Thanks to IRA Tax Credits, It’s Now Cheaper to Make Solar and Wind Components in the U.S.

For the first time ever, solar and wind components made in the U.S. are less expensive than imports, a new study by researchers from Dartmouth and Princeton has found.

The study estimated the impacts the Inflation Reduction Act (IRA) will have on the U.S. solar and wind industries. It looked at how it will change solar and wind manufacturing, job creation and labor standards for renewable energy workers and demand for materials.

“The study reveals how the Inflation Reduction Act transforms the economics of wind and solar power to help delink our climate goals from overseas supply chains that are marred by labor abuses, higher levels of pollution, and shipping bottlenecks,” said nonprofit BlueGreen Alliance Vice President of Manufacturing and Industrial Policy Ben Beachy in a press release from the organization. “Instead, these new investments offer an opportunity to build our clean energy future on a foundation of good jobs, clean manufacturing, and a more reliable and equitable industrial base.”

The report, “Effects of Renewable Energy Provisions of the Inflation Reduction Act on Technology Costs, Materials Demand, and Labor,” was funded by a grant from BlueGreen Alliance, which helps unite labor unions with environmental organizations.

The report zeroed in on the potential effects of the IRA’s 45X Advanced Manufacturing Production Tax Credit, as well as the law’s investment and green electricity production tax credits, the press release said.

The study found that developers of solar and wind will save big by using components manufactured in the U.S. while paying fair wages to workers.

“Using U.S.-manufactured parts and materials for clean energy development and paying workers a fair wage has always been the right thing to do. Now it’s also the most economical thing to do,” said BlueGreen Alliance Executive Director Jason Walsh in the press release.

The researchers found that solar photovoltaic modules made entirely from components manufactured in the U.S. and assembled domestically will now be 30 percent cheaper than imported modules because of the 45X manufacturing tax credit.

They also found that U.S.-manufacturing components — like blades, towers and nacelles — for offshore and onshore wind will be less expensive than imports for the first time ever.

The study noted that by meeting the prevailing apprenticeship and wage standards, a developer can save more than 60 percent in the production of onshore wind or solar power.

The full credit more than offsets any extra project costs related to meeting the labor standards and will be approximately 20 percent less for offshore wind projects that comply with the standards than those that do not.

Demand for more than 1.6 million more wind and solar jobs will be brought about by the 45X manufacturing tax credit and the renewable energy tax credits combined, compared to how many would have been needed without the IRA, the press release said.

The IRA will also ramp up demand for cement, aluminum and steel made in the U.S. to be used in wind and solar projects.

The report found that aluminum demand will be increased by solar and wind power expansion due to the IRA, as it is one of the main materials used in solar panel manufacturing. More steel and cement will also be necessary, as they are used in the making of wind turbines.

On average, steel produced in the U.S. is cleaner than all of the other major steel producers in the world, according to the press release, so producing it domestically will help with the country’s climate goals.

“This report shows that the Inflation Reduction Act successfully creates an air-tight business case for supporting U.S. workers and manufacturers,” Walsh said in the press release.