Tag: moratorium

Has the Solar Industry Improved Under Inflation Reduction Act?

Posted on by bop-admin

When President Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022, it opened the door for a clean energy renaissance. 

Since then, a flurry of activity has occurred, especially in the burgeoning solar industry. Many new manufacturers and solar installations are cropping up across the country, but has the IRA had the intended effect we thought it would? 

What Did the Inflation Reduction Act Do? 

From the get-go, the Inflation Reduction Act laid out several ambitious goals. 

  • Make solar adoption more affordable 
  • Increase domestic manufacturing 
  • Create solar jobs 

In theory, the IRA would deliver the best of both worlds. The IRA instituted billions of dollars in programs, tax incentives, and development projects to bolster renewable energy production. Manufacturers also lined up, investing billions of their own dollars, with government support, to reshore solar development and production. 

But beyond the basics, the IRA has given the industry and government several things to cheer about. 

Solar Costs Drop 

When the IRA took effect, the inflation rate was over 8%, making it harder for businesses to fund projects. Despite the high cost of borrowing, the Inflation Reduction Act enhanced and extended programs to make solar more affordable. 

Among them were a series of tax credits, including Investment Tax Credits (ITCs) and Production Tax Credits (PTCs). Solar EPCs can claim ITCs upfront based on system costs. PTCs, meanwhile, are based on the amount of electricity produced over the project’s first 10 years. 

Every project is different, but deciding which credit makes more sense depends on project size, power output, and eligibility. 

Other credits encourage investments in low-income areas, rural communities, and abandoned sites like brownfields. These projects create jobs in underserved communities, add formerly abandoned sites to the tax rolls, and improve access to low-cost electricity. 

At the same time, utility-scale solar costs have leveled out in recent years, according to the National Renewable Energy Laboratory. Other costs, including labor and permitting, have also been resilient.  

Meanwhile, several tax credits tied to prevailing wages and brownfield development have helped lower costs. 

Domestic Manufacturing Blossoms 

As part of the IRA, the Biden administration pushed for more domestic solar manufacturing. So far, the Inflation Reduction Act has done what it intended to do. 

The IRA introduced Advanced Manufacturing Production Tax Credits for solar energy, which ties incentives to producing renewable components. Also known as 45X MPTC, manufacturers receive the credit per unit produced and sold. Eligible products include solar photovoltaic (PV) modules, inverters, batteries, trackers, and critical minerals. 

Another tax credit helping manufacturers is the Advanced Energy Project Credit (48C ITC). Like the previously mentioned credit, this applies to manufacturers building or upgrading facilities. However, it incentivizes companies to outfit their buildings or facilities with greener installations. These installations must reduce greenhouse gas emissions by 20% through low- or zero-carbon heat systems. 

Although the two credits cover different aspects of solar energy, companies cannot take both. 

Spurring Investment 

Beyond tax credits, the IRA allows more public/private investments to produce renewables. 

According to the White House, companies have announced about $265 billion in clean energy projects since August 2022. Many of those projects are in areas living below the median household average, bringing high-paying jobs and low-cost energy to underserved communities. 

Other information from the Clean Investment Monitor tells a similar story. In the first half of 2024, companies invested $147B into clean energy manufacturing and deployment. The amount has increased dramatically each year since 2022 as companies find ways to incorporate renewables into manufacturing, energy production, and operations. 

From opening new manufacturing facilities to upgrading critical infrastructure, solar and other renewables are thriving under the IRA. 

Bringing Back Jobs 

One of the most attractive features of the IRA was its ability to create manufacturing and skilled labor jobs. 

Since August 2022, the IRA has helped launch 330,000 new clean energy jobs. Manufacturing jobs are also coming home as the U.S. attempts to wean itself from overseas solar panels from Asia. 

Facts and Figures: Assessing the IRA’s Impact 

One way to analyze how well the Inflation Reduction Act has performed so far is to look at the metrics. 

What have we seen over the past 24 months, and is it enough to call the law successful? 

Clean energy investments are taking off. Source: Clean Investment Monitor (Tallying the Two-Year Impact of the IRA (cleaninvestmentmonitor.org))

Renewable Investments are Way Up 

Clean energy investments totaled about $147 billion through June 2024. 

Though the number is impressive, it’s more exciting when compared to investment figures before the IRA. In 2021, clean energy only garnered about $141 billion for the entire year. Seeing the number eclipsed in half the time is wildly impressive. 

