Avi Salzman

More than a dozen large solar-panel factories have popped up around America in the past three years, spurred on by new tax credits in the Inflation Reduction Act of 2022. Those factories are the best hope for the U.S. solar industry to reduce its dependence on Asian suppliers for panels. But the new Republican tax and spending bill imperils their growth, said a manager of one of the factories.

Mick McDaniel, the general manager of the Bila Solar unit in Indianapolis, said that the Senate Finance Committee's version of the "Big Beautiful" tax and spending bill will impede plans to expand the company's solar factory.

"I think our expansion plans are on the shelf," he said in an interview. "There's no way we can invest tens of millions of dollars in phase 2 at this point in time, until we see how this starts to work out."

Uncertainty about federal policy has led several clean-energy companies to slow investment in recent months. Through the first four months of this year, companies canceled or delayed $14 billion worth of clean-energy projects, impacting 10,000 jobs, according to environmental policy organization E2, which attributed the slowdown to concerns about changes in the bill.

Bila Solar, based in Singapore, has been producing solar panels in a former Eli Lilly pharmaceuticals factory in Indianapolis since January. It expects to have the capacity to produce 300 megawatts worth of panels by the end of the year, and employ about 60 people.

McDaniels said that the company was also considering an expansion project that would more than double its capacity. But it needs to see how the Republican bill plays out. The Senate committee's version of the bill that passed the House of Representatives last month did bring back some tax credits, but it will still reduce government support for solar in ways that make expanding the factories less economically viable.

Bila Solar makes solar panels for the utility and commercial-scale solar markets, where the price of the panels is particularly important because the panel makes up a larger portion of the total cost of the project than it does for residential solar installations.

Making solar panels in the U.S. is more expensive than making them overseas, because American companies pay higher wages and do not have robust supply chains like they have in Asia. The tax credits were designed to balance out those costs. Solar modules made in China have sold for as little as 10 cents a watt.

American companies are effectively banned from buying directly from China, but they do rely on panels made in Southeast Asia. A panel made in Asia costs about 20 cents to 25 cents per watt for an American buyer after accounting for tariffs. American-made panels can cost 40 cents to 45 cents per watt. The Inflation Reduction Act offered 7 cents per watt worth of tax credits to domestic manufacturers. And the act made buying domestic panels more appealing, because buyers can get a tax credit worth 10% of the value of their project if they use domestic panels, on top of a base 30% investment tax credit for installing renewable energy. Utility-scale projects can cost tens of millions of dollars, so the 10% tax credit is very valuable.

To make America's solar supply chain economically feasible, companies try to stack these tax credits on top of each other. That way they can overcome the government support, lower wages, and technological know-how that has given foreign suppliers an advantage.

The Senate version of the bill maintains most tax credits for domestic manufacturing, but would phase out the investment tax credits, which will hurt demand for renewable installations. "If our demand goes away or drops substantially, that will certainly impact our investment plans, " McDaniel said.

Both the House and Senate bills also take away credits for companies that use Chinese-made components, or have financial ties to China and other countries considered "foreign entities of concern." The Senate bill softens some of the foreign supply chain rules that the House initially imposed, but maintains many of them.

Bila Solar recently began using American-made solar cells -- the building blocks of solar panels -- at its Indianapolis factory. But McDaniel said that the underlying material for the cells, known as wafers, are still made almost exclusively in Asia. "Right now in the United States, there is literally zero wafering capacity for solar panels," he said. "All of those wafers are coming from outside the United States."

McDaniel expects Bila Solar's Indianapolis factory to remain profitable despite the tax bill, but he doesn't think it can roll the dice on an expansion in an environment like this. McDaniel sees one possible benefit to Bila Solar from a larger slowdown in the solar manufacturing industry, however. If the tax credits go away, "there should be fewer folks like us around. So we should get a larger part of that smaller market. Under that scenario, it looks like we could still thrive -- maybe as a smaller business than we had planned."

Write to Avi Salzman at avi.salzman@barrons.com

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June 18, 2025 14:08 ET (18:08 GMT)

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