US solar panel manufacturers get a gift from the US military

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Marco Werman: I'm Marco Werman, this is The World. American solar panel manufacturers once dominated the global market, but for years China siphoned off American business, and now China dominates in solar panels. The Chinese are able to produce cheaper panels because they get a lot of government assistance. But this holiday season, American solar panel manufacturers got a bit of a gift from the U.S. military. The World's Jason Margolis joins me now. What did they get actually?

Jason Margolis: The gift they got is the U.S. military will no longer be buying solar panels from China.

Werman: That seems pretty big. How'd that come about?

Margolis: So, the U.S. Department of Defense issued an interim rule. It's a long, legal document, and it essentially defines the country at origin for where solar panels are made. They call it the place where substantial transformation occurred.

Werman: What does that actually mean?

Margolis: Yeah. I have you confused. So you got to go back a little bit in history to the last day of Herbert Hoover's presidency in 1933. He signs what's called the Buy American Act. Essentially it says that the American government will buy American made products for highways, bridges, roads, etc., if they are competitive. But fast forward to the 21st century. Well, what really is made in any place? You know something has a piece of material from country A, it's manufactured in country B, and then shipped to country C. So there are loopholes to what actually is made here in America.

Werman: So how are solar panel manufacturers goind to sort through this long legal document? I mean, is it going to be clear to them?

Margolis: So the legal document basically says if it's made in the U.S. or one of the nations that has a free trade agreement with the U.S., that's okay. So about 20 nations now are on the approved list. What is off the list is China.

Werman: What's stopping the Pentagon then? What would stop the Pentagon from buying solar panels from any of these 20 countries on this list?

Margolis: Nothing. That's the hard part. The U.S. still has to be competitive. So if Singapore, or Mexico, or Canada can make a better solar panel that's cheaper, the Department of Defense if probably going to buy their solar panels from them.

Werman: So is this such a big deal then?

Margolis: Well, yeah. I think so. I talked to M.J. Showe, he's a solar analyst with GTM Research here in Boston, and he went over some of the numbers with me. Right now, the Army, Navy, and Air Force operate about 1% of the installed solar panels in the U.S. But that could be just the tip of the iceberg. The Pentagon has big plans for solar in the next five years. They could install about eight times as many solar panels on military bases as well as homes for military personnel. And the Department of Defense has even bigger ambitions for renewable energy in general by the year 2025. Needless to say, the solar industry here in the U.S. is very excited about all of this.

Werman: The World's Jason Margolis. Thank you.