When the average person thinks about a solar panel, they’re usually envisioning a crystalline silicon solar module. Silicon-based solar panels are the most dominant model on the market, holding somewhere between 90 and 95% of the global production market share. The other main module type is thin-film solar, typically made with cadmium-telluride (CdTe) deposits.
Without getting too bogged down with historical details, the first solar panel was invented in the United States in 1954 through silicon testing, and the material has remained the dominant option in the solar market. Most early research and investment dollars were thrown at silicon designs, and today there is a robust, global silicon supply chain. But CdTe thin-film technology, championed by manufacturer First Solar, has found a niche supplying the utility-scale market and is still an important contributor to our greener future.
But the manufacturing processes for crystalline silicon and thin-film solar are different, and it appears the new manufacturing tax credits in the Inflation Reduction Act will benefit thin-film the most at the start. Here’s why.
Solar panel manufacturing processes
A crystalline silicon solar panel first starts as metal-grade silicon. A company purifies that into solar-grade polysilicon. Then it is shaped into ingots, which are cut into silicon wafers. The wafers are doped to make silicon cells, which are then finally assembled into a solar panel. There are a few solar companies that handle multiple steps in this process, but, mostly, crystalline silicon solar panel manufacturing is fragmented. Currently, the United States only has final solar panel assembly plants — a U.S. solar panel maker must buy solar cells from overseas, and those solar cells are probably made from another company’s solar wafers, and so on up the chain.
Meanwhile, CdTe thin-film solar panel manufacturing has fewer cooks in the kitchen. Generally, cadmium and tellurium are vapor-deposited on glass like a wafer, lasers cut “cells” in the deposit for interconnection lines and conductors and another piece of glass finishes the panel. Everything is completed on the same final unit on one manufacturing line. Where a crystalline silicon panel maker depends on outside suppliers for its silicon product, a CdTe thin-film panel maker produces almost everything in-house.
The IRA established manufacturing tax credits of 7¢/WDC for modules, 4¢/WDC for cells, $12/m2 for wafers and $3/kg for solar-grade polysilicon.
A U.S. crystalline silicon panel assembler would receive $29.40 in credits per 420-W module.
A U.S. thin-film panel manufacturer, on the other hand, would receive $75.84 per 420-W module, based on the company technically making its own cells and wafers in-house (SPW determined this rough math using a First Solar spec sheet).
At first glance, thin-film solar module manufacturers have a clear monetary advantage to ramp production. But crystalline silicon panel manufacturers are also incentivized — to innovate higher-power products and bring their fragmented supply chain in-house.
How credits will change the domestic manufacturing landscape
Both types of solar panel manufacturers were included in Senate Committee on Finance discussions on how best to structure credits in the IRA. Scott Moskowitz, senior director and head of market intelligence, public affairs and marketing for crystalline silicon panel manufacturer Qcells North America, said the purpose of the legislation is to make U.S. manufactured solar more competitive with foreign-made solar, no matter the technology type.
“The Senate wanted to ensure the credit was ‘technology-neutral,’ so if you had a vertically integrated crystalline silicon PV manufacturer and a vertically integrated thin-film manufacturer (even though thin-film tends to be vertically integrated already), you wouldn’t have one disadvantaged against the other,” he said. “You don’t have one manufacturer getting more tax credits than another for a product that essentially does the same thing.”
Having a credit based on wattage also encourages manufacturers to improve their technology outputs to grab more credits.
“It incentivizes innovation,” Moskowitz said. “You get more credit on a per-watt basis if you have a higher-wattage panel or a more efficient cell.”
The credits are available for 10 years, with a phasedown in the latter years. With some factories taking a few years to get started, new facilities and expansions will be announced quickly to capitalize on the credits. Toledo Solar, a small-scale CdTe thin-film panel maker, operates a 100-MW factory in Perrysburg, Ohio, and is banking on the full suite of manufacturing credits available to thin-film companies to grow its annual capacity to 2.8 GW by 2028.
“[IRA credits] allow us to further lower the cost of manufacturing, which is critical for a level playing field,” said Aaron Bates, CEO of Toledo Solar. “Second, it gives confidence to the world of finance. That’s critical for us; that’s critical for everyone. When there’s actual commitment from the federal government, it gives the financial markets the expectation of stability — that this industry won’t get swept away like it did in 2010.
“These are not small numbers,” he continued. “For us, you’re talking $40 million per leap of growth, from 100 to 300 MW, 300 to 600 MW, etc. For First Solar, they’re doing billion-dollar projects. These are not small endeavors.”
Qcells will spend $170 million to build a 1.4-GW solar module assembly plant in Georgia, and even the 7¢/WDC credit afforded to modules will be a big help. Hanwha Group, Qcells’ parent company, is planning on investing in all areas of the silicon solar supply chain, so we may soon see the country’s first vertically integrated crystalline silicon solar panel manufacturer.
“This is a multi-phase, multi-billion-dollar investment plan. We need to figure out how to build this complete value chain all the way from polysilicon to module,” Moskowitz said. “Folks in Washington want to see this policy work. They want to see a big investment from it.”
Thin-film panel manufacturers may see an easier path to maximizing the available credits, but all manufacturers in the solar panel supply chain stand to gain from the IRA.