By Patrick Regan, president, Crossroads Solar
The recent climate legislation in the Inflation Reduction Act has the potential to do wonderful things for the decarbonization efforts in the United States and for the solar industry. As a U.S. solar panel manufacturer, we at Crossroads Solar are watching and waiting to see how the various credits will play out. Much of the objective of the IRA climate legislation is to generate American-made solar infrastructures in a way that will compete with cheaper imports. To my mind, we have to be sober about the likely outcome – or cheapness – of American-made panels. Prices will moderate but we will not become China, nor should we aspire to be so.
I get asked all the time how my panels made in Indiana compete with (mostly) Asian imports on price and quality. The answer is easy: We are a better-quality module, but we are more expensive. Both points will endure, and we should not expect that increased domestic production will decrease prices to be cheaper than imports. Price is important and will continue to be so, but the cost of a locally made panel should be evaluated on more than the simple dollar-per-watt calculus.
When I am asked about the price of a Crossroads panel relative to an imported option, I generally describe some of the added benefits that come with that added cost. My employees are all men and women transitioning from prison to society. What society gains from this local employment is the reduced cost of housing prisoners. When my employees begin to acquire financial stability, they start spending locally — on cars, insurance, housing and goods. They pay child support, restitution, find partners and get married. Some go to college, which we support financially. You don’t have to have a workforce such as Crossroads Solar’s to add up the benefits of local production. Non-felons also buy cars, rent apartments, and go to the dentist. To allow individuals to add back to our communities, we have to pay them well.
Crossroads is unique on this only in our mission, not in the cost of labor or the benefits our labor brings to local communities. It is difficult to ask a customer to pay more for an American-made solar panel. In the early phase of Crossroads, I was troubled by that added price. Then someone explained to me the added value that a locally made panel provides, and I lost much of my trepidation about our price point. Now I recognize that it is simply what we must pay to maintain the jobs and opportunities on our shores.
Just consider how many of us lamented the race to the bottom on price for everything from screws to door locks and tools that came with the movement from local hardware stores to big box outlets. Those big box stores thrive because we demand low prices, but they also aren’t much help when you break the cheap screw in the wood and it takes you hours to get it out. Quality seemed to suffer as the price went down in this situation. There are some things about “American-made” that we cherish and not complain about pricing. Sometimes we are happy to pay for quality and service.
To put the price dynamic into context for solar, if you paid $0.10/watt more for a 400-W American-made solar panel over the comparable import, you’d pay $40 more per panel. If you use 25 panels in a 10-kW array, the added cost for the panels is $1,000. When the entire system costs upwards of $20,000, how much of a difference does that extra grand make?
At the outside we are talking about a 5% premium for an American-made panel, for a panel that lasts over 25 years. It seems like a small price to pay for things like stability and economic development, along with the customer service that comes with a local production facility. The IRA incentives will push prices down, but our target should not be the box store model.
This dynamic changes considerably when you think of utility-scale installations. Tens of thousands of panels at $40/panel can have an appreciable impact on the bottom line, which is often driven by investment decisions. We still need large-scale imported panels at this stage of our decarbonization initiatives. There is a place for open trade, lower pricing and compromises — but not everywhere and not all the time. A race to the bottom only gets you to the bottom.
Of course, I’m biased at Crossroads Solar. When I argue that price shouldn’t matter as much as the value, I have a strong interest in convincing you that this is so. We are all going to make choices based on our finances and our commitment to climate stability. I care more that you install solar than I do that you buy American-made – or Crossroads Solar – panels. The IRA credits make it much easier to install solar energy systems, regardless of the source of the materials, but it makes it even more affordable if American-made products are purchased. The things that we cannot rebuy are the forests that burn from a harsh climate, the houses and coastlines that are destroyed from excessive storms, the crops that fail because of drought, and the lives lost because we were waiting for a better opportunity to “go solar.” We must do it, and we have to do it now.
The incentives in the IRA will make more solar available at more affordable pricing up and down the value stream. But what the IRA should not do is put U.S. solar production on par with imports. These credits should generate a long and enduring transformation in the U.S. solar industry, toward high-quality products and good-paying manufacturing jobs. Otherwise, it will be a blip that once again moves offshore once the incentive structures change.