Climate law incentives prompt First Solar to build another US factory

The largest U.S.-based solar manufacturer is going to expand its domestic production significantly.

First Solar will invest $1 billion to build a new 3.5-gigawatt solar module factory in the Southeast, the company said Tuesday. Meanwhile, it will expand its existing manufacturing capacity in Ohio by 0.9 gigawatts. Those expansions, plus an already-planned factory coming online in Ohio next year, mean the company will be able to produce more than 10 gigawatts of solar panels each year by 2025. 

That’s almost as much as the current total U.S. module production today, which sits at 11 gigawatts, according to research firm Wood Mackenzie.

The announcement came just two weeks after President Joe Biden signed the Inflation Reduction Act into law. The $369 billion climate package includes novel tax credits to incentivize domestic solar manufacturing over the next 10 years. Expanded U.S. manufacturing creates jobs in the U.S. but also reduces reliance on China, which currently dominates the supply chain for solar cells as well as for precursors like silicon ingots and wafers.

“This investment is an important step toward achieving self-sufficiency in solar technology, which, in turn, supports America’s energy security ambitions, its deployment of solar at scale, and its ability to lead with innovation,” First Solar CEO Mark Widmar said in a statement.

First Solar is uniquely situated to take advantage of a push for American clean energy security. When the rest of the solar industry veered toward crystalline silicon cells produced cheaply in China, First Solar stuck with an alternative approach: cadmium telluride thin film. This technology eschews the Chinese silicon supply chain, which in recent years has been embroiled in controversy over alleged Uyghur forced labor.

Operating out of Ohio for years, First Solar honed its approach to cost-effective manufacturing in the U.S. (it also operates factories in Vietnam and Malaysia). That means the company is well positioned to expand from its existing foothold, rather than having to start from scratch on U.S. soil. By late July, First Solar had racked up a staggering 44.3-gigawatt backlog of orders, meaning customer demand far outstripped the company’s ability to produce its products.

First Solar leadership has consistently spoken out in favor of policies to support more U.S. solar manufacturing. Most divisively, the company has publicly supported multiple efforts to impose tariffs on imported solar products tied to China. 

Earlier this year, when little-known U.S. manufacturer Auxin Solar asked the Commerce Department to impose tariffs on imports from four South Asian countries because of producers’ ties to China, First Solar was a lonely voice of public support for the tariffs, even as much of the solar industry decried the disruption to the market.

Tariff supporters argue that raising the price of products that got an unfair boost from the Chinese government is a necessary precursor to building a healthy U.S. manufacturing base. But a decade of U.S. tariffs on Chinese solar panels failed to actually instigate a U.S. solar manufacturing renaissance. 

What was missing, until this summer, was active support from the U.S. government for new factory construction. The Inflation Reduction Act took a carrots-rather-than-sticks approach, adopting provisions of the earlier proposed Solar Energy Manufacturing for America Act, as Canary Media previously reported:

Manufacturers will be eligible for a generous credit of 11 to 18 cents per watt for a solar module manufactured in a U.S.-based vertically integrated plant. Subsidies will apply across the solar value chain of polysilicon feedstock, thin-film or crystalline PV cells, wafers and modules, and will cover about half the cost of a solar module — a significant subsidy that will make U.S. manufacturing much more competitive. 

Those credits, now locked in for a decade, have fundamentally changed the calculus for building new domestic factories versus investing in overseas expansion. First Solar didn’t get the new tariffs it wanted (at least not yet); instead it got incentives that are poised to drive a nation-leading industrial expansion.