What happened: To be eligible for the tax credits provided by the Inflation Reduction Act, U.S. solar producers must employ locally produced cells, according to recent instructions from the U.S. Treasury. Analysts predict that the requirement won't considerably lessen the U.S.'s reliance on imports from China because the U.S. has a limited capability for producing solar cells. Since 2011, China has invested $50B to become the world leader in solar-power technology, significantly more than any other country. Why it matters: The U.S. solar manufacturing industry needs to catch up to China's, making it unlikely that the new U.S. regulations to restore renewable energy supply chains will be able to weaken China's sway over the industry. The limitations on imported cells may impact solar producers' procurement plans and show Washington's efforts to offset China's competitive edge in clean technology. Where to see the impact: Due to supply chain limitations and trade prohibitions on solar-related imports, U.S. solar projects will only benefit from the full tax credit if they obtain their cells domestically. According to IEA, China's share of manufacturing in the critical stages of solar panel production is set to reach 95%. |
