While the Inflation Reduction Act (IRA) is reshoring solar manufacturing in the United States, raising import tariffs may slow momentum. The actions of the incoming Trump administration are tough to forecast at this point.
With passage of the IRA, along with the Bipartisan Infrastructure Law and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, the United States has a strong industrial policy for the first time in about 50 years.
More than $265 billion of clean energy investments have been made, with 330,000-plus new jobs anticipated, since the IRA was enacted.
President-elect Trump said on the campaign trail that he would cancel all unspent IRA funds – but $90 billion of the $120 billion available for climate-focused grants had already been allocated by October 2024, according to Joe Biden administration officials. Another $15 billion could be disbursed before January 2025, when the new president takes office.
Some analysts believe the IRA may be protected by its strong performance, perhaps with the phasing out of investment tax credits (ITCs) brought forward. A recent Bloomberg Intelligence report predicted the policy could be hit by targeted cuts, rather than complete cancellation.
The act saw the United States’ annual solar module manufacturing capacity rise more than 10 GW to 31.3 GW in the second quarter of 2024, with the nation becoming the world’s third largest producer. Some 48% of the new production lines have arrived in election swing states Arizona, Georgia, Pennsylvania, Nevada, and North Carolina.
“Domestic solar manufacturing has grown fourfold under pro-business federal clean energy policies and soon we will have enough American-made solar panels to meet our demand for solar deployment,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA), in a statement released after Trump’s election win. “Nearly nine in 10 Americans support these policies, which are uplifting communities in states like Ohio, Texas, Georgia, and South Carolina with thousands of jobs and billions of dollars of investments.”
Equipment price falls saw solar comprise 67% of the new electricity-generation capacity added to U.S. grids in the first half of 2024. The United States added 9.4 GW of solar in the second quarter of 2024.
Impressive IRA-driven growth has been witnessed in the transfer of tax credits – “a cornerstone of U.S. energy policy for decades,” according to Alfred Johnson, CEO of consultant Crux. Johnson told pv magazine that clean energy installations saw significant growth during the first Trump administration. “Repealing the credits would raise the cost of energy and increase taxes on companies, which is unlikely to be attractive to the administration and Republicans in Congress,” he added.
Bipartisan support
Eighteen members of the House Republican Conference wrote to Speaker Mike Johnson in August 2024, emphasizing the need to “prioritize business and market certainty” over repealing or amending the IRA.
The SEIA’s Hopper and Philip Shen, managing director and senior research analyst for sustainability at Roth Capital Partners, estimated in a post-election webinar that 12 to 14 of those IRA-supporting Republicans won’t return to Congress. They noted, however, that IRA investment has predominantly flowed into Republican Congressional districts.
Carrot and stick
Tax credits are the “carrot” that could incentivize part of a cumulative 55 GW of annual module manufacturing capacity in the United States in 2024.
Trump and his trade policy guru, Robert Lighthizer, levied tariffs – the onshoring “stick” – of 7.5% to 25% on Chinese goods during the former’s first term. Having promised 60% tariffs on Chinese goods during the recent election campaign, Trump wants Lighthizer back as his U.S. trade representative.
Biden retained the first Trump tariffs to free the U.S. solar supply chain of Chinese imports, but Jason Kaminsky, CEO of kWh Analytics, said, “The industry’s supply chains have proven incredibly resilient and dynamic in the face of years of prior tariffs.”
If the new Trump administration puts higher tariffs in place, the question for the U.S. solar industry will be how to fill the gaps left in the supply chain as American cell, wafer, and ingot manufacturing ramps up.
