Solar supply chain supercharger

The Biden administration is set to unveil tax guidance that will test Democrats' belief that the Inflation Reduction Act is made-in-America industrial policy.

Why it matters: It's the next development in the ongoing political fight about onshoring solar supply chains.

• That bubbled up last week when the Senate voted to overturn President Biden's solar tariff waiver.
• There's plenty of bipartisan concern on the Hill about allowing China to control so much of the solar supply chain.

Driving the news: The Treasury Department will soon issue guidance on "domestic content" requirements for renewables projects seeking additional money from the IRA.

• Under the law, projects that source their steel, solar panels and wind turbines from the U.S. are eligible for a bonus tax incentive as high as 10% — big money in a competitive renewables market.
• The question for solar is what, exactly, it means for a panel to be made in the U.S., given that so much of the supply chain sits in China.
• Solar manufacturers want the standard to go as far down the chain as possible. That would include, at the very least, basic components like solar cells — not just final assembly of the panel that gets shipped out to project developers.

The intrigue: Hill Democrats view the bonus credit as crucial to the IRA’s industrial intentions.

• "This is the first time in my career that we actually have an industrial policy in this country, and this is part of it," Sherrod Brown told Nick as he walked through the Senate subway tunnel.
• Brown linked it with his vote last week for the Congressional Review Act resolution to repeal Biden's pause on solar tariffs for Southeast Asian countries, which laid bare political fault lines on China and the energy transition.

Here's the problem, per Solar Energy Industries Association CEO Abigail Ross Hopper: "There is currently no cell manufacturing capacity in the United States, so requiring modules to use U.S. cells makes the domestic content bonus impossible to use in the near-term."

• Some in the solar industry are discussing a phased-in implementation that goes deeper as domestic supply chains grow.

Yes, but: Manufacturing advocates believe a domestic content standard that only touches solar modules would belie the intent of the credit.

• They emphasize that it's a bonus — and should therefore be challenging for developers to claim.
• Brown and three other Senate Democrats who voted for the solar tariffs CRA — Bob Casey, John Fetterman and Tammy Baldwin — recently penned a letter calling for "a comprehensive approach to evaluating domestic manufactured products beyond just assembly."

What they're saying: "The domestic content bonus credit should work hand-in-hand with the 45X and 48C credits," the IRA's incentives for domestic manufacturing projects, the four senators wrote.

• Finance Chair Ron Wyden — another "yes" on the solar tariffs CRA — told Nick that "the coordination [with other tax credits] is key."

The big picture: The bonus credit is one attempt to remedy concerns about China's role in the solar supply chain.

• If successful, it could make U.S.-made panels more appealing to developers and spur new manufacturing for solar components that aren't made here at any scale right now.