[Hot US Solar] ① Energy Mix to Increase 40% by 2035... North America Investment Surge

Editor's NoteThe biggest beneficiary of the U.S. Inflation Reduction Act (IRA) is ‘renewable energy.’ More than 40% of the support funds, amounting to $160.3 billion, are allocated as tax credits for renewable energy. While the U.S. cites inflation and climate change response as the basis for the legislation, it is interpreted that the underlying intention is to attract new production bases to the U.S. in competition with China, the leader in renewable energy. So far, many global companies appear to be investing in the U.S. as intended by the U.S. government.

In particular, the solar power industry is expected to grow rapidly, becoming the largest component of the U.S.’s future energy mix, which is currently based on fossil fuels. Due to the U.S.’s efforts to counter China, an unprecedented opportunity has arisen for the domestic solar industry. However, the reality of relying on China for major solar supply chains has emerged as a challenge to be resolved. We have examined the response strategies of domestic solar companies to the Inflation Reduction Act and the industrial policy directions to support them.

Hanwha Q CELLS' 168MW solar power plant in Texas, USA, constructed in 2021. Photo by Hanwha Q CELLS

[Asia Economy Reporter Jeong Dong-hoon] The U.S. is envisioning a blueprint to supply 40% of the nation’s total electricity from solar energy by 2035. With the implementation of the Inflation Reduction Act (IRA), solar companies have announced large-scale investments such as building factories within the U.S., turning this plan into reality.

◆U.S. Solar to Account for Over 40% of Energy Mix Within 10 Years... Explosive Growth Expected=According to the ‘U.S. Renewable Energy Market and Energy Transition Trends’ report published on the 6th by the Korea Trade-Investment Promotion Agency (KOTRA), the U.S. wind and solar power installation capacity reached an all-time high in 2020. Wind power increased by 85.1% year-on-year to 16,913 MW (megawatts), and solar power more than doubled to 11,158 MW compared to the previous year. The share of renewable energy generation, including wind and solar power, rose to 21%, surpassing nuclear power (19%) and coal (19%).

The U.S. aims to raise the share of solar power within its energy mix (composition of power generation sources) to the highest level. In September last year, the Biden administration announced that the share of solar energy supply could increase to 40% of total electricity within the next 15 years. The U.S. Department of Energy revealed a blueprint to gradually increase the solar power share to 40% by 2035 and 45% by 2050.

In particular, investment in the U.S. renewable energy industry is expected to exceed $39 billion this year. KOTRA analyzed that this is mainly due to the widespread installation of residential solar power systems in Arizona, California, and Texas, as well as improved market conditions following the extension of the Investment Tax Credit (ITC) for solar power facilities.

The U.S. solar power new project market is also experiencing a boom. Most solar power projects are in the early development stage, totaling 68.9 GW. Projects currently under construction amount to 11.9 GW, late-stage development projects total 8.1 GW, and newly announced projects are 8 GW.

Solar Panels Installed in the United States

◆Trillion-Won Investments in Solar Following Semiconductors and Mobility Under IRA=Last month, U.S. solar panel manufacturer First Solar announced plans to invest up to $1.2 billion (approximately 1.6 trillion KRW) to build and expand factories within the U.S.

First Solar stated it plans to invest up to $1 billion (approximately 1.3513 trillion KRW) in the southeastern U.S. to build a new factory producing 3.5 GW of solar panels annually. Additionally, it will expand its existing factory in Ohio with an investment of $185 million (approximately 250 billion KRW), increasing production capacity by 75% compared to the current level. First Solar explained that by the time the new investments are completed in 2025, its solar panel production capacity in the U.S. will reach 10.6 GW, enough to supply power to 1.8 million households. Mark Widmar, CEO of First Solar, said that until recently, investments in Europe or India were prioritized over the U.S., but the implementation of the Inflation Reduction Act shifted the focus to domestic investment.

Hanwha Solutions also announced in March plans to invest tens of billions of dollars in solar and other sectors in the U.S. Andy Klump, CEO of consulting firm Clean Energy Associates, stated that excluding First Solar’s recent announcement, the total U.S. production capacity expansions planned by solar equipment manufacturers following the passage of the Inflation Reduction Act amount to about 14 GW. He added that three major solar companies are considering building production facilities exceeding 5 GW each.

Professor Hong Jong-ho of Seoul National University’s Graduate School of Environmental Studies said, "The solar industry has a very promising outlook and is engaged in an economic war over industrial hegemony worldwide," adding, "Like the U.S. government, our government needs to create an environment where domestic companies can invest. We need to grow the market for domestic investment and innovate regulations."