Enel to Build Massive Solar Panel Factory in U.S.

Source: By Phred Dvorak, Wall Street Journal • Posted: Tuesday, November 22, 2022

The planned factory would also make solar cells, a key part of the supply chain not currently produced in the U.S.

Enel’s plan is the latest in a rush of deals after the U.S. passed legislation offering incentives to build up a domestic supply chain for renewables.PHOTO: JAKE DOCKINS FOR THE WALL STREET JOURNAL

Italian energy giant Enel ENEL 0.43%increase; green up pointing triangle SpA is readying a massive solar-manufacturing push in the U.S., including plans for a factory that will make solar cells, a key part of the supply chain that currently doesn’t exist here.

Enel said it is planning a factory that can initially produce 3 gigawatts—and ultimately as much as 6 gigawatts—of solar panels. That is a scale that would make Enel’s factory one of the largest such ventures in the U.S., at a cost that could approach or top a billion dollars, according to Journal estimates.

The factory will also manufacture solar cells, the building blocks for solar panels and a component not currently produced in the U.S., after the last few manufacturers went out of business or were priced out of the market by cheaper imports in recent years.

“Economies of scale and learning curves are super important in this business,” said Giovanni Bertolino, U.S. head of Enel’s cell- and panel-making unit, 3Sun. Enel needs big production volumes if it is to compete with the Chinese manufacturers that dominate the industry now on price and quality, he said.

Enel’s plan is the latest in a rush of deals being announced after the U.S. passed legislation offering generous incentives to build up a domestic supply chain for renewables. That law, the Inflation Reduction Act, offers tax credits to companies that make everything from wind turbines to electric-vehicle batteries in the U.S., as well as bonus tax credits for power-plant developers that use domestically made components.

After the law was passed in August, many companies from solar-panel maker First Solar Inc. to battery maker LG Energy Solution Ltd. have unveiled billions of dollars of manufacturing plans, and industry experts say many more deals are coming.

In the solar industry, domestic manufacturing efforts are also gaining traction after equipment shortages started springing up during the pandemic, and because of mounting fears of becoming increasingly reliant on goods from China, which controls an estimated 80% of the supply chain now. During the past few years, those equipment shortages have been exacerbated by U.S. legislation and trade actions aimed at preventing alleged human-rights abusesand tariff evasion by Chinese companies.

Another factor in driving more local manufacturing is soaring demand for solar power in the U.S. and worldwide, as governments push to increase the amount of power generated by sources that don’t emit the large amounts of greenhouse gas that fossil fuels do.

For the past few years, the U.S. has been adding around 20 gigawatts of solar capacity a year—enough to power around 3.6 million homes—and some forecasters say that number could double in the next decade.

Enel makes both solar cells and panels at a factory in Italy now, and is expanding its capacity 15-fold, to 3 gigawatts.

“We thought there was an incredible need to re-shore [solar manufacturing] both in Europe, but also in the U.S.,” said Enrico Viale, head of Enel’s operations in North America.

Enel, based in Rome, is one of the world’s biggest utilities and renewable-power developers, with a global portfolio of wind, solar, geothermal and hydropower that totals 55 gigawatts. More than 8 gigawatts of that is in the U.S. and Canada, and the company said last year it hopes to increase that amount by 75% by 2024, although a shortage in solar panels may slow growth somewhat.

Enel’s planned U.S. factory will be important for meeting that growing panel demand, Mr. Bertolino said. The company is looking at potential sites from the Great Lakes to Texas, giving priority to locations where it can move fast to set up operations. Enel hopes to make a decision on where to build by the end of the year and start manufacturing panels and cells by the end of 2024, he said.

Mr. Viale declined to say what the factory might cost. But Enel is spending around 600 million euros, equivalent to $622 million, for its Italian plant expansion, and building an all-new factory of that size in the U.S. will cost significantly more, he said. Like many other solar-equipment manufacturers looking to set up new factory lines in the U.S., Enel is also seeking to help secure funding by inking purchase agreements with developers.

Enel produces solar panels that use a relatively uncommon type of technology that the company says can produce more electricity than mainstream panels.

Although a handful of companies, including South Korea’s Hanwha SolutionsCorp. and Singapore-based Maxeon Solar Technologies Ltd. have said they are hoping to build solar cells in the U.S., none do now.

Write to Phred Dvorak at phred.dvorak@wsj.com