Several Chinese companies will begin manufacturing solar panels in the United States this year, a move that places Chinese manufacturers close to American customers and qualifies them for state and federal incentives.

Suntech America, Yingli Green Energy Americas, and UpSolar—all Chinese companies with U.S. headquarters in San Francisco—are building or looking for manufacturing space in the U.S.

Solar-panel manufacturer Kyocera Solar, with U.S. operations based in Scottsdale, Arizona, also recently announced plans to open its first U.S. plant in San Diego for the same reasons.

In January, Suntech and Yingli were awarded $2.1 million and $4.5 million, respectively, through a $2.3 billion federal stimulus program for clean energy manufacturers, which required that they manufacture panels in the U.S. The California Energy Commission said $95 million of the $226 million it got from the American Recovery and Reinvestment Act will go to tax credits for clean energy manufacturers that locate in California. Other states, including Arizona, are offering portions of stimulus awards plus income, sales, and manufacturing tax credits for clean energy manufacturers.

Suntech is readying its first U.S. factory, a 30-megawatt facility in Goodyear, Arizona, that has the potential to expand to 120 megawatts. Thirty megawatts of panels would serve approximately 7,500 average homes.

Suntech is the first Chinese solar company to announce it would manufacture panels in the U.S. Steve Chadima, vice president of external affairs for Suntech America, called the factory an “experiment” to determine if manufacturing in the U.S. can pencil out.

Like other Chinese solar companies, Suntech was also motivated to build U.S. manufacturing in the States by the American Recovery and Reinvestment Act’s “Buy America” clause, as well as similar provisions in other public contracts. The clause stipulates that goods used in federally funded projects should come from U.S. manufacturers when available and when the cost of U.S. products compared to foreign products isn’t prohibitive.

Because of its plans for a U.S. factory, Suntech has been able to bid on projects that otherwise would have been off limits to a Chinese-based solar manufacturer, Chadima said. But he warned that “domestic content” restrictions can go too far.

“At some point you’re basically driving up the cost for people that have to pay the bills,” he said.

Clearly, manufacturing is cheaper in China, where labor is cheap. But Chadima said Suntech has been working to automate more processes at its U.S. factory that will reduce the number of total workers and costs. Placing products closer to customers and implementing just-in-time inventory will also help reduce costs and bring them close to what they can achieve in China.

“It’s maybe a little more expensive but not that much more expensive,” said Chadima. “The fact that we have access to certain contracts that we otherwise wouldn’t makes up for some of that.”

Yingli Green Energy is negotiating for a site for a 100-megawatt factory between Austin, Texas, and Phoenix, Arizona.

The facility will put the company closer to its customers and suppliers and allow Yingli to innovate and react to customer demands more quickly, said Robert Petrina, managing director for Yingli Green Energy Americas.

And UpSolar said it’s also looking for a manufacturing partner based in the United States, its first outside of China.

The company said it was also motivated by “Buy America” stipulations, as well as gaining access to low-interest financing and other incentives offered through various state and federal programs.

“We feel that with the current framework that exists and with what the Obama administration has laid out as essentially the ground rules to qualify for the financing—we think at this point it’s important to get something online here in the states,” said Troy Dalbey, head of North American sales for UpSolar.