Solar wafers to be included in US domestic content bonus

In a statement, the Treasury said the new percentages for wafers “appropriately recognise cost differentials for manufacturers who use cells made with domestic wafers, thereby enhancing incentives for onshoring wafer manufacturing.”

It added that the cost percentages were “based on [Department of Energy] estimates of underlying direct costs” and the “expected cost premium associated with domestically produced silicon wafers”.  It is designed to create end demand for products made with US wafers.

The guidance also differentiates between fixed-tilt and tracker-mounted solar projects, as well as providing separate tables for ground-mount and rooftop PV, onshore wind and battery energy storage system (BESS) projects.

“Ensuring American workers are building the growing clean energy economy is a top priority for the Biden-Harris Administration,” said US deputy secretary of the Treasury Wally Adeyemo. “Today’s guidance will help fuel America’s clean energy investment and manufacturing boom and create good-paying jobs.” 

Solar wafer manufacturing

Western wafer producers and industry groups, such as the Solar Energy Manufacturers for America (SEMA) Coalition, have repeatedly called for more direct support for US silicon wafer production over the least year, both through domestic content provisions and direct manufacturing tax credits. Last October, the Treasury announced that solar ingot and wafer production would be included under the Advanced Manufacturing Investment Credit (CHIPS ITC) and become eligible for a 25% tax break.

The Domestic Content Tax Bonus adds a 10% credit to the existing 30% Investment Tax Credit under the Inflation Reduction Act (IRA). Based on their total cost, the bonus requires that 40% of a solar project’s components be produced in the US. This includes solar modules and their components, as well as balance of system components, such as inverters and solar racking. The bonus threshold will increase to 55% from next year.

Since its first announcement in May 2023, PV manufacturers have been concerned about the makeup of the domestic content guidance, primarily because upstream components, including cells, wafers and ingots, make up the majority of a module’s cost but were absent from the initial guidance.

To date, the US’ solar manufacturing expansion has been more successful at bringing module assembly capacity onshore than upstream components. The new domestic content guidance could begin to change that and provide more support to the companies which have begun efforts to establish domestic wafer capacity.

In response to the new guidance, SEMA Coalition head Mike Carr said: “The latest guidance, although a positive step, falls short in some respects. Congress intended the bonus to serve as a technology-neutral direct complement to the Section 45X advanced manufacturing production tax incentives, creating a clear demand signal in the market for American-made products built with components produced in America, spurring new investments in domestic energy manufacturing. 

“While it’s significant that the value of US wafer production is now recognised, if the tables were more focused on the core, strategic components of all solar technologies, we would see a faster and more expansive build-out of factories in the United States.”

The Treasury’s full notice of its domestic content guidance can be read here.

Insulating the IRA

Since Donald Trump’s presidential election victory in November, the future of Joe Biden’s flagship legislation, the IRA, has been uncertain.

While many industry experts have said that the IRA is unlikely to be repealed or significantly undone, there will likely be significant changes to federal regulation and the Department of Energy.

This guidance will be one of the final changes made to the IRA before the White House changes hands next week.

Measures like the domestic content adder, which emphasises support for “made in America” products and promotes measures to reduce US reliance on Chinese energy supply chains, are perhaps the most likely parts of the IRA to attract bipartisan political approval.

The incoming administration has expressed disapproval of Biden’s energy policies but has also emphasised US independence and strict trade measures against China. A group of 18 Republican congress members publicly warned against repealing the IRA in an open letter last August.