacturing base for solar cells and modules is expected to take hold.
The U.S. solar industry is already growing at a record pace. According to this latest industry update:
- The U.S. solar industry recorded the most growth of any first quarter in its history in 2023, with 6.1 GW of solar installed across the country, up 47% from Q1 2022.
- Solar power accounted for 54% of all new electricity generating capacity added to the U.S. grid during Q1 2023, with utility-scale projects jumping 66%.
- The residential solar segment installed 1.6 GW in Q1 2023, a 30% increase from a year earlier. Residential growth would have been higher, were it not for heavy storms in California that delayed many installations in this #1 state for residential solar customers.
Following passage of the Inflation Reduction Act last summer, the U.S. solar market is forecast to grow from 142 GW by nearly 377 GW at the end of 2028. At the same time, U.S. solar manufacturing capacity is expected to jump from just 9 GW to as much as 60 GW, with at least 16 GW of this manufacturing capacity already under construction. Such added domestic content will allow investors to take advantage of new tax adders featured in the Inflation Reduction Act to stimulate U.S. solar cell and module production in a global market now dominated by Chinese producers.
Source: World Economic Forum and Wood Mackenzie
Overcoming Speed Bumps
It has not been all smooth sailing for the global solar industry in recent years. The COVID-19 pandemic that struck in early 2020 disrupted all sorts of supply chains, with many U.S. solar installers left in the lurch. Complicating matters, U.S. importers of solar modules had to contend with new regulations following congressional passage of the Uyghur Forced Labor Prevention Act (UFLPA) in 2021; this delayed many solar projects, especially at the utility level.
The Wood Mackenzie consulting firm expects supply chain constraints to continue easing as more suppliers satisfy new Custom and Border Protection requirements. Moreover, President Biden’s veto of legislation, which would have repealed a two-year pause on new solar tariffs under the UFLPA law, also ensures that buyers of imported solar modules will have more time to switch to alternate suppliers if new duties come into effect next year.
The biggest remaining variable for the U.S. solar industry is a domestic content adder for solar equipment that was placed in the IRA law. At present, there is no silicon solar cell manufacturing capacity in the U.S. Since the IRA was passed last summer, however, 20 GW of domestic solar cell manufacturing facilities have been announced, plus 52 GW of new solar module manufacturing facilities, according to the latest update from the SEIA and Wood Mackenzie.
Since solar manufacturing facilities take at least 2-3 years to build and ramp up production, it will still be some time before U.S. solar projects can take full advantage of these tax adders for domestic content. What is clear, however, is that the weighted average tax credit available for U.S. solar projects will continue to increase over time, accelerating future deployment. Altogether, Wood Mackenzie expects U.S. solar deployments to increase at a low-teens percentage rate from 2024 through 2028, doubling U.S. installed solar capacity over that five-year period.
U.S. Battery Production Also Ramping Up
As this added solar capacity comes on-line, much of this clean power will be used to charge batteries for the nation’s growing fleet of electric vehicles. With $370 billion in clean-energy funding under the Inflation Reduction Act, the U.S. government has lots of money available for domestic battery manufacturing. Plus, buyers of EVs can qualify for consumer tax rebates of up to $7,500 per vehicle.
This dizzying array of tax incentives, government lending and private-sector investments is spurring a manufacturing boom in the U.S. EV and battery markets. More than 100 battery and EV production projects have been announced or are already under construction after passage of the IRA last August, representing about $200 billion in pledged total investments.
This compares with more than $130 billion in subsidies that the Chinese government poured into the EV market between 2009 and 2021, according to a report issued last year by the Center for Strategic and International Studies. Not only did China commit far more government money in support of domestic battery businesses over the past decade, but Beijing also imposed strict limits on sales of internal-combustion vehicles, with Chinese buyers facing long waits and higher costs to purchase any car still running on fossil fuels.
Now China dominates most of the world’s battery supply chain. More than 80 percent of lithium-ion battery cell production currently takes place in China, according to BloombergNEF.
However, about $120 billion in loan requests for battery and clean energy manufacturing facilities are now pending before the U.S. Department of Energy’s Loan Programs Office. While applicants must still undertake extensive documentation in order to qualify for these U.S. government loans, the DOE Loan Program Office expects nearly all of these requests to be approved and issued over the next 15 months.
Have You Moved Ahead Yet?
What’s your plan to install solar power? With so many funding programs and tax incentives kicking into high gear, here are four reasons to move forward with your solar plans this summer – and the paybacks that await you if you power your home and electrify your vehicles with our Solaflect trackers.
Solaflect Energy is your trusted home energy management partner. We help you install clean and affordable solar electricity for a more resilient and climate-friendly future. For more information, email us, or call (802) 649-3700. Working together, the power is in our hands to build a brighter future and make a difference in the fight against climate change.