Energy Tax Credits, Meant to Help U.S. Suppliers, May Be Hard to Get

At the same time, clean energy companies are digesting the administration’s guidance on how the tax credits will be allocated, and finding some unworkable in ways that may slow deployment.

Take the bonus of up to 20 percent for developers that locate projects in low-income communities (which is separate from a bonus of 10 percent for locating in areas struggling with the transition away from fossil fuels). The Treasury Department, wanting to ensure that credits give rise to projects that wouldn’t otherwise happen, will award them to only projects not yet completed. Solar installers would have to sell the system and then wait to see if they get the credit before starting work.

“I think we will lose some development in low-income communities this year because of the way that credit has been constructed,” said Sean Gallagher, a vice president for policy at the Solar Energy Industries Association. “Either the developer is going to absorb that difference, or they’ll have to go back to the customer to renegotiate the price, or the project’s not going to happen.”

An even thornier issue is the extra 10 percent for using domestically manufactured components.

Manufacturers are concerned that while effectively requiring solar cells to be made in the United States to qualify for the credit, the Treasury Department did not require their foundational component — the wafer, a thin slice of silicon that conducts energy — to be domestically produced. That could allow Chinese factories to continue to dominate a key part of the supply chain.

“The prices they’re ultimately getting from the developers are undermined because the Chinese wafer manufacturers can crash the prices,” said Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition.

Developers are upset because receiving the credit will, in most cases, require a complex calculation of the cost of each component to reach the threshold of 40 percent U.S.-produced content, and manufacturers are loath to disclose sensitive pricing information. Many also expected a more gradual phase-in process that would allow some of the current U.S. factory output to qualify for the credit, while planning for more stringent requirements.

Brett Bouchy is the chief executive of Freedom Forever, a residential solar installation company that did more than $1 billion in business last year. He had planned to build a solar module and cell manufacturing plant in Arizona, which would cost $100 million and employ 1,000 people, to supply his own operations. After the guidance came out, he halted those plans — he couldn’t be confident his panels would qualify for the domestic content credit on top of the 7 cents per watt available to manufacturers.