Chinese photovoltaic enterprises are "excluded"! Or they may be restricted from obtaining tax credits

On August 1, a bipartisan group of senators introduced the American Solar Manufacturing Tax Act, which aims to prevent Chinese solar manufacturers, the world's largest solar manufacturers, from enjoying tax incentives in the Inflation Reduction Act (IRA).

Specifically, the proposal would amend the Internal Revenue Code of 1986 to "prohibit the provision of advanced manufacturing production credits for components produced by related foreign entities."

The Advanced Manufacturing Production Credit (also known as the 45X Production Credit) has been one of the most widely praised mechanisms for expanding solar capacity in the United States. The U.S. Treasury Department issued guidance on the credit in December 2023.

Currently, the world's five largest solar manufacturers (all of which are Chinese companies or have close ties with Chinese capital) have announced production plans in the United States. Recently, Canadian Solar, one of the top five, started production at its 5GW TOPCon module factory in Texas. Trina Solar, JinkoSolar, JA Solar and Longi have also announced production capacity in the United States or have started production.

Ohio Senator Sherrod Brown said: "We can't let American tax dollars go to companies that destroy American solar manufacturing. The bipartisan bill will ensure that only American companies are supported by taxpayer funds."

Democratic Senator Jon Ossoff, who participated in the bill, has been pushing for more protectionist policies in the US solar industry for some time. In an interview with this magazine last year, he said that domestic solar manufacturing is a "problem" for the United States due to its dependence on Chinese products.

The bill is supported by First Solar, a cadmium telluride thin-film solar manufacturer with operations in Ohio and Louisiana, states represented by Brown and Cassidy.

"It is imperative that the U.S. solar manufacturing industry be leveled to compete on its own merits, rather than lumped together with companies that simply assemble components in the U.S. from imported, value-added parts," said Mark Widmar, CEO of First Solar.

Widmar also called for tighter U.S. restrictions in a statement to the Senate Finance Committee in March. He said the U.S. "cannot use U.S. taxpayers' money to line foreign pockets" and warned that it was "not unrealistic" for Chinese manufacturers to open factories in the U.S. to take advantage of the 45X credits and then close them when the incentives expire.

In addition to First Solar, South Korean company Hanwha Qcells will be a major beneficiary of the legislation, with a major vertically integrated manufacturing site in Georgia, where Ossoff is based.

Despite the IRA incentives and the wave of capacity expansion in the PV manufacturing industry, uncertainty remains.

Earlier this week, Mark Widmar warned of an "uncertain policy environment" ahead of the U.S. presidential election in November, which he said was constraining financing for "established companies looking to build capacity domestically."