The Recovery Act will help, but the federal government needs to offer more incentives for the U.S. to be globally competitive in solar manufacturing, according to consulting firm Deloitte.

Deloitte expects that market forces will eventually drive solar manufacturers to the U.S., but the current government incentives, according to an online debate between Deloitte staffers, “simply aren’t competitive with other countries.”

The Deloitte debaters included points and counterpoints on two schools of thought on the need of further government involvement. Decision makers need to recognize the demand for a commitment to solar manufacturing, and although the American Recovery and Reinvestment Act provided some necessary incentives, the U.S. federal efforts remain deficient.

Though a report released last month revealed the U.S. to be the largest solar thermal market in the world, manufacturing concerns such as foreign labor cost advantages, could keep investors and decision makers alike away.

Labor costs are an issue when competing in international markets. First Solar Inc, the largest thin-film manufacturer, has achieved significant profits due to lower production costs through Malaysian plants. The ARRA is a step in the right direction, though Deloitte emphasized that it should be considered just a start. Phil Schneider, principal of Deloitte Consulting, wrote of executives speaking of desperately needed additional incentives.

Companies, like SolFocus, are already planning to utilize credits, such as the 30% manufacturing investment tax credit set forth in the ARRA. Arizona developer SolFocus currently has the ability to produce 2 million concentrating reflectors annually, providing over 30 megawatts of power. This tax credit, though considered insufficient by some, brings American factory production costs on par with India. Without the tax credit, American factories would be as costly as Germany’s.

U.S. solar power will owe the majority of its future growth to state governments through efforts such as the $500M solar incentive bill that was passed in Texas last month. Rebecca Ranch, director of Deloitte Consulting encouraged solar companies to take into consideration changes in legislation regarding carbon regulations when deciding on manufacturing locations and echoed that “state incentives will undoubtedly be part of any winning packages.”

Arguments against solar have previously centered on its payback being beyond the perceived equipment lifetime and that it is simply not cost effective The future energy demand of the US is too great to outsource solar needs, and efforts should instead be focused on energy self-sustainability. Hopefully, forward thinking government policies, such as investment tax credits, when coupled with reduced production costs due to advances in technology, will contribute to the future growth of the solar market.