New Incentives Available for U.S. Solar Manufacturers

As the U.S. transitions to more renewable energy sources, solar manufacturers are poised to benefit from federal tax credits enacted as part of the 2022 Inflation Reduction Act (IRA). Some of the IRA’s tax credits are specific to the domestic manufacturing and sale of qualified solar, wind and battery components.

Key takeaways

• The IRA allocated $369 billion for clean energy infrastructure to bring U.S. carbon emissions down 40% by 2030.
• The Production Tax Credit (PTC) is defined by a set amount per watt or per production quantity, allowing the government to increase support as production volumes increase.
• The IRA also includes an expanded Investment Tax Credit (ITC), a one-time base tax credit for up to 30% of investments into solar production facilities provided in the year a project is placed in service.
• Bonus credits may also apply for projects with domestically sourced materials, qualified low-income economic benefits, or within defined “energy community” areas.

Top U.S. solar manufacturing markets

According to data from the U.S. Department of Energy’s Solar Energy Technologies Office (SETO), the number of manufacturing facilities that contribute to the solar photovoltaic supply chain is growing across the country, especially in the Midwest, South and Southwest. California, Ohio, Texas and Alabama lead the nation with a collective 32 manufacturers, or 44% of all production facilities tracked by SETO (standalone HQs excluded). The top metropolitan areas include the San Francisco Bay Area (6), Phoenix (4), Toledo, OH (4) and Dallas (3).

Figure 1: U.S. Solar Photovoltaic Manufacturers by State

Source: U.S. Department of Energy (Solar Energy Technologies Office).
Note: HQ locations without a manufacturing function have been excluded.

Federal incentives available today for solar manufacturing projects

One tax credit available to advanced solar manufacturers is the Production Tax Credit (PTC). Section 45X of the IRA defines a set amount per watt or per production quantity, allowing the government to increase support as production volumes increase. This structure is expected to significantly expand solar manufacturing across the U.S. This tax credit is offered annually over a 10-year period for eligible components sold beginning in 2023 through 2032.

Qualifying solar components eligible for these credits include:

Qualifying Solar Components

• Solar modules
• Photovoltaic cells
• Photovoltaic wafers
• Solar-grade polysilicon
• Torque tube or structural fasteners
• Polymeric backsheets
• Solar tracker

Applicable Tax Credits

• Solar module = 7 cents X current watt of such module
• Photovoltaic cells = 4 cents per watt-direct current
• Photovoltaic wafer = $12 per square meter
• Solar-grade polysilicon = $3 per kilogram
• Torque tube = 87 cents per kilogram
• Polymeric backsheet = 40 cents per square meter
• Structural fastener = $2.28 per kilogram

The IRA also includes an expanded Investment Tax Credit (ITC), under Section 48C of the IRA, which is a one-time tax credit for up to 30% of investments into solar production facilities provided in the year a project is placed in service. Qualified facilities may elect to claim the Section 48C ITC in lieu of the Section 45X PTC, but credits for component production cannot be claimed for facilities that also claimed credits for investments in manufacturing. The decision of which tax credit to elect depends on a variety of factors including project cost and how strong the resources are in the selected location.

These IRA tax credits continue to spur new solar manufacturing facilities domestically as companies try to quickly acquire these benefits. For more information on how to tap into these credits, contact the Location Incentives Group.

This brief is intended for general informational purposes. Nothing contained herein shall be construed as direct or indirect advice or recommendations about specific facts and/or circumstances that may be applicable to your situation. You should consult with CBRE or other professionals about the specific circumstances applicable to you. This brief does not contain legal or tax advice and should not be interpreted as such. You should consult with your own attorneys and/or tax advisors if you have any questions about your legal and/or tax obligations. CBRE makes no representations or warranties regarding the accuracy or completeness of the data, or any other information presented herein, or the applicability of such data or information to your specific circumstances.