Six years ago, an executive from Suniva, a bankrupt solar panel manufacturer, expressed concern about the intense competition from Chinese and Southeast Asian companies in the solar industry. Many U.S. solar companies had already closed down, and more were at risk unless the government took action. The Trump administration responded by imposing tariffs on foreign-made solar panels in 2018, but it didn’t bring jobs back to the U.S. Suniva’s factories remained closed until recently when they announced plans to reopen a Georgia plant. This decision was fueled by tariffs, regulations, and new tax breaks introduced in President Biden’s climate law, the Inflation Reduction Act.

The United States has always provided subsidies and trade protections to support the solar industry, but the current level of government support is unprecedented. Billions of dollars in tax credits for new facilities and stricter regulations on foreign products are leading to a resurgence of solar jobs in the U.S. Critics argue that these gains come at a high cost to taxpayers and may not be sustainable in the long run.

In the past year, solar companies have announced nearly $8 billion in investments in new solar factories across the U.S. This is more than triple the total investment announced between 2018 and 2022. Suniva plans to reopen and expand a factory in Georgia, REC Silicon is restarting a plant in Washington that was closed in 2019, and Maxeon is starting work on a $1 billion site in New Mexico next year. Executives from these companies credit the incentives provided by the climate law as a significant factor in their decisions to invest.

China has been a dominant player in the solar industry for over a decade. While the demand for solar power in the U.S. has grown substantially, a significant portion of the spending went towards cheaper foreign solar panels, often from Chinese companies. This raised concerns about overreliance on China and its human rights concerns. U.S. solar manufacturing employment peaked in 2016 but has begun to grow again with the recent investments.

Public subsidies have played a crucial role in driving the resurgence of the solar industry in the U.S. These incentives have made domestic production more economically viable compared to cheaper foreign alternatives. The climate law’s manufacturing tax credit has significantly reduced the cost of solar manufacturing in the U.S., offsetting higher wage and construction costs. The law also includes credits for customers who install solar panels, further promoting domestic sourcing.

While there is optimism about the growth of the U.S. solar industry, some skeptics argue that many of the announced projects may not materialize. The costs associated with subsidies and tariffs also raise concerns, as they can be expensive and may hinder the adoption of solar technology. However, proponents of the government support argue that a comprehensive approach that includes tariffs and tax credits is necessary to compete with China.

Government actions have historically shaped the global solar industry. Countries like Germany and Japan kickstarted the industry through subsidies, and China’s massive investments allowed it to surpass foreign competitors. Tariffs have also played a role in shaping the industry’s evolution. The United States imposed tariffs on Chinese solar products, and China retaliated with tariffs on U.S. polysilicon. These actions had consequences for companies like REC Silicon.

To effectively compete with China, the solar industry requires a holistic approach that combines tariffs and tax credits for domestic manufacturing. Suniva’s executive emphasized that these are not opposing measures but rather work together to strengthen the industry.