Made In America: Wind and Solar Components Cheaper to Manufacture than Imports with the Inflation Reduction Act
A common complaint among Americans is a lack of manufacturing jobs across the country. The 1970’s was the peak of American manufacturing, with a quick taper as business owners found it was cheaper to hire out manufacturing services overseas. Although the cost of goods, as well as the quality of craftsmanship, had decreased over time. Many Americans have been rallying for less imported materials and more American made products. For those Americans, I have good news for you.
The Inflation Reduction Act
Researchers at Dartmouth and Princeton released a report on the estimated impacts the Inflation Reduction Act will have on the U.S. wind and solar industry. With this act, proposals have been made for changes in wind and solar manufacturing, labor standards, job creation, and demand for materials. The report explores the impacts of the law's clean electricity production and investment tax credits, in particular, the 45x Advanced Manufacturing Production Tax Credit.
So, what is the Inflation Reduction Act? The Act will make a down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40% by 2030. The bill will invest approximately $300 billion in Deficit Reduction and $369 billion in Energy Security and Climate Change programs over the next ten years.
Projected Impacts of The Inflation Reduction Act
The report finds that wind and solar developers will reap significant cost savings by using U.S.-manufactured components and paying workers fair wages, due to the investments in the Inflation Reduction Act. The main points of the report are as follows:
Using American made wind and solar components will be cheaper than importing them. This is the first time in history this has ever happened. It pays to pay workers well. Wind and solar developers can significantly cut costs which will enable them to pay better wages to their workers. This is made possible by the clean electricity tax credits. The new report finds that when a developer meets the prevailing wage and apprenticeship standards, the cost of producing solar or onshore wind power drops more than 60%. Any additional project costs associated with meeting these labor standards are offset by the full credit.
The clean energy tax credits and the 45X manufacturing tax credit will induce demand for more than 4 million additional solar and wind jobs—about 3.7 million additional jobs related to utility-scale solar PV and about 0.4 million additional wind-related jobs in 2035 will be induced. This is made possible through the Inflation Reduction Act.
The Inflation Reduction Act will significantly increase demand for U.S.-made aluminum, cement, and steel for use in solar and wind projects. Relying on U.S. aluminum and steel production will better support our climate goals than relying on emissions-intensive imports. The U.S. already produces cleaner steel on average than all of the world's other major steel producers. By using Inflation Reduction Act funding to cut emissions in these industries while expanding production, the U.S. can meet the growing materials needs of the clean energy economy.
What this Means for American Manufacturing
While this doesn’t eliminate the need for over seas manufacturing, this will be a huge win for Americans looking to work in the solar and wind industry. It’s important to remember that international trade is a very good thing, as it helps the global economy and ensures families all over the world can afford a healthy living standard. But with everything, its important that national and global economics are balanced. Products that are sold in America often attract more loyal buyers when the products are “made in America”. This Act will ensure more products in the future will fit that criterion, thus bringing better paid workers, more successful business owners, and content consumers.