Although the solar industry is still awaiting final rules on IRA manufacturing incentives, inverter companies are working ahead to anticipate what the Dept. of the Treasury will require in the end. For some inverter-makers, this includes moving manufacturing operations stateside, while others already operating here consider expanding their facilities to meet new demand.
In August, Siemens announced a contract manufacturing partnership with Sanmina to make utility-scale solar string inverters in Wisconsin. The manufacturer will produce Blueplanet inverters at the new site, a product Seimens acquired from KACO in 2019.
As a multinational company, Siemens pays U.S. taxes but likely couldn’t fully capture the IRA’s 45X manufacturing tax credit by opening its own U.S. plant, according to Rudy Wodrich, director of PV business at Siemens USA. Instead, Siemens opted for contract manufacturing with Sanmina, with an agreement to split the tax credits.
Microinverter manufacturer Enphase is now producing IQ8 inverters with three U.S. contract manufacturers as well — in South Carolina, Texas and Wisconsin. Unlike Siemens, Enphase captures 100% of the IRA manufacturing credits through agreements with its manufacturing partners.
“Partnership terms with contract manufacturing partners are negotiated with many factors in mind, with tax credits being one. But the benefits are shared with the partners,” said Andy Newbold, senior director of corporate communications for Enphase.
Enphase expects to have the capacity to produce 18 million microinverters per year with these partners, for a total of about 7 GW.
In addition to receiving manufacturing tax credits, Siemens and other brands were motivated to start U.S. manufacturing operations because of customer demand — many community-solar and small-utility-scale developers that buy Siemens inverters are now seeking the IRA’s domestic content bonus credit.
In 2024, a solar project can achieve this 10% bonus if 100% of the structural steel and iron are manufactured in the United States and 40% of all manufactured products used in the project are American-made. Inverters could play a crucial role in reaching that metric.
“Some are able to do it by having sourced the right module that will get them to the 40 or 45% threshold immediately. Others who didn’t move fast enough are now scrambling to figure out, ‘OK, how do I get to that threshold with other components?’” Wodrich said. “The inverter, or inverter station, as it may be, can be part of that mix to help them get to the content threshold on their side.”
Another string inverter manufacturer with existing U.S. manufacturing, Yaskawa Solectria Solar, is expecting this IRA momentum to lead to a big boost in sales too. In the past, general manager Mark Goodreau said Yaskawa’s “Made in America” selling point was not always enough to beat out lower-priced Chinese inverter competitors.
“What we found is that even having that designation didn’t really compel our customers to buy from us, as opposed to a Chinese company, I think because the [desire for American-made products] wasn’t really a hard requirement,” Goodreau said.
Its main production line of XGI 1500 inverters in Buffalo Grove, Illinois, can expand to 2 GW per year with additional shifts and test equipment. Beyond that, Yaskawa would have to add an additional line.
Spanish utility-scale solar + storage inverter manufacturer Power Electronics is also bringing operations to the United States, with plans to open its own factory in Houston. Power Electronics expects to begin shipments of HEM and PCSM inverters in mid-2025, starting with a 5-GW capacity and eventually ramping up to 20 GW.
Domestic content makeup
Simply assembling products in the United States doesn’t necessarily mean they will count toward the domestic content requirements — the Treasury Dept. will consider the origin of a product’s subcomponents too. Only parts made in America or those that undergo a “substantial transformation” during the manufacturing process before final assembly are applicable.
Siemens is aware the U.S. content requirements could still change in future announcements from Treasury, but the company feels secure in its manufacturing plans.
“That doesn’t concern us greatly, because what we are actually trying to do as we domesticate this product is to find mechanisms and means by which we can localize some of the supply of components that are going into the product anyway,” Wodrich said.
To anticipate any additional requirements as well as lessen some typically cumbersome supply chain issues, Siemens is working to source as many components as possible from the United States. Switching suppliers for sheet metal, nuts, bolts, copper busbars and cable harnesses is relatively simple, but things become more complicated if Siemens changes any major components related to the electrical circuit of the product, which could trigger a retest and recertification by a nationally recognized testing laboratory (NRTL) to ensure inverter safety to the UL 1741 standard — which takes both time and money.
“We would have to build the samples, send them to Europe, have them tested to the UL standards and certify the new components in the supply chain that we’ve modified,” Wodrich said.
So Siemens is starting by finding U.S. partners for those smaller, simpler components, and also looking at “value-added processing” for other parts. That means taking a group of components from another country and processing them domestically in a way that substantially transforms them.
“I could have five components that are made in Europe, three components that are made in the U.S; I make a sub-assembly out of them in which I do some welding, some forming, some soldering, some painting, and then I can call that sub-assembly U.S. content,” Wodrich said.
Utility-scale solar + storage inverter manufacturer EPC Power also feels confident in the percentage of U.S. components in its products, but is still working to locally source even more parts.
“Our goal is to maximize that as much as possible,” said Adam Kabulski, VP of sales and marketing at EPC Power.
EPC Power has always made inverters in the United States, first at a facility in Poway, California, and now at a second plant that opened in Greenville, South Carolina, in late 2022. Current production capacity between both factories is 6 GW annually but will double to 12 GW by 2027.
The company is especially focused on incorporating more U.S. components in its forthcoming 500-kW inverter for solar + storage applications.
“The new M inverter will be more vertically integrated, with more manufacturing processes performed by EPC Power at our facilities, vs. previous inverters,” Kabulski said. “This will increase the domestic content portion of the bill of materials.”
Siemens is aiming for a March 2024 production start for U.S. string inverters out of Wisconsin, with full ramp-up by May. The company is asking customers to make reservations now for the limited inventory.
“We wanted to make sure that our key customers had an opportunity to reserve that capacity. It still is a bit of a seller’s market in the inverter space. There are more projects than there is capacity,” Wodrich said.
Capacity agreements are also a new reality for Yaskawa Solectria. The company had a few long-term supply agreements in the past, but now it’s working on numerous new long-term agreements with companies interested in its XGI 1500 inverter line, which the company said has between 50 to 60% U.S. content.
“We expect to be supply-constrained as we ramp up our capacity over the next couple of years, so that’s the purpose of these supply agreements — so that we have a good understanding of the demand for a particular customer,” Goodreau said.
EPC Power also uses supply agreements with customers, but always keeps some stock unclaimed so the company can respond to changes in the market.
“It’s a balance. We want to have strategic customers; we want to have certainty of who we’re working with, people that value what we bring. But we don’t want to be 100% MSAs (master supply agreements) that don’t allow us to respond to new developments,” Kabulski said.
Whether manufacturers have been producing inverters in the United States for years or they’re just setting out now, the IRA is incentivizing domestic operations and increasing customer demand for American-made products.