Today the Dept. of the Treasury has released long-awaited further guidance concerning the domestic content bonus within the Inflation Reduction Act. Solar developers and installers that source iron and steel products and certain manufactured products from domestic producers can receive up to a 10% bonus to the investment tax credit (ITC) or production tax credit (PTC) when completing projects. Projects can receive the domestic bonus if they meet the requirements and are less than 1 MWAC, began construction before Jan. 29, 2023, or are greater than 1 MWAC and meet prevailing wage and apprenticeship requirements.
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Treasury today further clarified project descriptions and created a new elective safe harbor that allows developers to rely on Dept. of Energy-provided default cost percentages to determine eligibility for the bonus credit.
No major changes to previously announced requirements were revealed. As a review:
The domestic content bonus applies to projects built using required amounts of domestic-produced steel, iron and manufactured products. A product is considered to be “Made-in-USA” under this rule if 40% of the cost to manufacture it (when used on projects beginning construction before 2025) was completed within the United States. That rule increases to 55% for projects beginning construction after 2026.
To receive the bonus, all steel and iron manufacturing processes used in significant structural components must take place in the United States. This requirement is not applicable for steel or iron subcomponents (such as nuts, bolts, screws and clamps). Racking, piles, ground screws and rebar used in foundations are considered to be “steel and iron products.”
Solar trackers, solar panels and inverters are classified under the “manufactured products” designation. Project developers can follow certain adjusted percentages of qualifying components to meet the domestic content bonus. American-made battery packs (including cells, packaging, thermal management system and BMS), battery enclosures and inverters can also receive this adder.
The default cost percentages can be seen in the charts below. Solar projects are split among four categories: tracker projects, fixed-tilt ground-mounts, rooftop projects using MLPE and rooftop projects using string inverters. “Production” refers to the production cost of the components and can only be included in the domestic cost percentage if all of the components are domestically produced.
Battery projects are split between two categories: Grid-scale (greater than 1 MWh) and distributed (less than 1 MWh).
When electing for the safe harbor, projects featuring both solar and storage components will use a multiplier to accommodate the different nameplate capacities (solar PV being kilowatts vs. storage being kilowatt-hours). Tracker projects will multiply by 0.57, fixed-tilt projects by 0.75, MLPE rooftop projects by 0.69, and string inverter rooftop projects by 0.99.
Treasury and IRS will continue to consider stakeholder comments and plan to issue further domestic content guidance to address issues not in the scope of this guidance, including possible offshore wind requirements. The government is also evaluating potential options to incentivize domestic manufacturing of solar wafers, an ask made by Senate Democrats earlier this year.
Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA), provided a statement: “The added clarity on the domestic content bonus credit has been a top SEIA priority because it’s crucial to give manufacturers the certainty they need to invest in American communities. We appreciate the administration’s approach to making sure this bonus credit helps downstream manufacturers in the near term as we ramp up production of upstream components over the next several years. We also want to commend the administration for taking initial steps to clarify how residential and commercial installations can qualify for these incentives."
Mike Carr, Executive Director of the Solar Energy Manufacturers for America (SEMA) Coalition, commented on the increased focus on domestic wafer manufacturing: “We are also encouraged to see the Treasury Dept. recognize the centrality of 'the IRA’s goals of incentivizing U.S. solar manufacturing, including solar wafer production' as they work to develop the long term guidance for this credit. Swiftly and successfully converting this intent to domestic content guidance is critical to investments in major facilities supporting thousands of jobs, so we look forward to working with the administration to expeditiously produce workable guidance as soon as possible. Breaking the Chinese cartel on wafer manufacturing is at the core of a sustainable U.S. solar manufacturing supply chain and we are very pleased to see the administration take action to address this fundamental dynamic."
I would only trust guidance from an attorney on this subject with E&O insurance for protection and manufacturer certification letters.
Any non-residential project above 15KW does now unfortunately have a prevailing wage requirement.
Does anyone have a perspective on whether domestically sourced aluminum racking for carport structures could be used towards the domestic content threshold based on this new guidance? Should this be considered “rooftop”? Why did they specify “rooftop”? Why did they leave out aluminum racking on fixed-tilt ground mounts?
Does anyone have any insights into the “Fasteners” portion of rooftop racking?
And where do the roof attachments/Mounts stand, which are such a significant portion of the rooftop racking system?
In the example given on pg.22 of this latest Guidance, it states-
“The PV trackers are Non-U.S. Manufactured Products because some of their Manufactured Product Components are not produced in the United States.”
I haven’t been able to find in the legislation or updates where it states that any single component of a tracker not being of domestic origin automatically disqualifies the tracker for being a Manufactured Product? I expected it would be subject to the 40% content rule (plus 100% steel/iron).
Has anyone found insight on this? Thanks
I think in that example on Pg. 22, it’s saying that the project uses American-made torque tubes only with the qualified American-made solar panels, and that the actual tracker has no other component made in the United States. Therefore, the tracker is not of domestic origin. Just a few purposely placed torque tubes are domestic.
Since just yesterday, this Treasury Guidance for project components may change drastically. It has been announced that Biden has signed to raise imported items from China from Chinese built vehicles at a 100% tariff to ‘other’ Chinese supply chain items into the 301 tariff schedule to 25% to 50% more. It seems like rare earth materials will be 27%, cars 100% and some solar PV and battery units 50% more than last year. 2024 seems to be when a bulk of this is applied, but, this also seems to have “guidance” in some tariffs increasing to the 100% or 50% mark from now to about 2027. SO, this is a tell that the Treasury Department will have to revise their guidance from now to 2027 that will affect solar PV and energy storage moving forward. What does “stacked” guidance look like, first the IRA component and materials guidance is changing year over year on the amount of required materials from the U.S. or their trade partners, then these tariffs affecting the more robust supply chain from China. For instance many battery ‘modules’ for residential BESS units are running from $1,500 to $2,500. If these units were manufactured in China the new tariff of 50% will make these same modules $2,250 to $3,750 per module. This alone will ‘body slam’ solar PV plus ESS systems with a really big price increase and could destroy the momentum gained over the last 10 years. This portends a 20kWh battery in a solar PV system today costing around $10K will be $15K and the cost per kWh of storage will jump from around $1,000/kWh to around $3,750/kWh at the BESS level. This will be the time when one will see who a U.S. trading partner valued product is and who has been making products and using China for their supply chain of such components.
Kelly.
You wrote it Only applies to solar projects < 1MW (AC) or less? Really? Are you sure?
Solar projects less than 1 MW do not have to have the prevailing wage requirements. Projects greater than 1 MW have to meet prevailing wage requirements.