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IRA at 1: US solar manufacturing rises from rubble


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IRA at 1: US solar manufacturing rises from rubble

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First Solar is rapidly expanding its US manufacturing footprint. It is one of dozens of companies committing billions of dollars to revive a depleted domestic solar supply chain.
Source: First Solar Inc.

Franz Feuerherdt had a front-row seat to see the rise and fall of the US solar supply chain over the previous decade. One of his former employers, SolarWorld Americas Inc., ramped up, ramped down and, in 2018, sold off the nation's last vertically integrated factory for crystalline-silicon photovoltaic panels, which ultimately shuttered in 2021.

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"We were buying polysilicon, melting it, growing ingots, slicing wafers, making cells and making modules," Feuerherdt recalled.

Now a vice president at Sacramento, Calif.-based panel maker Solar 4 America Technology Inc., a subsidiary of SPI Energy Co. Ltd., Feuerherdt is participating in an unprecedented resurgence of US solar manufacturing, propelled by invaluable tax incentives outlined in President Joe Biden's signature climate law, the Inflation Reduction Act (IRA), which was signed into law Aug. 16, 2022.

Worth billions of dollars over the next decade, the IRA's tax credits for US-made photovoltaic (PV) panels, parts and system equipment are "good enough and strong enough" to unleash a building boom across the country's underdeveloped solar manufacturing landscape, Feuerherdt said. Although some elements of the climate law are unwieldy, including preliminary guidance on a domestic content incentive for developers, "as an industry, our attitude has to be to compete, to say, 'We're going for it.'"

Domestic and foreign solar companies have committed more than $11 billion for US factories since Biden took office, according to the White House's National Economic Council. Those commitments, almost all of which have come since the passage of the IRA one year ago, signal a new dawn for solar manufacturing in the birthplace of the industry. It comes amid ongoing heavy reliance on imports from Asia despite more than a decade of trade sanctions against China-based PV producers, which dominate the global supply chain.

"It's definitely happening," said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, the sector's largest trade group.

A first wave of IRA-backed investments is gathering momentum. The Solar Energy Industries Association counts more than 15 GW of solar module capacity under construction, more than double the country's current capabilities. Some new downstream manufacturing lines are already rolling, including Flex Ltd.'s production of Enphase Energy Inc. microinverters at a factory in South Carolina, which the president in July used as a platform to highlight his "Bidenomics" economic strategy.

"I like ribbon-cuttings better than groundbreakings," said Hopper, who expects panel factory openings to multiply over the next few years. Further up the supply chain, into production of wafers, ingots and polysilicon, "it gets a little bit less transparent," she added.

'Cohesive industrial policy'

The next generation of US solar factories is led by First Solar Inc.'s integrated 3.5-GW thin-film PV factory in Trinity, Ala., and Hanwha Q CELLS USA Inc.'s 3.3-GW crystalline-silicon ingot, wafer, cell and module complex in Cartersville, Ga. Both are planned to launch commercial operations in 2024.

Over the past year, Arizona-headquartered First Solar has committed $2.8 billion to build its Alabama plant along with another new 3.5-GW facility at a still-undecided location, while also expanding production and research capabilities in Ohio. Hanwha Q CELLS, a subsidiary of South Korea-based Hanwha Solutions Corp., plans to invest $2.5 billion to recreate a complete crystalline-silicon supply chain in the US.

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"We have really lacked a cohesive industrial policy for a long time," said Lindsay Cherry, senior market intelligence and policy manager at Qcells. "What the IRA does is it brings that back and it allows manufacturers to have the confidence that's been lacking."

In addition to building its integrated PV production hub in Cartersville, Hanwha's solar manufacturing arm, known as Qcells, plans to add 2 GW of module capacity at an existing 1.7-GW facility in Dalton, Ga. The company's supply chain strategy goes further upstream to an existing-but-idled polysilicon factory in Moses Lake, Wash., which Norway's REC Silicon ASA plans to restart by the end of this year.