All told, clean energy projects have pulled nearly $500 billion in investments. Some of the most welcome growth came from the manufacturing and transportation technology industries, with $89 billion invested. The total was more than four times the amount in the two years leading up to the IRA. 

More Projects Coming Online 

Officials have announced hundreds of projects across at least 40 states, with many tied to solar, wind, electric vehicles (EVs), and battery storage. 

According to RMI Analysis, the government has only disbursed about $66 billion in funds through the first half of 2024. More projects will come online in the next few years, including an estimated 320 GW of clean energy projects. 

More importantly, as new manufacturers and clean energy projects launch, added jobs will become available. RMI expects the solar industry alone will need 500,000 workers by 2033, doubling the number of jobs available today. As a result, we need more educational and certification programs today to develop tomorrow’s workers. 

Better Grid Resilience 

What good is generating a ton of renewable energy if the current electrical grid can’t support it? 

The IRA has provided a lifeline for grid operators to improve the grid. As more green energy comes online, including wind farms and utility-scale solar power, the grid must support it. That means investing in efficient power plants and transmission and distribution lines to move electricity effectively. 

Grid resilience could take several forms. One choice is to add to the grid to help it accommodate more electricity. Expanding the grid is not popular, as substations and massive transmission lines cause problems for communities. 

Another possibility is to improve transmission lines with new conductors. Most conductors crisscrossing the United States are aluminum wrapped around a steel core. The conductor design is over a century old (the patent is from 1908), so minor improvements could go a long way. 

A third option is to add more microgrids. Microgrids are small community grids that can run independently. If a storm takes down the larger grid, a microgrid can disconnect to still provide power to homes and businesses. 

The goal is to equip rural communities with microgrids powered by renewables and energy storage. Residents get reliable, low-cost energy produced close to home, and utilities can use microgrids to quickly pinpoint and correct problems during an emergency. 

Because the grid is such a critical piece of infrastructure, the government is stepping up to help. Luckily, the IRA and Bipartisan Infrastructure Law combine to create the largest investment in the power grid’s history. The laws will upgrade and rebuild infrastructure to accommodate new technology, expand service, and increase resiliency. 

Not All Sunshine 

No legislation is perfect, and the Inflation Reduction Act has shortcomings. 

Though the law does a lot for the green energy community, there are several holes, including some outside its control. 

The Rules Can Be Murky 

No government initiative would be complete without endless confusing and difficult rules. 

Between understanding how to qualify for the ITC and PTCs, navigating community, county, state, and federal regulations, and chasing down funding, getting projects off the ground is slow. Worse yet, the ITC and PTC dollars are sometimes not easy to qualify for and will only get harder to reach in later years. 

Despite the occasional trouble, companies have invested billions of dollars into developing a vibrant solar energy industry. 

Interest Rates Are Still High 

The long-term solar industry is growing by leaps and bounds, but high interest rates temper some investments. 

High interest rates make projects, facilities, and infrastructure upgrades more expensive. Everything comes with an extra added cost, potentially leading to delays or cancellations for builds. 

High interest rates have also resulted in a sharper increase in solar LCOE compared to fossil fuels. Though solar is experiencing an uptick in cost, fossil fuels still have a higher LCOE, making solar and other renewables more cost-efficient over the long run. 

Additionally, anticipated rate cuts in the coming months may kickstart investments in other projects, keeping the good times rolling. Investments are booming dramatically under the IRA despite currently high interest rates. 

We Still Rely on Others for Panels 

In June 2022, the Biden administration issued a two-year moratorium on solar panels from four Asian countries to keep projects going while domestic manufacturers caught up. 

The temporary pause is over, and new tariffs have been added to overseas solar products.  

Why? To protect a bevy of new manufacturers in the U.S. Without tariffs, cheap solar panels could flood the U.S. market, driving domestic manufacturers out of business. 

While solar manufacturing is making headway in the U.S., the industry cannot compete with low-cost panels. Tariffs keep the playing field even until U.S. manufacturers can sufficiently meet demand. 

Despite the tariffs and occasionally frosty relationship with China, the United States relies on many solar products. China controls roughly 80% of the global solar supply, from raw material sourcing to finished goods. 

Prices could skyrocket if solar EPCs and other installers lose access to overseas solar panels. American-made products are high quality but come at a high cost – sometimes too high for a budget to absorb. 

Spiking prices could cripple U.S. solar expansion until the domestic manufacturing supply chain catches up. 

Looking to the Future 

All things considered, renewable energy is moving in the right direction. 

