Republicans failed to deliver severe cuts in clean energy production for solar companies

In a significant turn of events, the solar industry in the United States is facing a potential shift, with the One Big Beautiful Bill Act posing a test of the GOP's commitment to domestic solar panel production.

For years, the U.S. solar industry has relied on cheap imports from Asia, while domestic manufacturers have struggled. However, the market appeared confident in solar manufacturers, as shares of Arizona-based manufacturer First Solar jumped on Monday by nearly 9%.

The Biden administration has maintained trade levies and offered tax credits in the Inflation Reduction Act for domestic clean-energy equipment production. This move is aimed at reviving the American solar industry.

However, the One Big Beautiful Bill Act, a Republican-proposed legislation, initially threatened to yank back tax credits for solar manufacturers. The bill proposed phasing out the 48E tax credit for supporting solar panel construction by the end of 2027, earlier than in past drafts. Additionally, it initially threatened to strip the "stackability" aspect of the credit, reducing the amount manufacturers could receive.

However, negotiations on Capitol Hill are trending toward a return to the status quo regarding the stackability aspect of the credit. The Senate Committee on Finance has released a revised version of the bill that tweaks the language to something closer to the current law.

The key lobby groups supporting the retention of the existing language of tax credits 48E and 45Y in the One Big Beautiful Bill Act include the Solar Energy Industries Association (SEIA) and Advanced Energy Economy (AEE). These groups consider these credits vital for reviving the American solar industry.

The most important credit, 45X, reduces federal tax bills for companies producing clean-energy equipment domestically. The bill includes an excise tax on renewable power equipment made with foreign components, which would kick in for certain projects after 48E and 45Y phase out at the end of 2027.

Rob Bradham, the director of policy at the Chambers for Innovation and Clean Energy, stated that "you can't view 48E, 45Y, and 45X as separate. 48E and 45Y drive the demand side, and 45X responds to that on the manufacturing side."

The bill's early phase-out specifically applies to wind and solar, not other technologies. This early phase-out could potentially impact the growth of the solar industry in the U.S.

During the 2021 vice presidential debate, Republican JD Vance argued that the federal government should invest more in domestic solar panel production. In 2017, the first Trump administration imposed tariffs on imported solar panels, a move that drew fierce criticism from senators.

Some solar manufacturers, such as Heliene (based in Minnesota) or Qcells (building out factories in Georgia), are either private companies or U.S. subsidiaries of foreign corporations whose stocks trade overseas. Under the IRA, both tax credits contain bonus writeoffs for panels made with domestically-sourced components.

While some solar panels are made domestically, many components are still manufactured overseas, particularly in China. Democrat Tim Walz countered, stating that solar manufacturing is already happening in Minnesota.

The three tax credits (45X, 48E, and 45Y) are seen as vital to restoring American solar manufacturing and are part of a complementary suite of incentives that make the U.S. feel like a safe space for the nascent market to grow. The future of American solar manufacturing hangs in the balance as the One Big Beautiful Bill Act continues to be negotiated.

Republicans failed to deliver severe cuts in clean energy production for solar companies