Right now, U.S. manufacturers do not produce enough solar panels to meet the nation’s demand, but industry investments and federal tax incentives have been making progress, though recent federal moves have created uncertainty.

In 2024, U.S. installers put up enough solar panels to generate 50 gigawatts of electricity, enough to power New York City for a year. But U.S. manufacturers produced only a small fraction of that – 4.2 GW of solar modules in the first half of 2024. That was a big boost, though, representing a 75% increase compared with the same period in 2023. And the prices were roughly three times the cost of imports.

U.S. solar imports vs. domestic production

In 2024, the U.S. imported far more panels than the country needed, suggesting that developers may be stockpiling panels for future projects.

Most of those imported panels were made in Asia, particularly Malaysia, Vietnam and Thailand. In fact, nearly all of the U.S.-made panels used at least some components from overseas. China currently makes about 97% of the world’s supply of photovoltaic wafers, which are building blocks of solar panels.

The effects of proposed U.S. trade policies on the solar industry remain unclear. Through 2024, manufacturing continued a yearslong ramp-up to take advantage of government policies favouring domestic manufacturing. And imported panels seem slated to suffer from ever-increasing tariffs, which drive up costs.

Since 2010, U.S. solar panel production has increased about eightfold. But U.S.-made panels are more expensive than imported alternatives. In 2024, U.S.-made panels typically cost 31 cents per watt, but imported panels, even including tariffs that existed before President Donald Trump’s second term, cost about one-third of that: 11 cents per watt.

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But domestic manufacturers are bringing costs down by ramping up production while relying on the government to maintain or increase tariffs on imports, which may make U.S. panels more competitive domestically in the future.

The distorting influence of tariffs

Despite that increase in domestic production, U.S. demand for solar panels has grown even faster. To meet demand, the U.S. imports a substantial portion of its solar photovoltaic modules.

Tariffs, including a 30% tariff on solar cells and solar panels starting in 2018, aimed to boost domestic manufacturing. But those tariffs and falling global prices made solar installations more costly in the United States than in the rest of the world. The average global cost of installed solar systems dropped from $1.15 per watt in 2012 to $0.72 per watt in 2016, nearly half that of U.S. installations.

The 2018 tariffs, as well as earlier rounds in 2012 and 2014, have shifted the source of U.S. imports of solar panels from China and Taiwan to Malaysia and South Korea. Manufacturers are also building solar panels in Singapore and Germany to maintain access to the U.S. market. And Chinese companies are even investing in U.S. solar manufacturers to take advantage of federal incentives and avoid tariffs.

Trump’s proposal for new tariffs on foreign-made solar goods, including panels and components, particularly target Chinese-owned companies in Southeast Asia. They could include a potential 375% tariff on Thai products – nearly quadrupling prices – and a 3,500% tariff on products from Cambodia.

In contrast, U.S.-made solar panels will be cheaper. But a reduced supply of solar panels will raise prices even of domestic-made panels, at least until U.S. manufacturing can catch up with the demand. Some developers have begun to delay or cancel solar installations to address rising costs.

U.S. solar manufacturing capacity is growing

Due in large part to the Biden administration’s Inflation Reduction Act, enacted in 2022, the U.S. solar panel industry has seen significant investments.

Since the law’s enactment, more than 95 GW of manufacturing capability have been added across the solar supply chain in the United States – including new facilities that in a year can construct enough solar panels to produce nearly 42 GW. This growth in manufacturing capabilities is located largely in Texas and Georgia.

Still, the new administration’s shifting priorities and trade policies make the landscape uncertain. Before Trump began discussing various solar-related trade policies, the industry projected it would install an average of 45 GW of solar panels every year for the next decade.

Mojtaba Akhavan-Tafti is an associate research scientist at the University of Michigan. As a scholar who studies the sun, as well as an entrepreneur who is working to harness its power here on Earth by creating new designs for generating solar electricity, he has studied market trends and manufacturing capabilities in the United States and abroad.

This story first appeared in The Conversation. It has been edited to conform with Corporate Knights style. Read the original article here.

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