Domestic manufacturing is increasing, and public/private investments are pouring in. Under the IRA and other initiatives, the industry should reliably expand over the next decade. Costs are stable, the government has incentivized expansion and development, and consumers are saving money in the long run. 

Though the long-term prospects look good, the upcoming 2024 election could affect the future of renewables. Depending on who assumes office and what agendas are announced, portions of the IRA could be rolled back or scrapped entirely. 

Overall, the IRA has done its job. Solar and renewable investments are exploding, the industry is vibrant, and there is real hope for a carbon-neutral future.

What Happens When the U.S. Solar Moratorium Ends?

Posted on by Mike Zimm

When the Biden administration implemented a tariff moratorium in June 2022 on solar panels and other products, the goal was to encourage more solar development while domestic producers and manufacturers could catch up.  

Fast forward nearly two years later, and the moratorium is about to expire. While some companies and industries have prepared for this day, others have been feverishly looking for alternatives. But with only a couple of months to go before new tariffs kick in, what can we expect to happen? 

The biggest questions we currently face are related to ongoing solar development. What will happen to current projects relying on foreign solar panels? Who stands to benefit most from reimplementing tariffs, and who could lose? How will disruptions like this impact our renewable energy goals?

How We Got Here 

The U.S. solar industry has been growing for years, mainly because of low-cost solar panels from China, but their relationship has had its difficulties. 

In 2012, the United States placed anti-dumping duties on Chinese photovoltaic (PV) panels containing crystalline silicon. Anti-dumping duties are a defense mechanism governments use to protect domestic producers from below-fair-market value products imported from overseas. 

Chinese manufacturers soon began moving their solar operations to Taiwan to avoid the tariffs. Not long after, in 2015, the U.S. expanded its duties to include Taiwan, too. 

By early 2022, the situation had bubbled into a full-blown problem. The U.S. Department of Commerce began investigating possible tariff circumvention by China through four additional countries, including Malaysia, Vietnam, Thailand, and Cambodia.  

One year later, the Commerce Department confirmed five companies out of eight investigated had circumvented anti-dumping duties. Other companies not under investigation at the time were also found to be skirting the tariffs.

So, Why Did We Issue a Moratorium? 

There has clearly been some bad blood brewing between the U.S. and China. But why did the U.S. issue a moratorium on solar panels, racking, and other components from Malaysia, Vietnam, Thailand, and Cambodia? 

Long story short – it had to. Thanks to the moratorium, solar projects could continue without delays. It also allowed the industry to keep growing while domestic production ramped up.  

The government also had time to investigate the circumvention allegations without handcuffing the solar industry during a vulnerable time.

The Sun is Shining for Solar. Why? 

By all accounts, 2023 was a fantastic year for solar generation. 

In 2023, the U.S. added more than 30 GWdc of solar power to the grid, accounting for more than half of all new electricity. But more solar power means more than just more electricity.  

Solar Energy Industries Association (SEIA) president and CEO Abigail Ross Hopper says solar energy generates tons of money through investments and jobs. 

“Nearly half of all solar capacity on the grid today has been installed in the last three years, generating over $120 billion of private investment and thousands of jobs across all 50 states,” Hopper explained. 

But a lot of importing had to happen to get to this point. In the first quarter to the third quarter of 2023, the United States imported about 40.6 GWdc of PV modules. In most cases, the panels were exempt from Section 201 duties, which protect domestic industries from import threats. 

Looking Ahead 

The SEIA forecasts another strong year for solar in 2024, though it will likely be less impressive than last year’s growth.  

Experts predict double-digit increases for commercial, community, and utility-scale solar this year, but residential install rates may slow. The organization attributes the potential slowdown to higher interest rates keeping homeowners on the sidelines until conditions improve.

  • Commercial – 19%  
  • Community – 15%  
  • Utility – 26%  
  • Residential – (13%) 

The states leading the charge are also the ones you would expect, with a couple of surprises. Texas, California, and Florida are sunny states with plenty of room for solar arrays. Colorado and Ohio, two surprising states making strides, are leveraging clean energy initiatives and solar-adjacent industries, respectively, to add renewable energy to the grid.

Solar Expansion Isn’t All Because of the Moratorium 

The moratorium affected the U.S. solar industry, but was it as significant as some may believe? 

It stabilized short-term supply chains for solar companies and allowed domestic producers to increase production. A steady supply of low-cost solar panels from Asia kept U.S. solar projects on time while preventing delays and cancellations that could have set the industry back. 

