Major developments affecting the domestic photovoltaic (PV) manufacturing sector include technological advances, improved production methods, dramatically lower prices for PV modules, and trade frictions, particularly with China. These volatile industry trends have adversely affected the operations of many solar companies, forcing some to reassess their business models and others to close factories or declare bankruptcy. In addition, the rapid growth in shale gas production has the potential to affect the competitiveness of solar power, as cheap natural gas possibly may provide an alternative source of energy at a lower price. If oil and gas prices stay low, demand for renewable energy, including solar, might be hurt. These trends affect the ability of the United States to build a sustained domestic production base for PV equipment. U.S. solar manufacturing makes up a small part of the U.S. manufacturing base. In 2014, the nation's solar manufacturing industry directly employed about 32,000 workers, according to the Solar Energy Industries Association (SEIA), a trade group. The U.S. cell and module market, measured by domestic shipment revenues, has grown in size from $3.3 billion in 2008 to $7.1 billion in 2012, reports the U.S. Energy Information Administration (EIA). Following an unprecedented period of growth, the number of PV systems in the United States reached more than 445,000 by the end of 2013, more than twice the total at the end of 2011. Government support has been instrumental in sustaining the solar industry worldwide. In the United States, tax incentives and stimulus funding have helped to spur new PV installations. In its 2013 annual report, SEIA wrote that "more solar has been installed in the United States in the last eighteen months than in the 30 years prior." Nevertheless, even with direct government involvement, solar energy merely accounts for 0.5% of overall U.S. electricity generation. The Obama Administration actively supports greater deployment of solar energy and sees it as one way to encourage advanced manufacturing in the United States, create skilled manufacturing jobs, and increase the role of renewable energy technology in energy production, among other objectives. In its Solar Progress Report: Advancing Toward a Clean Energy Future , the Obama Administration argues that "The Administration's investments have helped expand U.S. manufacturing capabilities, including new facilities to produce cost-effective, high quality solar panels as well as startup operations to commercialize novel PV and concentrating solar power (CSP) technologies." This report looks at the solar photovoltaic manufacturing industry and its supply chain; employment trends; international trade flows; and federal policy efforts aimed at supporting the industry. It does not cover other methods of solar-power generation, such as concentrating solar power plants. Concentrating solar technologies, largely dormant prior to 2006, are suitable mainly for utility-scale generation, whereas solar photovoltaics can be arranged in small-scale installations to produce power for individual buildings and in large installations to supply power to utilities. Even with decreasing PV prices, producing equipment that generates solar power at prices competitive with electricity generated from fossil fuels remains a challenge. This is particularly true for utility-scale installations, as wholesale purchasers of electricity will compare the cost per megawatt hour of solar power directly with the cost of power from other sources. The cost-competitiveness of solar power is better in the residential and business markets, as the relevant comparison is with the delivered cost of electricity rather than with the generating cost. But even if the popularity of solar systems grows, falling equipment prices are likely to undermine efforts to sustain a solar manufacturing base in the United States. Solar PV manufacturing, previously undertaken by numerous small firms, is rapidly maturing into a global industry dominated by a smaller number of producers. Cell manufacturers typically have proprietary designs that seek to convert sunlight into electricity at the lowest total cost per kilowatt hour. Vertical integration, whereby manufacturers produce their own components from wafers to modules, is becoming more common, but many PV manufacturers still rely on extensive supply chains for components such as wafers, glass, wires, and racks. Worldwide, the market for solar PV (including modules, system components, and installations) expanded from $2.5 billion in 2000 to $91.3 billion in 2013, according to one estimate. PV systems do not require complex machinery and thousands of parts. In fact, most PV systems have no moving parts at all. They also have long service lifetimes, typically ranging from 10 to 30 years, with some minor performance degradation over time. In addition, PV systems are modular; to build a system to generate large amounts of power, the manufacturer essentially joins together more components than required for a smaller system. These characteristics make PV manufacturing quite different from production of most other types of generating equipment. In particular, PV