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Solar Companies Attracted to U.S. by Generous Tax Credits and Trade Safeguards

Six years ago, an executive from Suniva, a bankrupt solar panel manufacturer, warned that competition from companies in China and Southeast Asia was causing a “blood bath” in the industry. Many U.S.-based solar companies had already closed down, and more were expected to follow unless the government provided support. This plea led to the Trump administration imposing tariffs on foreign-made solar panels in 2018. However, the tariffs did not reverse the trend of job losses in the industry.

Recently, there has been a shift. Suniva announced plans to reopen a Georgia plant, thanks to tariffs, protective regulations, and new tax breaks for Made-in-America solar manufacturing. The U.S. government is making significant efforts to support the solar industry with substantial financial backing.

The combination of tax credits and restrictions on foreign products has led to a wave of “reshoring” solar jobs. In the year since the climate law was passed, solar companies have announced nearly $8 billion in new investments in solar factories across the United States. This is more than triple the total investment announced from 2018 to mid-2022.

For example, Suniva plans to reopen and expand a factory in Georgia, REC Silicon is restarting a polysilicon plant in Washington, and Maxeon will begin work on a $1 billion site in New Mexico. Executives from these companies have cited the incentives in the climate law as significant factors in their investment decisions.

The generous subsidies and tariffs, combined with public support, have revitalized solar manufacturing employment in the United States. These efforts are estimated to create thousands of permanent jobs in the solar industry.

However, some economists express concerns about the high costs associated with these subsidies and tariffs. Past industrial policy programs, such as the investment in bankrupt solar company Solyndra, have been costly for taxpayers. Additionally, protections for the U.S. industry can make solar products more expensive, potentially hampering the adoption of solar technology and impacting climate goals.

China has been a dominant player in the solar industry for over a decade. The United States has relied on cheaper foreign solar panels, particularly from Chinese companies, raising concerns about overreliance and supply chain vulnerabilities. China’s substantial government investments have allowed it to capture a significant share of the global manufacturing process.

The solar industry’s evolution has been shaped by tariffs as well. The United States imposed levies on Chinese solar products in 2012, and China retaliated with tariffs on U.S. polysilicon. These tariff measures had a significant impact on solar companies outside of China, forcing them to close.

To compete with China, the U.S. solar industry needed a comprehensive approach that included tariffs and tax credits for domestic manufacturing. The industry believes that these measures work together to strengthen the industry’s resilience.

Overall, the U.S. solar industry is experiencing a resurgence fueled by tax credits, trade safeguards, and government support. While there are concerns about costs and potential limitations, the industry is hopeful that these measures will help establish a robust domestic manufacturing sector capable of competing with China.

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