Canadian Solar Industry Navigates Shifting Global Markets Amidst U.S. Policy Changes

Canada's solar industry is facing a dynamic shift in global market conditions, driven by recent changes in U.S. tax policy and trade tariffs. These developments present both challenges and opportunities, prompting a strategic re-evaluation of investment, manufacturing, and export strategies within the Canadian renewable energy sector.

Key Takeaways

• U.S. tax credit changes may redirect investment towards Canada's renewable energy projects.

• U.S. tariffs on Canadian imports, particularly aluminum, impact competitiveness in the U.S. solar market.

• Canadian manufacturers are exploring domestic market growth and international diversification.

• New Canadian tax incentives aim to bolster domestic clean energy investment.

U.S. Tax Credit Revisions and Canadian Investment

The "One Big Beautiful Bill Act" (OBBBA), signed into law in July 2025, has significantly altered U.S. tax credits for wind and solar facilities. Notably, the clean electricity production credit is now unavailable for "foreign-influenced entities," and facilities beginning construction after December 31, 2025, that receive "material assistance from a prohibited foreign entity" will be disqualified. Furthermore, the clean electricity investment credit is set to terminate for facilities placed in service after December 31, 2027, with an exception for those commencing construction by July 4, 2026.

These changes are expected to decrease the financial viability of certain U.S. projects. Concurrently, Canada is implementing new "clean economy investment tax credits." The existing clean technology investment tax credit (CTITC) offers a refundable credit of up to 30% of eligible capital costs for projects between March 28, 2023, and December 31, 2033. Additionally, a proposed clean electricity investment tax credit (CEITC) aims to provide a refundable tax credit of up to 15% for "clean electricity property," potentially including wind and solar generation, and is proposed to be available to non-taxable entities like First Nations.

This alignment of reduced U.S. incentives and enhanced Canadian incentives is anticipated to increase investment in Canadian renewable energy projects, attracting investors who might have previously focused on the U.S. market.

Impact of U.S. Tariffs on Canadian Solar Exports

U.S. tariffs on Canadian imports, particularly aluminum, pose a significant challenge to the Canadian solar industry. Aluminum is a critical component in solar panel manufacturing, and in 2022, Canada exported a substantial $8.88 billion worth of unwrought aluminum to the U.S., representing 92% of its total aluminum exports. The reintroduction of tariffs makes Canadian products less competitive, potentially leading to reduced orders from U.S. developers. Exports of solar products from Canada to the U.S. have previously seen declines of up to 82% following similar safeguard tariffs in early 2018.

Domestic Market Opportunities and Diversification

While U.S. tariffs disrupt export markets, they may also encourage Canadian manufacturers to focus more on the growing domestic market. Canada's solar capacity is expanding, supported by federal and provincial commitments. The Canadian Renewable Energy Association (CanREA) projects a 25% increase in solar capacity over the next five years. However, increased reliance on the domestic market could intensify competition among Canadian companies.

These trade challenges also present an opportunity for market diversification beyond North America. Europe and Asia, with their robust renewable energy growth, offer significant potential. The International Energy Agency forecasts Europe's solar capacity to grow by 15% annually through 2030. Canadian companies investing in research and development and targeting high-value products could capture market share in these regions. Government-supported trade missions and export development programs can assist manufacturers in navigating these new markets.

Strategic Adaptation and Future Outlook

The evolving trade and tax landscape necessitates a strategic pivot for Canada's solar industry. The tariffs highlight the need for a more self-reliant clean energy supply chain within Canada, encouraging local production of solar components. While these shifts present immediate financial strains and potential project delays, they also offer a chance to foster innovation, explore new global markets, and accelerate domestic solar deployment. The long-term resilience of Canada's solar industry will depend on its ability to adapt, innovate, and leverage policy support to navigate these complex global dynamics.

Sources

• How the elimination of U.S. tax credits under the One Big Beautiful Bill Act may increase investment in theCanadian renewable energy sector | Insights, MLT Aikins.

• Trump tariffs could reshape Canada’s solar industry forever, pvbuzz media.

• How U.S. tariffs will have ripple effects on Canada’s solar industry—Is this the beginning of a crisis? -PVBuzzMedia, pvbuzz media.