systems offer little opportunity for manufacturers to make customized, higher-value products to meet unique needs. Manufacturers offer competing technological approaches to turning sunlight into electricity, but many customers have no reason to care about the technology so long as the system generates the promised amount of electricity. Economies of scale are significant, as increasing output tends to lower a factory's unit costs. Crystalline silicon PV is the main technology used by solar manufacturers, and accounted for about 90% of global PV production in 2013. Production of a crystalline silicon system involves several stages: Polysilicon M anufacturing . Polysilicon, based on sand, is the feedstock for the PV and semiconductor industries. It is the material used to make the semiconductors that convert sunlight into electricity. Polysilicon accounts for about a quarter of the cost of a finished solar panel. Approximately 90% of demand for polysilicon comes from the solar PV industry. Production requires large processing plants that may cost of up to $1 billion to build. Historically, polysilicon prices have been volatile because the construction of a new plant can add a large amount of supply to the market. A handful of manufacturers dominate polysilicon production. In 2013, the largest polysilicon manufacturer was GLC Poly from China, followed by Wacker-Chemie from Germany, Hemlock from the United States, and OCI from South Korea. In 2013, nearly half of the world's polysilicon was produced by Chinese and South Korean companies. Wafer M anufacturing . Using traditional semiconductor manufacturing equipment, wafer manufacturers, including companies such as Elkem, LDK Solar, Okmetic, Siltronic, Nexolon, and SunEdison (formerly MEMC), shape polysilicon into ingots and then slice the ingots into thin wafers. The wafers are then cut, cleaned, and coated according to the specifications of the system manufacturers. Cell M anufacturing. Solar cells are the basic building blocks of a PV system. They are made by cutting wafers into desired dimensions (typically 5 x 5 or 6 x 6 inches) and shapes (round, square, or long and narrow). The manufacturer, such as Yingli, Trina Solar, or Sharp, then attaches copper leads so the cell can be linked to other cells. Minimizing the area covered by these leads is a key issue in cell design, as the lead blocks sunlight from reaching parts of the cell surface and thus reduces potential energy output. The U.S. Department of Energy (DOE) estimated in 2011 that a manufacturing plant to produce 120 megawatts (MW) of cells per year would require an investment of around $40 million. Module M anufacturing. Modules, which normally weigh 34 to 62 pounds, are created by mounting 60 to 72 cells on a plastic backing within a frame, usually made of aluminum. Chinese manufacturers have come to dominate module manufacturing, making up about 70% of the total global production in 2013. The module is covered by a special solar glass, which protects the unit against the elements and maximizes the efficiency of the unit that coverts sunlight into power. Production of solar glass is highly capital intensive, and approximately 60% of the global market is controlled by four manufacturers: Ashai, NSG Group (Pilkington), Saint Gobain, and Guardian. The glass is expensive to ship, so glass producers tend to locate near module manufacturers. In some countries, module manufacturing is highly automated; in others, more labor-intensive processes are used. A newer technology, thin-film PV, accounts for about 20% of total solar PV production. Rather than using polysilicon, these cells use thin layers of semiconductor materials like amorphous silicon (a-Si), copper indium diselenide (CIS), copper indium gallium diselenide (CIGS), or cadmium telluride (CdTe). The manufacturing methods are similar to those used in producing flat panel displays for computer monitors, mobile phones, and televisions: a thin photoactive film is deposited on a substrate, which can be either glass or a transparent film. Afterwards, the film is structured into cells. Unlike crystalline modules, thin-film modules are manufactured in a single step. Thin-film systems are usually less costly to produce than crystalline silicon systems, but have substantially lower efficiency rates. On average, thin-film cells convert 5%-13% of incoming sunlight into electricity, compared to 12%-21% for crystalline silicon modules. Looking ahead, relatively newer thin-film technology may offer greater opportunities for technological improvement. In the United States, First Solar is the largest thin-film panel manufacturer, with an annual production capacity of 280 MW. Crystalline silicon systems and thin-film systems all make use of a variety of other components, known as "balance of system" equipment. These include batteries (used to store solar energy for use when the sun is not shining), charge controllers, circuit breakers, meters, switch gear, mounting hardware, power-conditioning equipment, and wiring. In the United States, inverters are also needed to convert the electricity generated from direct current (DC) to alternating current (AC) electricity compatible with the electric grid.