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WASHINGTON D.C. –Today, U.S. Sens. Sherrod Brown (D-OH) and Charles Schumer (D-NY) launched a tough proposal to loosen China’s grip on the global solar panel market. The proposal would bar Chinese-made solar panels from qualifying for the 30 percent tax credit that U.S. individuals and businesses receive for purchasing and installing solar panels in their homes and businesses. Brown and Schumer’s efforts come as the amount of new solar wattage installed in the U.S. has grown more than 70 percent per year since 2008, yet the vast majority of those solar panels have been made in China and have undercut U.S. producers and jobs. 

Brown and Schumer’s proposal would narrow the scope of solar panels eligible for the existing 30 percent tax credit by adding a domestic content requirement. Specifically, the proposal would require that 70 percent  of the parts of the qualifying solar panel must be American-made—or, if the final point of manufacture is in the U.S., then 50 percent of the parts must be U.S.-made.

“We can’t trade our dependence on foreign oil for a dependence on Chinese-made solar panels,” Senator Brown said. “We went from a solar trade surplus with China to a solar trade deficit in a matter of years. Ohio workers can compete with anyone in the world, but they deserve access to a level playing field. When the Chinese government provides direct export subsidies to its solar manufacturers, that’s not competing – it’s cheating. And it’s costing American jobs in solar manufacturing. The American tax code should not make matters worse by encouraging the purchase of Chinese-made solar panels. Our plan will ensure that American tax incentives support American solar panel manufacturers.”

“The federal government has to take China’s strangle-hold on the solar power industry very seriously, and U.S. manufacturers must have every arrow in their quiver to fight back,” said Schumer. “This proposal is tough, but it’s needed to successfully counter China’s unfair trade practices. This hard-hitting plan will level the playing field for U.S. solar producers so that they can compete, create jobs and become a global leader in this rapidly-growing industry.”

Brown and Schumer highlighted the fact that Chinese companies have been able to grow and take hold of the solar industry at a rapid rate, in part because they have taken large, government-subsidized loans from banks. These subsidized rates have led to plunging prices for wholesale solar panel makers in the United States, at approximately $1 a watt of capacity today, down from $1.80 in January and $3.30 in 2008.

Since 2007, Brown has held more than 200 roundtables, meeting with Ohioans to develop strategies to boost jobs and support our state’s economy. In October 2011, Brown held a roundtable in Toledo with solar industry officials which helped inspire this domestic-sourcing bill.

China is on the verge of emerging as the world’s largest manufacturer of clean-power generation equipment, particularly solar panels. According to the Department of Energy Information Administration, 57 percent of all solar photovoltaic cells sold in the United States in 2009 were imported. Additionally, China was responsible for half of the world’s production of solar panels in 2010, although 95 percent were exported. Currently, the IRS provides tax incentives for all solar panels sold and installed in the United States, no matter where they are made. Brown and Schumer said that it makes no sense to let Chinese companies take advantage of these tax credits, on top of the built-in subsidies it already enjoys back in China.

Later this month, the U.S. Commerce Department is expected to deliver preliminary determinations on whether China’s state-sponsored solar industry is illegally dumping solar products into the U.S. market. Brown wrote to President Obama in December expressing his support for a petition filed by a coalition of U.S. solar manufacturers with the U.S. Department of Commerce and International Trade Commission seeking relief from illegal Chinese trade practices.  The petitioners alleged that Chinese imports of crystalline silicon solar cells are being dumped into the U.S. market far below their fair value, and that Chinese solar cell and panel producers receive massive subsidies from the Chinese government. In October 2011, Brown introduced an amendment to increase trade enforcement and level the playing field for Ohio solar industry and other manufacturers forced to compete with unfair Chinese trade practices.

The senators proposed that the Energy Investment Credit or Residential Energy Efficient Property Credit be modified to include a specific domestic content requirement. The senators said this would ensure that the United States emerges as a global leader in the fast-growing solar industry. The tax credits the senators propose modifying are described below:

• Residential Energy Efficient Property Credit: This credit is equal to 30 percent of the costs of qualified solar electric property and solar water heating property (with no upper limit).  This includes any labor costs properly allocable to the onsite preparation, assembly, or original installation of the residential energy efficient property and for piping or wiring to interconnect such property to the home.  Existing homes and new construction qualify. Both principal residences and second homes qualify. Rentals do not qualify. Expires December 31, 2016.

• Business Energy Investment Tax Credit (ITC): This credit is equal to 30 percent of expenditures, with no upper limit. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible. Expires December 31, 2016.

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