The U.S. clean energy manufacturing sector has made enormous strides thanks to industrial policy, but competitors are following suit.
The European Union is setting its sights on building a more robust and complete clean energy supply chain, announcing on Monday grants totaling nearly $5 billion. Though an ally, Europe’s investment in this vital sector cements the need for continued focused clean energy manufacturing investment in the United States.
Despite this new focus from the EU and the U.S., China’s lead in the clean technology race has been well established. It’s the world’s biggest manufacturer and exporter of solar panels, lithium batteries and electric vehicles, and that primacy has rightly been identified as a threat.
Notably, Bloomberg reports that the European Commission will favor bids that “sources less of their cathodes, anodes and active materials from China. It will also require a transfer of know-how: new patents originating from the awarded projects will have to be registered in EU member states.”
Meanwhile, importers are sounding the alarm that tariff increases on Chinese solar products could delay America’s clean energy transition. This warning is profoundly misplaced. Against enormous odds, the United States solar manufacturing industry has revived though Chinese overcapacity flooded the market in the late 2000s and put scores of U.S. manufacturers out of business. It’s a comeback made possible by 2022’s Inflation Reduction Act (IRA).
Reuters reports:
“By October, U.S. solar module production capacity had risen more than fivefold to 45 GW, analysts at S&P Global said, due to new tax credits for manufacturing facilities introduced in the inflation act. There are currently more than 95 utility-scale solar-related manufacturing facilities in the U.S. and almost 100 new or expanded facilities announced since 2022, according to the American Clean Power (ACP) association. In September, First Solar opened a 3.5 GW/year panel production plant in Alabama, taking its domestic manufacturing capacity to 11 GW/year.”
A new report from the Solar Energy Industries Association finds that U.S. solar factories have reached a total annual output of almost 40 GW, nearly enough to meet all domestic demand.
In E&E News coverage of the report, one of the authors, Wood Mackenzie Principal Analyst Sylvia Levya Martinez, highlighted the role that the IRA has played in restoring America’s solar manufacturing capacity.
“There has been a drastic increase in total manufacturing capacity,” Martinez said. “We’re still seeing more capacity that is also under construction, and even more announcements for 2025.”
The IRA’s work is still in progress, and the U.S. clean energy supply chain will see even more growth in the coming months. That is, if we keep the law’s incentives in place and shield the U.S. market from the tidal wave of Chinese overcapacity that once again threatens to obliterate solar factories and other key clean energy manufacturers.