About Solar Domestic Content

As the renewable energy landscape continues to evolve, the role of domestic content in solar projects has gained significant attention. Recent additional guidance from the U.S. Department of Treasury and the Internal Revenue Service (IRS) regarding the Inflation Reduction Act (IRA) sheds light on how domestic content bonuses for renewable energy projects will be calculated and implemented.
The interim guidance marks an important step in building upon the domestic content safe harbor introduced in May 2024. This safe harbor allows clean energy developers to utilize default cost percentages provided by the Department of Energy, simplifying the process of complying with domestic content requirements.
Key Features of the Updated Guidance
Treasury’s latest guidance reflects more accurate default values that align with the actual costs and characteristics of project components in the marketplace. Solar developers can now take advantage of optional alternative cost percentages specifically for solar systems employing solar cells made with U.S.-manufactured wafers. This move is crucial as it aims to promote domestic solar manufacturing and strengthen the supply chain.
The guidance also brings clarity to the updated safe harbor tables, which include:

• Solar Updates: The interim tables provide refined cost percentages, adjust characterizations of project components, and clarify definitions relevant to solar projects.
• Domestic Solar Wafers: New optional cost percentages are introduced for projects utilizing solar cells manufactured with locally sourced wafers, thereby incentivizing the use of domestic components.
• Land-Based Wind: Minor adjustments have been made to the characterization of applicable components for land-based wind projects.
• Battery Electric Storage Systems (BESS): Similar updates have been applied to the cost percentages for BESS, reflecting the evolving market dynamics.

Additional clarifications provided in the guidance extend to retrofits, projects utilizing elective pay (or “direct pay”), as well as solar carport and floating solar projects. These updates are aimed at fostering a clearer understanding of compliance for developers.
Industry Reactions
The response to the guidance has been varied within the industry. The Solar Energy Manufacturers for America (SEMA) Coalition acknowledged the positive nature of the update, while also highlighting its shortcomings. Executive Director Mike Carr pointed out that the approach remains complex and could perpetuate America’s dependency on China for solar supply chains. He emphasized the need for a more focused acknowledgment of core components to stimulate domestic manufacturing of solar technologies.
Conversely, QCELLS expressed strong support for the updated guidance, describing it as “crucial and highly welcomed.” The company commended President Biden’s leadership in fostering domestic clean energy manufacturing, which they believe has led to the creation of over 4,000 manufacturing jobs in the U.S. QCELLS emphasized the significance of the IRA’s “game-changing incentives” for boosting the domestic solar manufacturing landscape.
Looking Ahead
As the U.S. seeks to reclaim its status as a leader in renewable energy technology, the latest guidance from the Treasury and IRS represents a significant milestone in promoting domestic content in solar projects. It highlights the government’s commitment to fostering a robust clean energy supply chain while also responding to the complexities of the global marketplace.
In this evolving landscape, it will be vital for industry stakeholders to navigate these updates effectively, leveraging the opportunities presented by the IRA while addressing the challenges outlined by various industry leaders. As solar technology continues to advance, the potential for a self-sustaining and economically vibrant domestic solar manufacturing sector is within reach, provided that collaboration between the government, manufacturers, and developers remains strong.