171. The Domestic Content Bonus Credit and How to Maximize Incentives for Solar Projects
The domestic content bonus credit is available to taxpayers that certify their qualified facility, energy project, or energy storage technology was built with certain percentages of steel, iron, or manufactured products that were mined, produced, or manufactured in the U.S. “What we’ve seen happen is just a proliferation of investments into U.S. domestic manufacturing,” Mike Hall, CEO of Anza Renewables, said as a guest on The POWER Podcast. Hall said U.S. manufacturers started with the easiest and probably lowest-risk investment in the supply chain, which is module assembly. “You could count on one hand the number of U.S. module options just a couple of years ago,” he said. “Today, I was actually looking at our database, and if you were looking to take delivery in late-2025, there are 17 different manufacturers that are willing to sign POs [purchase orders] today to supply domestically made modules.” Hall suggested most developers that are looking to utilize domestic supplies are trying to solve one or two problems. “Either they’re trying to mitigate trade risk—AD/CVD [anti-dumping and countervailing duty] risk—from the various petitions, or risk around detainment by customs due to concerns around UFLPA [Uyghur Forced Labor Prevention Act] violations,” explained Hall. “So, that’s one potential problem that customers are trying to solve, and a domestically made module may really help solve that problem,” he said. “The other thing, though, that we increasingly see developers looking to do is to try and access the extra 10% tax credit that you can get if you meet certain minimum standards for domestically manufactured content,” Hall continued. For solar projects, that generally means a domestically manufactured solar cell is needed. “A few years ago, again, there were one, maybe two options for that,” Hall noted. “There’s still only a few—we see those options growing over time—but if you’re looking at late-2025 deliveries, there’s four to five viable options of companies that will actually issue POs today for domestically manufactured cells. So, overall, we’re definitely seeing more and more options come to the market, and that’s really exciting.” Yet, aside from domestic content, the options available on the market have never been greater than today. “There are more manufacturers selling into the market,” said Hall. “On Anza, we have coverage of 95% of the U.S. supply, and that requires us to have relationships—partnerships in the data pipeline—with over 33 different suppliers. So, if you’re doing a mid- or large-scale project, there’s over 120 different products that you should be considering. And, so, navigating that, and finding the module or the handful of modules that are actually going to deliver an optimal financial outcome is a big challenge.” Hall suggested maximizing project economics requires having a sound view of the market. Then, developers must compare products, accounting for cost to install, predicted energy production, the value of the energy, and particular project risks and priorities. “One of the things we help developers do is really understand: what is the value in dollars per watt of efficiency and the value for their particular project,” explained Hall. “And that value differs. If you’ve got a community solar project with a really high priced PPA [power purchase agreement], then efficiency is worth a whole lot. If you’ve got a really low dollar-per-megawatt-hour utility-scale PPA, then efficiency is still worth something, but it might be worth less.” Projecting the longevity of products can be difficult, but Anza tries to factor that in using warranty information. If different manufacturers warranty their equipment for different lengths of time, that can be incorporated into financial models and will impact outcomes.