The rules that the Biden Administration released on Friday will determine which companies or manufacturers are eligible for new tax credits in the solar industry. U.S.-based solar product makers have criticized these guidelines, saying they do not go as far as necessary to lure manufacturing from China.
The rules are a result of President Biden's clean energy bill. It offers a mixture of tax credits and incentives in an effort to encourage the construction of solar factories within the United States, and to reduce the country’s dependence on China to provide clean energy products needed to combat climate change.
In a Friday guidance, the Treasury Department said that it would provide a tax credit of 10 percent for solar panel assembly facilities in the United States. This is true even if the silicon wafers are imported from other countries. Solar and wind farms are eligible for a 30% tax credit under the new climate legislation of the Biden administration.
On Thursday, senior administration officials told journalists that they were taking a balanced approach that was geared toward forcing supply chains back to the United States. China's dominance in the global solar industry presents a difficult calculus to the Biden Administration, which is trying to ensure that the United States manufactures solar products while also ensuring a supply of cheap solar panels for reducing carbon emissions.
Officials said the Biden administration will have the flexibility to change rules as American supply chains strengthen.
Treasury Secretary Janet L. Yellen stated in a press release that the domestic content bonus, under the Inflation Reduction Act, will boost American manufacturing. This includes iron and steel. As a result, American workers and companies can continue to reap benefits from President Biden’s Investing in America Agenda. These tax credits will drive investment and ensure that all Americans benefit from the growth of the new energy economy.
The critics said that the new rules wouldn't go far enough in giving companies incentives to move their solar supply chains out of China.
Mike Carr, executive director of the Solar Energy Manufacturers for America Coalition which includes solar companies like Hemlock Semiconductor and Wacker Chemie with U.S. operations, Qcells, First Solar and First Solar called the move "a missed opportunity to create a domestic manufacturing supply chain."
In a press release, he stated that the announcement today would likely lead to a reduction in planned investments in critical areas such as solar wafers, ingots, and polysilicon. China produces 97 percent the world's wafers, giving it a significant control over polysilicon production and cell manufacturing. This guidance could cement China's dominance in these key pieces of the solar supply chains.
The Biden Administration has set a lofty goal to generate 100 percent of America's electricity using carbon-free sources of energy by 2035. This goal may require that solar installations double in pace each year.
Solar modules are still a major source of low-cost energy in the United States, but many Chinese factories produce them now in Vietnam, Malaysia, and Thailand.
China is also the source of many key components used in solar panels. This includes more than 80% of the polysilicon that most solar panels rely on to absorb sunlight. A significant amount of Chinese polysilicon is sourced from the Xinjiang area, where the U.S. has banned imports due to concerns about forced labor.
The Treasury Department's advice was more positive for other companies in the solar industry, who rely on imported parts.
Abigail Ross Hopper said that the guidelines were an important step in the right direction and would'spark investment into American-made clean energy components and equipment.'
She said that the U.S. Solar and Storage Industry strongly supports the onshoring of a domestic clean-energy supply chain. Today's guidance will complement the manufacturing renaissance which began last summer when the historic Inflation Reduction Act was passed.
Republicans in Congress have targeted the climate legislation of the Biden Administration, claiming that it does not set strict guidelines against Chinese manufacturing and that federal funds could be funneled to Chinese-owned firms that have established in the United States.
Biden's administration also provides funding for the development of the semiconductor and electric car battery industries. The guidelines for this money limit access to foreign entities that are deemed to be of concern. This includes Chinese-owned businesses. The Inflation Reduction Act, however, does not include any safeguards to prevent federal dollars from going to U.S. operations by Chinese solar companies.
Representative Jason Smith of the House Ways and Means Committee pointed out that the Florida-based facilities of JinkoSolar – a Chinese manufacturer – were eligible for federal tax credit.
A fact sheet by Mr. Smith stated that 'work at the plant involves robotically placing strings of solar cell -- which are mostly sourced from China -- on a solar panel' base.
Mr. Biden also clashed over another trade case with solar producers in the United States. This case would have tariffs placed on solar products imported by Chinese companies located in Southeast Asia.
Republicans and Democrats in Congress were angered by Mr. Biden’s decision to waive tariffs for two-years. They said that U.S. manufacturers deserved greater protection. Recently, both the House and Senate passed a bill to reverse President Obama's decision. Mr. Biden will likely veto the measure.