During last year’s lone vice presidential debate, Republican JD Vance sparred with Democrat Tim Walz over the issue of solar manufacturing. President Donald Trump’s now-second-in-command argued that the federal government is spending U.S. taxpayer money on made-in-China solar panels, but the country should instead make more of those panels domestically.
“We are,” Walz replied. “In Minnesota.”
“Some of them are, Tim, but a lot of them are being made overseas in China, especially the components that go into those solar panels,” Vance responded. “So if you really want to make the environment cleaner, you’ve got to invest in more energy production.”
It was an exchange that actually showed where the right and the left tend to align on clean energy: that it should be made in the U.S.
The One Big Beautiful Bill Act that Republicans are pushing through the congressional budgeting process poses a test of the GOP’s commitment to Vance’s position. Earlier versions of the bill that threatened to yank back tax credits that solar manufacturers relied on to build out new assembly lines in recent years — but in the ongoing Senate bargaining over the legislation, lawmakers are now trending toward restoring the original language of the law.
How we got here
For years, the solar companies that lease, sell, build and panels and generate electricity from photovoltaics and make up the bulk of the industry’s employment in the U.S. have relied on cheap imports from Asia. U.S. manufacturers, meanwhile, have struggled.
In 2017, the first Trump administration slapped tariffs on imported panels. The Biden administration maintained those trade levies, but proffered carrots to accompany that stick. Those came in the form of tax credits in the Inflation Reduction Act.
The most important credit is known as 45X, which shaves money off the federal tax bills of companies that produce clean-energy equipment such as solar panels domestically. Manufacturers that produced multiple components for their panels in the U.S. were allowed to claim the credit for each step in the supply chain, dramatically increasing the value of the credit.
The bill Republicans proposed last month stripped out the so-called stackability aspect of the credit, significantly reducing the how much manufacturers could expect to receive by allowing integrated panel producers to write off only the final solar module.
But the version of the bill the Senate Committee on Finance released over the weekend tweaked the language in the legislation to something closer to what’s currently in law today. The Solar Energy Manufacturers for America Coalition, a lobby group, said negotiations on Capitol Hill are trending toward a return to the status quo.
“There’s movement in the right direction on stackability,” Mike Carr, SEMA’s executive director, told Latitude Media. “We’re cautiously optimistic we’ll get to where we were pre-bill.”
The focus now, he added, has turned to the fate of the two other tax credits seen as vital to restoring American solar manufacturing.
The legislation proposed phasing out both the 48E tax credit to support construction of solar panels and the 45Y credit for production of power from those units by the end of the end of 2027 — earlier than in past drafts. (This early phase-out specifically would apply to wind and solar, but not to other technologies.) Under the IRA, both tax credits contained bonus writeoffs for panels made with domestically-sourced components.
For many businesses, the three tax credits are part of a complementary suite of incentives that make the U.S. feel like a safe space for the nascent market to grow.
According to Rob Bradham, the director of policy at the Chambers for Innovation and Clean Energy, a lobby group made up of local chambers of commerce from across the country, “you can’t view 45X, 48E, and 45Y as separate. 48E and 45Y drive the demand side, and 45X responds to that on the manufacturing side.”
“The three of them work together,” he told Latitude Media. “You have to have all three.”
Meanwhile, the big surprise in the bill the Senate released over the weekend was the inclusion of an excise tax on renewable power equipment made with foreign components, which would kick in for certain projects after 48E and 45Y phase out at the end of 2027.
But the levy drew fierce criticism from even the renewable industry’s biggest critics. On Monday, Sens. Lisa Murkowski (R-Alaska), Joni Ernst (R-Iowa), and Chuck Grassley (R-Iowa) introduced an amendment to eliminate the excise tax and restore the stackability of 45X. The proposal had yet to come up for a vote as of Monday evening.
Whatever short-term benefits U.S. manufacturers may have gained from the excise tax, the threat of the levy posed a threat to the growth of demand for solar power in the long term, said Bradham, including the panels U.S. factories produce.
That said, in the wake of news about the potential for significant changes to the tax credit regime, the market appeared confident in solar manufacturers. Shares of Arizona-based manufacturer First Solar jumped on Monday by nearly 9%. (Solar manufacturers such as Heliene, which is based in Minnesota, or Qcells, which is building out factories in Georgia, are either private companies or U.S. subsidiaries of foreign corporations who stocks trade overseas.)
