Solar cell manufacturing in the United States resumed in the third quarter as silicon cells were manufactured in the country for the first time since 2019, a pivotal moment for America’s surging solar manufacturing sector.
The U.S. added a record-breaking 9.3 gigawatts (GW) of new solar module manufacturing capacity in the quarter. According to the U.S. Solar Market Insight Q4 2024 report released by Solar Energy Industries Association (SEIA) and Wood Mackenzie, five new or expanded factories in three states were added, bringing U.S. solar module manufacturing capacity to nearly 40 GW--nearly enough to meet the country’s solar demand.
“Federal solar policies and increased private investments are strengthening our nation’s energy security and creating thousands of new job opportunities for American workers,” said SEIA president and CEO Abigail Ross Hopper. “The United States is stepping up to take market share from foreign competitors and making sure that the jobs and economic growth from solar are benefiting American communities.”
Unfortunately, investors have continued to flee from the solar sector, with the selloff accelerating after Donald Trump defeated Kamala Harris to clinch leadership of the White House. Trump’s victory has renewed worries among traders that the incoming administration will weaken support for the solar industry, as well as other forms of low-carbon energy.
OPEC+ May Be Facing Long-Term Production Cuts
Sunnova Energy (NASDAQ:NOVA) has crashed -71.3% in the year-to-date, JinkoSolar (NYSE:JKS) -30.8% and SolarEdge Technologies (NASDAQ:SEDG) -86.2%, Enphase Energy (NASDAQ:ENPH) -45.7%, Array Technologies (NASDAQ:ARRY) -63.9%, Maxeon Solar Technologies (NASDAQ:MAXN) -98.9%, Fluence Energy (NASDAQ:FLNC) -27.8% and Daqo New Energy (NYSE:DQ) -26.7%. Meanwhile, Invesco Solar ETF (NYSEARCA:TAN) has returned -33.3% YTD while the iShares Global Clean Energy ETF (NASDAQ:ICLN), the world’s largest green energy ETF and a catch-all bet on clean energy, tanked -21.8% over the timeframe. The sector’s worst performer has been Richmond, California-based SunPower Corporation which filed for bankruptcy on August 5, 2024
Interestingly, Tempe, Arizona-based First Solar (NASDAQ:FSLR) is one of a handful of clean energy stocks firmly in the green, with FSLR having returned +14.8% YTD. There’s a method to the madness here. For some time, China has been considering an export ban that would help the nation maintain its substantial dominance in solar. Reports have emerged that China plans to ban the export of several key technologies used in the manufacture of solar panels. Amongst the proposed rules, advanced technologies used in the manufacture of wafers and ingots will be placed in a list of export controls, according to a public consultation process. If the plan is adopted, Chinese solar manufacturers would be required to obtain a license from their provincial commerce authorities to export such technologies. Thankfully, unlike its U.S. peers,
First Solar's panels are made using a proprietary process that doesn't rely on Chinese crystalline silicon (c-Si) supply chains.
The IRA In Danger
The biggest reason why solar and clean energy stocks have been routed ever since Trump was declared president-elect is because his president threatens the historic Inflation Reduction Act (IRA. For years, Trump has never hidden his disdain for clean energy . He has repeatedly lambasted the) IRA, describing it as the “biggest tax hike in history”. Trump has pledged to rescind any “unspent” funds under the IRA should he ascend to the Oval Office, again, “To further defeat inflation, my plan will terminate the Green New Deal, which I call the Green New Scam,” the former president said before the Economic Club of New York in September.
Two years ago, the Biden administration signed the IRA, allowing hundreds of renewable energy companies to benefit from $369 billion in tax breaks and subsidies for clean energy. In the previous year, the Biden administration passed the Infrastructure Investment and Jobs Act (IIJA), with the act authorizing $1.2 trillion in spending for transportation and infrastructure; $43 billion (not including loans and tax incentives) in flexible spending could be used for battery manufacturing, retooling auto industry facilities, retraining and rehiring existing auto workers and grid updates while more than $7.5 billion will support the buildout of EV infrastructure.
Recently, Politico provided estimates that companies have announced plans to build or expand an estimated 555 manufacturing facilities thanks to generous IRA benefits of the IRA. But here’s the kicker: less than half of the 230 facilities that were slated to commence by the end of 2024 will beat the deadline, meaning that over 60% of IRA investments will be at the mercy of the Trump administration. With the GOP set to take both the Senate and the House, a unified Congress could spell doom for Biden’s signature bill.
The IRA has so far survived Republican-led attempts to repeal major parts, but could be under serious threat under a new Trump administration. Trump may lack the power to unilaterally roll back the climate law, but certainly could make its "implementation more difficult", as Shannon Rinehart, portfolio manager at Threadneedle, has pointed out. His administration could hobble the climate law through executive action by revising treasury department rules yet to be finalized, holding back some of its loans and grants and/or tightening limits on tax credits.
“Some parts of the IRA will receive more pushback from Republicans than others. We’re trying to steer clear of those parts,” Chris Berkouwer, portfolio manager at Robeco, reported. According to Berkouwer, investments aimed at improving the grid infrastructure are likely to receive bipartisan support; however, whereas Democrats might want the grid strengthened to cater for the rollout of more renewables, Republicans are likely to favor the renewed infrastructure serving coal and gas power generation utilities.
That said, it’s likely that Trump might face some pushback from his own party if he attempts to do away with the IRA: in September, 18 Republicans in the House of Representatives signed a letter to Speaker Mike Johnson, asking him not to work towards “prematurely repealing energy tax credits” supporting new IRA investments--the majority of which have gone to Republican states.’Red States have actually benefited more from the IRA than blue states: A 2022 report by Climate Central revealed that Iowa and Oklahoma, some of the ‘reddest’ states with Republican governors and majority Republican state legislatures, lead the nation in wind power production; California and Florida are the largest producers of solar power while Texas is a leader in both solar and wind power. The report says that state and federal incentives are a big reason for the rapid growth of renewable energy generation.
By Alex Kimani for Oilprice.com