Solar Wafer Makers Can Tap 25% US Tax Credit Under New Rule

(Bloomberg) -- Solar ingot and wafer manufacturing projects in the US will qualify for a 25% tax credit under a new rule that could unlock investment in domestic production of the equipment used to make panels.

So far, the US has struggled to foster domestic manufacturing of crystalline silicon wafers, despite a series of plans for new cell- and panel-making factories spurred by the 2022 climate law known as the Inflation Reduction Act. The new Treasury Department rule unexpectedly extends the reach of an investment tax credit created under a separate law known as the US Chips and Science Act that’s meant to nurture a local semiconductor supply chain. 

Under the final rule unveiled Tuesday, both semiconductor and solar wafers will qualify for the credit. The incentive applies to advanced manufacturing facilities and equipment used for growing single-crystal ingots as well as slicing, etching and bonding of semiconductor-grade polysilicon used in photovoltaic modules.

Solar manufacturers and renewable developers cheered the development, saying it would help cultivate a deeper domestic supply chain that extends beyond the final stage of panel assembly. 

The policy “will create new opportunities for solar manufacturers” and help address “a critical gap in the solar supply chain,” given the US doesn’t have ingot and wafer facilities operating today, said Abigail Ross Hopper, president of the Solar Energy Industries Association.

The credit, which applies retroactively, is expected to apply to a Qcells factory under construction in Georgia that will manufacture ingots, wafers, cells and panels. The benefits are concentrated in supply chains for conventional crystalline silicon panels, not those using other technology.

The move comes as some US solar manufacturers push for new tariffs to counter alleged unfair subsidization and pricing of cells and panels imported from Southeast Asia. They have argued that a mix of tariffs and incentives is needed to nurture a domestic solar supply chain and wean the US off Chinese manufacturers that dominate the industry.

The policy will help counter China’s “virtual monopoly of the clean energy supply chain,” said Danny O’Brien, president of corporate affairs at Qcells. “The White House is wisely addressing the fact that the overwhelming majority of solar panels manufactured in the world are done so by companies in China.”

The Treasury Department said it adopted the expanded tax credit approach “due to specific supply chain and national security considerations regarding the production of solar wafers.” In a news release, the Treasury Department emphasized it is working with other agencies “to evaluate additional options to further the administration’s goal of incentivizing domestic production of the full solar supply chain.”

(Updates with more details on credit eligibility and industry reaction from third paragraph)

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