But the moratorium was only one piece of the solar puzzle. 

Price is generally an issue for new and emerging technology but is less problematic as it ages and improves. Solar panels are a prime example of this idea in action. Module prices have fallen 99.8% since 1976, including an astounding 15% per year between 2010 and 2020. 

Solar technology is getting better and more affordable every year, opening the door for mass adoption. 

But what good are solar arrays if communities and utilities have issues storing the vast amount of electricity produced? Utilities use fossil fuels when renewable energy sources like solar and wind are not generating enough power. As we move away from fossil fuels for renewable options, the need for battery storage becomes more critical. 

Battery storage costs have fallen at nearly the same pace as solar panels, slipping 85% over the course of a decade. Installing batteries to store electricity is becoming a more cost-effective solution for temporary increases in energy production.

Leaning Into Solar 

The hard costs of solar have long been a barrier to entry for solar companies, utilities, and homeowners. Luckily, the tide is turning and opening the door for more Americans, including those in smaller rural communities, to participate in low-cost electrical production. 

Hard costs have fallen steadily as technology, supply chains, and, most importantly, availability improve. At the same time, panel efficiency and battery storage are hitting record highs and showing no signs of slowing down. 

Unfortunately, unpredictable solar soft costs are a thorn in the side of utilities, companies, and community-scale solar projects. These costs are often difficult to gauge because different states have different permitting processes. Some states are also more solar-friendly than others.

Attractive Tax Incentives 

How does the government encourage more domestic manufacturing and renewable energy adoption in the U.S.? 

It all starts with making the right investments. 

Federal ITC (Investment Tax Credit) and PTC (Production Tax Credit) adders are an attractive incentive for solar companies and utilities. ITCs reduce upfront costs, making solar projects more affordable and helping generate profits faster. PTCs are more long-term incentives to encourage larger projects to help more consumers. 

Individual states, like Rhode Island, California, New York, Texas, and Florida, have many policies and incentives to spur solar projects. These can range from tax credits or deferrals to renewable energy certificates. Each incentive drives down investment costs while creating low-cost energy for consumers. 

Federal and state programs work together to promote cleaner sources of energy that generate electricity for consumers without raising electric bills. Consumers also have a say in renewable energy, opting for cleaner community-based options with fewer environmental impacts.

What Happens When the Moratorium Ends? 

June is quickly approaching, and with it comes the end of the solar panel moratorium. What happens after that is somewhat of a mystery. 

Prices will likely rise as the tariffs tack on more import taxes. Meanwhile, domestic production of photovoltaic cells, panels, and other solar system parts is starting to take off.  

There are currently 16 solar manufacturers in the U.S., including First Solar, the largest utility and community solar producer. The increase in domestic production has also brought in several large-scale international players, including QCells, whose solar panels are a leader in the residential market. 

The Supply Chain Could Hiccup 

The solar panel supply chain will not fall apart, but it could face strain caused by companies looking for other options. 

Why would companies look for other options if there isn’t a shortage of overseas panels? The panels may still be more cost-effective than U.S.-made ones, but tariffs, duties, and other taxes can drastically affect the cost of those PV products. 

Companies are always looking for more cost-effective solutions to bolster the bottom line. If doing business with Asia is too expensive, solar installers may consider using manufacturers in other countries. However, it takes time to set up new sources, which could add time to shipping and create delays. 

Domestic production would likely reduce supply chain delays eventually, but the products are more expensive. Companies also don’t have enough supply to address total demand – but that will change as more manufacturers come online. 

Although higher domestic prices seem similar to overseas tariffs, the shorter domestic supply chain reduces potential delays.

Short-term Struggles Lead to Long-Term Progress 

Ending the moratorium doesn’t mean U.S. solar companies will lose access to overseas solar panels and other products. 

If anything, it allows the U.S. to compete on a level playing field with other major exporters. Solar growth may slow in 2024 and even into 2025, but it will not be a death knell. Domestic manufacturing is rising, and the benefits far outweigh the perceived negatives. 

The United States has a lot riding on its renewable energy programs, including solar and wind. Developing and bolstering manufacturing tied to those industries helps us one day produce electricity without relying on traditional fossil fuels. It also opens the door for us to export our own products to other countries. 

We have a unique opportunity to address electrical grid reliability while reducing greenhouse gases. As with anything, it will take time, investment, and labor, but the country is making strides toward a cleaner future.