Most of those involved in the solar industry applaud the climate provisions in the Inflation Reduction Act of 2022. Some of the most critical incentives apply to commercial installations, those high-consumption applications that can go a long way in reducing carbon dioxide emissions from the industrial and agricultural sectors. So far all is to the good.
Where it all begins to fall apart is in the complete lack of clarity from the federal government on a core provision of that legislation. It seems implausible for Congress and the president to design legislation with this level of import without also designing the mechanisms to implement it, but they have. It is actually a bit worse than that because of the debilitating nature of the uncertainty. The most critical aspect is in the designation for what constitutes an American-made solar panel.
There is a provision in the IRA legislation that provides for a 10% tax incentive for commercial installations that use American-made panels. Moreover, these provisions became operable in January 2023, but nobody is quite sure just what constitutes an American-made panel. Everybody is guessing, everybody is asking and nobody has clear guidance. And, frankly, nobody knows what the holdup is. By most indications this is not a hard task.
Crossroads Solar is an American-owned solar panel manufacturing company that produces an American-designed and American-made product, and we can make a panel with roughly 60% of the components coming from U.S. suppliers of U.S.-made products. On the face of things we are the quintessential American-made solar manufacturer. Like most others, our cells, frames and glass have to come from overseas because there are not yet sufficient U.S. manufacturers of these critical components.
There are other solar panels manufactured in the United States by companies much larger than Crossroads Solar — for example, Mission Solar, Qcells, Jinko, Heliene and more. They use a lot of U.S. labor, invest in U.S. communities and ship panels out of domestic factories. Presumably, some of their components come from U.S. suppliers just like mine. Although these larger manufacturers tend not to be U.S. owned, they do produce panels in the United States. In short, there are a lot of solar panels coming out of domestic solar factories. But who qualifies under the IRA provisions? No one knows.
If you were an EPC or local installer bidding on a commercial installation, how would you know whether the panels that get shipped to you from a U.S. factory qualify for the American-made 10% add on? We are in the second month of the incentive structures embedded in the IRA legislation and nobody knows how to quote on jobs — nobody is positive if their panel choice complies with the legislation. From my vantage point, there is a lot of guessing, a lot of hoping and, unfortunately, a lot of delays in potential installations.
It is almost unconscionable for the government to set out a list of incentives that require clarification for anyone to take advantage of them, but the best they can say is, “Wait until we develop guidance.” If the intention of the IRA climate provisions is to get solar installations under contract and in development with the aim of meeting the 2030 carbon goals, then it is incumbent on those who articulated these incentive structures to provide a way for the rest of us to act on them.
I get at least one phone call a week from an installer asking me whether my panels qualify under the IRA provisions. My answer is always just as unsatisfying for me as it is for the person on the other end of the phone. I tell them that if my panels don’t qualify, then I would suspect that no panel manufacturers qualify as producing an American-made panel. From that perspective, the IRA provision of a 10% add-back for commercial installations with American-made panels is at best vacuous. The caller usually ends by asking me if I have any sense of whether this has been clarified by the Biden Administration, and I have to say no. Things remain ambiguous at best. It should not be this way.
I am sure that I am simply echoing the sentiments of solar installers, solar manufacturers and potential customers when I call on the president to compel some urgency in this clarification process. Get us the guidance we need. He has articulated a laudable goal of carbon reductions by 2030, designed legislation to get us on that pathway, and then has allowed his administration to slow-roll things. Each week that we lose in delayed installations makes the goal of 50% reductions in CO2 by 2030 increasingly difficult. The president has to act, and the president should act now.
Patrick Regan is president of Indiana-based manufacturer Crossroads Solar.