The solar trade environment is currently imbalanced as growing demand for solar components outpaces domestic production capacity - driven by more than just supply and demand factors; policies aimed at increasing domestic content and securing American jobs also play a significant role. These intersecting dynamics create a complex landscape that solar businesses must navigate carefully.
Recent policies have boosted the solar sector, with marked growth in community solar (bolstered by IRA incentives for low-income communities), clearer domestic content standards (Standard 101) to come, and variable tariffs that have adjusted throughout the year to support US production while maintaining fallback contingencies. Although the election imbues some short-term uncertainties, both parties have supported protectionist trade actions. We anticipate policy adjustments, yet all aimed at strengthening the US solar supply chain over time.
As an US manufacturer in Houston, TX, Imperial Star Solar continues to navigate industry challenges with agility, leveraging its vertically integrated supply chain and strategic partnerships to secure domestic components for its modules. With a combination of long-term, strategic thinking and the ability to quickly adapt to new regulatory environments, we maintain sustainable growth and remain steadfast in the delivery of reliable products to our customers.
Community Solar Policy
Community solar is rapidly growing, with large companies investing in community solar projects, states hitting community solar milestones ahead of schedule, and others making headlines for record-breaking projects. We note that community solar policy adoption varies across states, with some - such as California, Indiana, Arkansas, and Maine - having implemented policies that have hindered community solar initiatives
As community solar and other distributed solar programs continue to gain favor, changing policy will be the determinant in how quickly — or smoothly —they are adopted.
Photo courtesy of PV Magazine
Bonus tax credits that support the expansion of low-income solar projects (updates to the IRA) spurs the growth of community solar projects further, providing an influx of investments and business opportunities to previously underserved communities. Imperial Star Solar is a supporter of local and global community solar and we expand solar access to underserved areas through our GivePower Campaign.
Community solar expansion can increase prevalence of solar energy and increase adoption in underserved communities where most resistance to adoption is the highest. It also opens up rural areas, promoting equitable access to solar power. The potential to enhance energy resilience and reduce the strain on centralized power grids could drive the mainstream adoption of solar energy and lead to the passage of more supportive policies.
101 Standard
The Solar and Energy Storage Supply Chain Traceability Standard, also known as SEIA 101 Standard, aims to develop a national standard that increases transparency in the solar and storage supply chain while helping companies meet US Customs and Border Protection (CBP) traceability requirements. The proposed requirements encompasses 7 steps to achieving the required standard, refer to SEIA to review the complete draft.
The 101 Standard is currently in progress and the final version is expected in Q1 2025. The 101 Standard was developed in response to ongoing challenges in navigating complex trade rules. If passed, it will serve as a foundational guide to be in compliance with the Uyghur Force Labor Prevention Act (UFLPA) and other import regulations on solar products.
Additionally, it will enhance supply chain traceability by mapping the supply chain and collecting relevant documentation, tracking the origin of materials used in the solar module.
At Imperial Star Solar, we remain abreast of supply chain compliance policies and are adept at navigating related challenges. As such, we have frequently advised clients on the development of supply chain compliance policies and how to mitigate risks. We have also engaged third-party consultants to enhance our capabilities and deepen our understanding of evolving supply chain policies. While the implementation of this traceability program is a positive step in this industry, we note that it does not guarantee compliance with all relevant regulations and nuances.
Tariff Rate Increase
As domestic production scales, recent policy changes—such as the removal of de minimis tariff exemptions for Sections 201 and 301 in May and September 2024, respectively, and the end of the Solar Bridge program in June 2024 - further encouragement for companies to utilize American made solar products. Specifically, the imposed tariff hike in September 2024 will affect solar cells (whether or not assembled into modules), increasing tariffs from 25% to 50%.
Photo courtesy of PV Magazine
Consequently, the rounds of tariff hikes will result in increased costs for Chinese-origin products such as raw materials, solar cells, and solar manufacturing equipment, with these cost increases anticipated to be phased in over the next two years. In the near-term, Section 301 further proposes raising tariffs to a suggested 50% on materials like polysilicon and wafers on January 1, 2025.
These tariffs primarily affect upstream products from China and third countries listed in the AD/CVD orders. The tariff protection wards China’s policy-driven overcapacity that depresses prices and aid in expanding US domestic production. Imperial Star Solar has addressed this issue by partnering with multiple domestic content suppliers.
Incentives & Temporary Tariff Reliefs
Incentives and temporary tariffs relief like these are closing gaps within the domestic solar supply chain and supporting solar manufacturing growth in the US.
Despite tax hikes, there is some good news. The finalized rules for a bonus tax credit under the IRA’s CHIPS ITC were issued in late October 2024. This 25% Investment Tax Credit aims to boost US solar wafer and ingot manufacturing by incentivizing facilities that begin construction before 2027. The country currently has no established capacity, with only 3.3 GW capacity under construction at the time of writing.
Additionally as part of the Section 301, The Office of the United State Trade Representative (USTR) currently proposed 19 temporary exclusion for specific Chinese-made solar manufacturing equipment that is to remain in effect through May 2025. USTR currently hosts an open portal for temporary exclusions requests for certain machines used in domestic manufacturing from October 15, 2024 through March 31, 2025. While this benefits current market players, it creates a barrier to entry for new entrants after Q2 2024 since they may not have had the chance to submit their requests and might need to use equipment that isn’t on the exclusion list.
Moreover, the US raised Section 201 tariff rate quota (TRQ) for imported cells to ensure domestic manufacturing will maintain momentum - intended to support the current nascent PV cell manufacturing in the US. With this tariff action effect in August 2024, the capacity of solar cells that could enter the country tariff free increased from 5 GW to 12.5 GW. This move is an important bridge for downstream producers to gain access to supply they need as the US progresses their onshoring of solar manufacturing.
Keeping a Close Eye on Policy
Policies affecting the solar industry are constantly changing with favorable as well as unfavorable outcomes. Embracing recent policy shifts allude to driving a more costly supply chain in the short term, in exchange for a more independent and reliable supply chain ecosystem in the long term. Ultimately, the market will see increased participation, particularly in the upstream sectors, and pricing for domestic content is expected to reach parity.
The following are takeaways from recent policy changes:
Opportunities for community solar to gain traction across states and drive mainstream adoption
Enhanced traceability (Standard 101) throughout the supply chain, particularly tracing back to upstream origins
Recent tariff hikes that favor domestic content products - further prompting local production
Incentives and temporary tariff reductions aim to boost US solar manufacturing
At Imperial Star Solar, we remain at the forefront of changes, actively mitigating risks and navigating policy nuances. With a focus on long-term strategies, we stay agile in the face of challenges, adapting swiftly to provide our customers and partners with valuable insights.
Our reliability, transparency, and deep sector expertise make us a valuable industry player. Follow Imperial Star Solar to stay informed on the latest changes, or book a call with our expert to stay ahead of the curve.
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