Hanwha Solutions last year became REC Silicon's single-largest shareholder, followed by affiliate Hanwha Corp., to secure feedstock for its aggressive US expansion.

"Our investment allows us to revitalize that shuttered capacity and we're going to use it to power our manufacturing plants in Georgia," Cherry said. "We're doing a fully vertically integrated supply chain in the US."

Many of the industry's new investments focus solely on modules.

By the end of 2024, US panel production capacity could rise to nearly 48 GW, more than tripling in two years, and jump to nearly 70 GW by the end of 2025, according to announcements tracked by S&P Global Commodity Insights. If realized, that could prime domestic producers to meet most, if not all, US solar panel demand in the second half of the decade.

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'Second wave' focused on cells

The IRA, which cuts the cost gap between the US and other regions, is "the key driver for manufacturing in the US," said Jessica Jin, principal research analyst for clean energy technology at S&P Global Commodity Insights. But there is "potential of overcapacity" at US panel factories, she added.

That does not appear to be a risk for new US crystalline PV cells, wafers and ingot production capacity, which sat at zero when Biden signed the IRA. New investments into those missing links in the US solar supply chain are underway, led by Qcells, though at a slower pace than modules.

PV cell capacity could jump to about 4.5 GW by the end of 2024 and to 14.4 GW one year later, according to manufacturer announcements tracked by Commodity Insights. Wafer capacity could rise to 1.5 GW by next year and ramp up to 11.8 GW by the end of 2025, if everything goes according to plan.

The Treasury Department's domestic content guidance will drive a "second wave of investment" into cells but, unless amended, will discourage wafer and ingot investments, according to a recent Commodity Insights report. That is because the preliminary rules, which some manufacturers are lobbying to change, list cells as the furthest upstream component in the calculation for solar installations to qualify for a 10% adder on top of an investment tax incentive worth 30% of project cost.

The rules did not halt Qcells' integrated supply chain strategy, however.

"While domestic content did not go all the way down to wafer, there are other incentives that allow us to invest," Cherry said.

The IRA awards incentives for US-made modules, wafers, polysilicon and other components, as well as power electronics and tracking systems. Manufacturers, which are adding thousands of new construction and manufacturing jobs, also qualify for local and state incentives.

'There are many challenges'

But some in the industry view the domestic content rules as a missed opportunity, reflecting a solar industrial strategy that still requires more coordination.

"Unfortunately, right now the guidance basically gives zero value to American polysilicon and American wafer, and that's what we were banking on," said Feuerherdt of Solar4America. "Which is ironic because obviously, as an industrial policy, you're not really pushing as much American value as you could have."

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HELIENE Inc. CEO Martin Pochtaruk is concerned
about import tariffs on manufacturing tools.
Source: HELIENE Inc.

Over the next year, the company plans to expand an existing module factory in California while initiating module, cell and wafer production in South Carolina with another SPI Energy affiliate, SEM Wafertech Inc. The wafer specialist initially sought to begin production by the end of this year, ramping to 3 GW in 2024. But those plans have slowed, according to Feuerherdt, as the focus shifts to panel and cell production.

Martin Pochtaruk, president and CEO of HELIENE Inc., which has solar panel factories in Ontario, Canada, and Minnesota, also plans to expand into cell manufacturing in the US.

"Of course, there are many challenges," he said.

Among those are ongoing exposure to import tariffs, including on the machines that US manufacturers need to make modules, cells, wafers and other products domestically, according to Pochtaruk.

"This is high complexity, highly automated manufacturing equipment that nobody makes in the US," he said. "If you want me to create jobs, you cannot hit me over the head with a baseball bat with import duties on equipment."

The HELIENE CEO also has concerns about finding sufficient workforce to keep factories running 24 hours a day, especially as the company moves into cell production. "Our constraint is as much know-how as it is capital," Pochtaruk said. "There's a gap that we need to cover, and we're covering it by hiring internationally."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.