Recently, there have been a series of policy changes within the renewable energy sector. These changes have impacted the solar market and will bring opportunities and challenges to the industry. Here is more information on the changes.

Tariffs Reinstated on Bifacial Solar Modules

In May, the Biden administration removed the tax exemption on bifacial solar modules. Bifacial modules are solar panels that can generate electricity on both sides. These panels were previously exempt from tariffs but will now be taxed at 15%. The reinstatement of this taxation is estimated to add 1%- 2% to the total cost of solar projects of any size. Bifacial panels currently account for 98% of all imported solar panels.

The CEA (Clean Energy Association) expects the reinstatement of the tariff to have a limited impact on the actual panels because suppliers will absorb most of the tax. With these changes, businesses may need to rethink their sourcing strategies. This new tax could put Asian solar products at a disadvantage within the U.S. market, so companies may need to diversify their suppliers.

Domestic Content Bonus

The next change was that the U.S. Treasury updated guidance regarding the domestic content bonus for clean energy projects under the Section 48/48E Investment Tax Credit and Section 45/45Y Production Tax Credit. These credits were made available through the Inflation Reduction Act.

This bonus offers a 10% addition to the 30% tax credit on clean energy products. Structural components, like steel and rebar foundations used in solar projects, should be 100% U.S.-made. In addition, 40% of the cost of other materials should be U.S.-made. Eventually, the 40% will rise to 55%. The Department of Energy has provided data that can be used to determine the percentages so that it is easier for developers to achieve the percentages and receive the bonus.

While the bonus may be easier to access, there will still be challenges. For example, some structural components (which need to be U.S.-made) have a limited supply. Experts expect that the limited supply issues will be resolved somewhat by 2026, allowing more developers to qualify for the bonus.

301 Tariff Increase

The final change in May was to the Section 301 tariffs. Section 301 encompasses the imports of electric vehicles, solar, battery energy storage, and other renewable energy components. Solar cells and modules shipped from China went from being taxed at 25% to 50%. Solar cells and modules imported from China only make up about 1% of the U.S. market, so this increase is largely seen as performative.

The changes to these tariffs are expected to create a more competitive domestic manufacturing environment. Therefore, U.S. factories may find it easier to set up operations and produce cells and modules at lower costs.

Conclusion

These recent policy changes create a dynamic landscape in the renewable energy sector. Industry professionals must be able to navigate these changes to succeed. They must remain competitive by leveraging tax credits, adjusting their supply strategies, and utilizing more U.S.-based manufacturing.