While the U.S. Inflation Reduction Act (IRA) is boosting solar energy production in the United States, raising import tariffs could slow the momentum. The actions of the new Trump administration are difficult to predict at this point.
With the 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 fifty years.
More than $265 billion in clean energy investments have been made since the enactment of the IRA, and more than 330,000 new jobs are expected.
President-elect Trump said during the campaign that he would cancel all unspent IRA funds — but according to Joe Biden administration officials, $90 billion of the $120 billion available for climate-focused grants had already been allocated by October 2024. Another $15 billion could be disbursed before January 2025, when the new president takes office.
Some analysts believe the IRA could be protected by its strong performance, perhaps as the phaseout of the investment tax credit (ITC) is brought forward. A recent Bloomberg Intelligence report predicted that the policy could be hit by targeted cuts, rather than a complete cancellation.
This law increased the annual production capacity of solar panels in the United States by more than 10 GW to 31.3 GW in the second quarter of 2024, making the country the third largest producer in the world. About 48% of the new production lines have arrived in the election swing states of Arizona, Georgia, Pennsylvania, Nevada and North Carolina.
“Domestic solar energy production has quadrupled under pro-business federal clean energy policies and soon we will have enough American solar panels to meet our solar energy demand,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association. SEIA), in a statement released after Trump’s election victory. “Nearly nine in 10 Americans support these policies, which will boost communities in states like Ohio, Texas, Georgia and South Carolina with thousands of jobs and billions of dollars in investments.”
Due to the decline in equipment prices, solar energy comprised 67% of the new electricity generation capacity added to US grids in the first half of 2024. The United States added 9.4 GW of solar energy in the second quarter of 2024.
Impressive IRA-driven growth has been seen in tax credit transfers – “a cornerstone of US energy policy for decades,” said Alfred Johnson, CEO of consultant Crux. Johnson said pv magazine that clean energy installations saw significant growth during the first Trump administration. “Repealing the credits would increase energy costs and taxes on businesses, which is unlikely to be attractive to the administration and Republicans in Congress.”
Bipartisan support
Eighteen members of the House Republican Conference wrote a letter to Speaker Mike Johnson in August 2024, emphasizing the need to “prioritize business and market certainty” over repealing or modifying the IRA.
SEIA’s Hopper and Philip Shen, director and senior research analyst for sustainability at Roth Capital Partners, estimated in a post-election webinar that 12 to 14 of the IRA-supporting Republicans will not return to Congress. However, they noted that IRA investments have flowed primarily into Republican Congressional districts.
Tax credits are the “carrot” that could boost some of the cumulative 55 GW of annual module manufacturing capacity in the United States by 2024.
Trump and his trade policy guru, Robert Lighthizer, imposed tariffs – the onshoring “stick” – ranging from 7.5% to 25% on Chinese goods during the former’s first term. After promising 60% tariffs on Chinese goods during the recent election campaign, Trump wants Lighthizer back as his US trade representative.
Biden kept the first Trump tariffs in place to free the US solar supply chain from 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 previous rates.”
If the new Trump administration implements higher tariffs, the question for the U.S. solar industry will be how to fill gaps in the supply chain as U.S. production of cells, wafers and blocks increases.
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