US solar manufacturers face steeper hill despite some wins in budget law

Since Trump resumed occupancy of the White House, promising to bring back manufacturing jobs, new investment in clean energy factories has plummeted from its Biden-era highs, and factory cancellations have surged instead. Now, with Trump’s signing of the One Big Beautiful Bill Act earlier this month, things are about to get even rockier for clean energy manufacturers — but several of the leading firms reshoring solar panel production still see reasons for qualified hope.

That’s not to say the path ahead will be easy. The law swings a battle-axe through the clean energy incentives that were carefully crafted by Democrats in the 2022 Inflation Reduction Act. Solar and wind deployment credits will disappear after 2027. Now, the U.S. will install somewhere between 57% to 62% less clean energy from 2025 to 2035, per a new analysis by Rhodium Group. That’s bad for all the customers and industries who will need vastly more electricity over that timeframe — not to mention the climate — but it also portends a shrinking market for American manufacturers to sell into.

“It’s a massive self-inflicted wound,” said Sen. Jon Ossoff (D-Ga.), an architect of the original clean energy manufacturing policy. ​“This law is a targeted attack on the advanced energy industry. It will hamstring industrial development; it will undermine energy independence and drive up energy costs by interrupting the development and installation of new generation capacity.”

But for manufacturers who have kickstarted a stunning reshoring of the solar supply chain after years of decline, the legislation’s final form is not nearly as dire as some earlier drafts. Chiefly, Republicans preserved the flagship manufacturing credit, which pays a company for each unit they make of key clean-energy components.

“Because manufacturing and job creation has always been a highlight of all politicians, independent of their party, that part has not been touched,” said Martin Pochtaruk, CEO of Heliene, which runs 1.3 gigawatts of domestic module production in Minnesota. However, the new law ​“has axed the businesses of many of our clients two years out, so it will require a lot of work by a lot of people to reshuffle how their businesses are run, and how they finance.”

The one major change the law did make to the manufacturing tax credit was to add in ​“foreign entity of concern,” or FEOC, restrictions, a whole new bureaucratic regime that polices companies’ corporate or supply-chain ties to China. New FEOC restrictions also apply to energy projects, and they actually resemble policies several domestic manufacturers have been requesting for years.

Take the case of T1 Energy, a solar manufacturer currently churning out 12,000 modules a day outside Dallas, on track for up to 3 gigawatts produced this year. Chinese giant Trina Solar actually built the factory but sold it to T1 (formerly known as Freyr Battery) in December, such that it is now operating under the control of a U.S.-based firm traded on the New York Stock Exchange. The company’s executive vice president for strategic communications, former longtime Wall Street Journal energy correspondent Russell Gold, called the law’s FEOC measures ​“good policy.”

“It promotes U.S. ownership and control of solar manufacturing and solar production,” Gold said. ​“Given how important solar is becoming on our power grids, that’s totally appropriate.”

Dean Solon, the billionaire solar entrepreneur who has manufactured connectors and cabling systems in Tennessee since the dawn of the modern solar industry, seemed unconcerned when I asked him in June about whether the new FEOC rules were too stringent.

“FEOC? Isn’t that a shitty little Italian car?” he responded.

For now, solar manufacturers that have factories operating or nearly operational can squint and see a good few years ahead while the tax credits are still accessible, though after that, it’s anybody’s guess. Companies that were about to commit to the multiyear effort to build new factories, however, just got an undeniable signal from Congress to take their jobs and economic dynamism elsewhere.

“The hill’s a lot steeper than it was before this for those kinds of investments,” said Mike Carr, executive director of the Solar Energy Manufacturers for America Coalition. 

Weathering slower solar demand 

Somewhat improbably, Trump’s signature policy effort let the Biden-era 45X clean energy manufacturing credit continue as planned before phasing down after 2030 and stopping entirely in 2033 (except for wind manufacturing, which got whacked with an early end).

Unlike the earlier House version, Gold noted, the law preserves transferability, which lets factories monetize their credits when they lack sufficient tax burden themselves; factories cost a lot up front before they start making money, so this is especially useful in their early years. Factories almost lost stackability, which guarantees credits for companies that produce several steps of the supply chain, but the final text preserved that, Gold added.

“When you look at 45X, which is what solar manufacturers do receive, it is exactly like what was included in the Inflation Reduction Act and proposed by Sen. Ossoff in the Build Back Better days,” Pochtaruk said.

That has direct implications for a solar cell factory Pochtaruk was developing somewhere in the U.S. but put on hold after the election as he waited to see if 45X would survive. Now that its fate is clear, Heliene can return to developing that factory, if the company determines it still makes sense in the new market landscape.

The major lingering concern for solar manufacturers is what happens next with their customers. The law, after all, attacks the demand-side credits that were designed to stimulate purchases of made-in-America solar products.

The early demise of the solar deployment credits will hit manufacturers in two major ways.

First, with the stroke of Trump’s pen, the amount of clean energy projects expected to come online in the U.S. over the next decade just dropped. Demand for the American factories that opened up to serve that market just took a commensurate hit. Americans pay a lot more for solar panels than the rest of the world, due to the trade protectionism in place to help factories here; thus, U.S.-made solar is for U.S. consumers, and can’t readily export to foreign markets if domestic demand suddenly drops.