Tariffs Drive New U.S. Solar Panel Production—Will Texas Miss Out?

Texas Lt. Gov. Dan Patrick has asked for a legislative inquiry into two companies that are constructing large scale solar panel manufacturing plants in Texas in reaction to a FOX News report that the companies have links to China and Chinese government officials. While Patrick’s ultimate goal is not clear, he and other state officials who have been quick to criticize should think about the long-term needs of the state and the nation. Limiting solar panel manufacturing will prove short-sighted indeed.

Ignoring for a moment that these companies are publicly traded in the U.S., the fact that they are investing hundreds of millions of dollars to build these facilities anywhere in the U.S. is a direct response to the 50% tariffs on Chinese solar cells to encourage U.S. based production. Tariffs give a massive economic incentive to foreign companies to invest and build manufacturing plants in the U.S. In 2003, Toyota broke ground on its light truck plant in Texas in response to U.S. trade policy that imposed a 25% import tariff on light trucks. Toyota now employs thousands of Texans and has invested billions of dollars in the state.

So, it is not surprising that the first movers for solar cell and solar panel manufacturing in Texas would have ties to the world’s largest manufacturers that are based in China. Those companies have the state-of-the-art technology required to scale up production of more efficient solar cells—taking the 19^th century invention well beyond the first practical applications of Bell Labs in the 1950s and improving on NASA’s well known use. As a practical solution to meeting exploding electricity demand in Texas and across the nation, the U.S. needs more solar panels – yesterday. To protect U.S. energy security, the manufacturing of these components should be sited in the U.S.

The Electric Reliability Council of Texas announced that more than 225 gigawatts of large load projects have lined up to become new electricity customers in Texas. (For perspective, the Hoover Dam produces two gigawatts of electricity, so think of 112 Hoover Dams.) If actual demand reaches only one-third of that projected need, the average daily demand on the ERCOT grid will double. With at least a five-year backlog for new natural gas power plants and an even longer time horizon for permitting and building small nuclear power plants, the solution for Texas will be a very rapid buildout of solar farms and batteries.

One of the companies that caught Patrick’s attention is T1 Energy, which is traded on the New York Stock Exchange. The company is mounting the largest effort to expand solar in Texas by investing more than $400 million in a new manufacturing plant in Austin, Texas. In total, the company expects to add more than 3,000 jobs in its Austin and Dallas operations alone. Vice President Vance recently met with T1 Chairman and CEO Dan Barcelo to discuss American energy and manufacturing – something he likely would not have done if he viewed T1 as a threat to the U.S.

America is playing catchup and, unfortunately, has already ceded the rest of the global solar panel market to China. Domestically, Texas is behind Ohio and Louisiana in manufacturing panels, and both of those states are hosting companies with ties to China. Texas does not have a monopoly on tax breaks or a skilled workforce. It had to hurt elected leaders in Austin that President Trump announced more than $92 billion of investments in new AI data centers and other electricity intensive businesses at the Pennsylvania Energy Summit earlier this year while pointing out that Texas did not win the investments. Does Texas really want to create a hostile environment and lose its position as Energy Capital of the World? More crucially, could Texas cost the U.S. the war on AI development against China? Texas leaders must think about the long game for the Lone Star State and welcome the reshoring of American technology.