To succeed, US solar factories need more government support, report says

By Nichola Groom

(Reuters) - U.S. efforts to build a domestic supply chain for solar energy components is stalled and will require urgent government action to support the factories needed to compete with China, according to a report published on Wednesday.

The analysis by Guidehouse Insights, commissioned by the Solar Energy Manufacturers for America Coalition, said existing federal subsidies and trade policies are not enough to help U.S. producers succeed in the face of a global glut of solar equipment.

Many in the U.S. solar industry worry that the dozens of factories announced since passage of President Joe Biden's signature climate change law in 2022 may be uneconomical as global panel prices have collapsed due to a wave of new Asian production capacity.

"The biggest thing that we're looking for is a sense of urgency and a renewed commitment to achieving this goal," SEMA Coalition Executive Director Mike Carr said in an interview. "There's no fundamental reason why we can't have this industry here, but it does take a level of commitment and a willingness to keep the pressure up and respond to changing circumstances."

Though the Inflation Reduction Act (IRA) unleashed billions of dollars in clean energy subsidies, the report recommends more coordinated federal support for domestic solar factories.

Recommendations include tougher standards for project developers to qualify for a 10% bonus tax credit for using American-made components.

Currently, projects can claim the credit even if the cells assembled into their panels are made from Chinese materials. That means companies lack any incentive to build domestic sources for materials including silicon wafers and solar-grade polysilicon, leaving the industry dependent on overseas products.

The report also calls on the Biden administration to step up enforcement of duties on panels imported from Southeast Asia. Biden paused those tariffs nearly two years ago as project developers complained that they would increase costs and harm growth of a key clean energy technology.

"Duties must be effectively enforced, and actually collected, if they are going to work," the report said.

Finally, the report recommended stiffer enforcement of a U.S. law that bans goods made with forced labor and said the government should require federal solar projects to use only panels made with American-made components.

(Reporting by Nichola Groom; Editing by Richard Chang)