overview


Future Doesn’t Look Bright for US Solar Panel Manufacturers


T


he Solar Panel Manufacturing industry has faced tremendous challenges over the past fi ve years, de- spite a signifi cant increase in solar power electricity


generation. Strong government incentives over the past de- cade have promoted an expansion in solar power as a clean and renewable alternative energy source to fossil fuels. The subsequent rapid rise in demand for solar panels, coupled with tax credits for domestic manufacturers, propelled pro- duction up and led revenue to surge through 2010. However, the industry has been in a state of free fall since 2011, primar- ily as a result of intensifying international competition and deteriorat- ing prices for solar panels. In recent years, an excess sup- ply of heavily subsidized and thus low-cost solar panels from China has fl ooded the


Leah Goddard Analyst IBISWorld New York


The US has seen a sharp drop in the number of companies engaged in solar panel manufacturing.


market and undercut the competitiveness of domestic manu- facturers. Despite tariffs against solar panels and their com- ponents produced in China as well as Taiwan, the domestic industry has still struggled to survive. Over the fi ve years to 2015, IBISWorld estimates industry revenue will plummet at an annualized rate of 20.5% to $933.6 million.


Government Support Drives Growth While solar panels generate electricity for free once in-


stalled, high upfront costs for this technology can deter orga- nizations and individuals from making the initial investment. As a result, according to the US Energy Information Adminis- tration (EIA), more than two-thirds of net electricity generation in the US in 2014 came from fossil fuels, which are more cost competitive than solar power. To combat this, the federal and state governments have offered a number of incentives to make solar panel technology more competitive, includ- ing the Solar Investment Tax Credit (ITC), the 1604 Treasury Program and the US Department of Energy (DOE) Loan Guarantee Program. Conse- quently, genera- tion of electricity from solar power has increased at an annualized 39.4% over the past 10 years, making it the fastest-growing source of elec- tricity generation in the US. The Energy Policy Act of


2005 created both the Solar ITC and the DOE Loan Guaran- tee Program. The Solar ITC (which was extended to 2016) provides tax credits to commercial and residential custom- ers equating to 30% of solar panel purchase and installation costs. After 2016, the ITC for commercial customers will drop to 10% while the ITC for residential customers will expire. Under the DOE Loan Guarantee Program the DOE backs loans to developers of energy generation and manufacturing


19 — Energy Manufacturing 2015


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