![]() ![]() The Inflation Reduction Act signed into law last year offers billions of dollars in tax credits for facilities using American equipment to speed decarbonization of the US power sector, create domestic jobs, and challenge China’s dominance in manufacturing. ![]() ![]() Shares of First Solar rose 26% following the announcement, while shares of inverter maker Enphase Energy increased more than 7%. Investors reacted favorably to the news, seeing it as giving a boost to companies with existing or future plans for US factories. The rules about how companies can claim a new tax credit for clean energy projects built with domestic equipment represent a compromise between conflicting proposals by solar project developers, who rely on cheap imports to keep costs low, and manufacturers who want to expand and compete with China to supply the US market. The announcement appears to undercut the stand the US trade representative took last year after Auxin Solar filed its petition for trade protection. Reuters reports that on May 12, the Treasury Department clarified that developers of solar energy projects can claim a new subsidy for facilities built with American-made products even if the system’s panels contain cells made entirely with Chinese materials. This week, the US Treasury Department issued new rules that will determine who is eligible for production credits and tax incentives regarding solar cells and panels. Politicians may thunder and declaim, but administrative agencies make the rules and regulations that translate political policies into action. There’s nothing business hates more than regulatory uncertainty, particularly when decisions made in Washington, DC, can determine whether a project is profitable or loses money. ![]() In the meantime, solar developers are shelving plans to build new solar installations because they don’t know how much those critical components will cost. While the IRA has encouraged new investments in solar cell and panel production in the United States, those new factories won’t spring up overnight. The Biden administration responded by putting a two-year pause on those higher tariffs, but the Senate recently voted to overturn that pause.Īll this turmoil has had a negative effect on the US solar industry. Last year, the US trade representative slapped higher tariffs on solar panels from China after a complaint was filed by Auxin Solar. The nub of it all is that China is currently the dominant supplier of solar cells and panels in the world and there are many complaints it is using its advantage to put other manufacturers - particularly those located in the US - out of business. It’s a delicate dance, one that is fraught with geopolitical implications. On the other hand, the government wants to encourage domestic production and protect American manufacturers from overseas competitors who may be using forced labor and government subsidies to make solar cells and panels that they sell for less than the cost of manufacturing. To accomplish that goal, there are many incentives included in recent federal legislation, like the Inflation Reduction Act, that are worth billions of dollars. On the one hand, the federal government wants to speed up the installation of solar power plants to help lower carbon emissions from thermal generating plants. Unless you have been living under a rock lately, you are probably aware that a titanic struggle is taking place in the US over solar power. ![]()
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