Weighing Both Sides of the China-U.S. Solar Panel Manufacturers Trade Dispute

In recent years, the price for solar PV panels has plummeted, falling 30% in 2011 alone. The drop in prices can be attributed in part to cheap, imported panels produced by Chinese manufacturers who benefit from billions of dollars of cheap credit from the Chinese government. But while solar installers benefited from inexpensive panels, manufacturers suffered. The flood of cheap panels into U.S. markets drove a significant number of U.S. manufacturers into bankruptcy, contributing to job loss and jeopardizing the ability of the U.S. to compete in renewable technologies.

In a dramatic move, several U.S. firms, most of which remain anonymous, filed a suit in October of last year with the U.S. Department of Commerce and the U.S. International Trade Commission, “alleging the unfair importation of crystalline silicon photovoltaic cells and modules from China.”  SolarWorld USA is leading the group of firms that have formed the Coalition for American Solar Manufacturing, demanding President Obama impose tariffs and duties on Chinese panel and silicon cell makers to offset their losses. According to the Coalition, China can undercut all other producers, put them out of business, and end up with a monopoly on the solar sector by heavily subsidizing panel production. Gordon Brinser, president of SolarWorld, alleges that this is their whole intention; to “gut it and own it.

SolarWorld claims that its installations, like this 600+kW facility in Yosemite National Park, will slow or cease in the face of unfair Chinese competition. Image via www.solarworld-usa.com

China has denied any allegations of wrongdoing, essentially calling the U.S. a bad sport in a losing market. Though reports accusing China of pledging $30 to $40 billion dollars in cheap credit to its companies drove allegations against the industry, evidence suggests that not only have Chinese solar companies hardly touched the financing, but that the interest rates have been quite reasonable as well. Some reports say companies have tapped as little as 3 percent of the billions of dollars made available to them, and data from actual loans indicate that interest rates fall between 3 to 9 percent depending on maturities and currencies used – hardly cut-rate lending.  While Chinese companies have access to other sources of financing, there still exists little evidence that points to the “all-encompassing range of illegal subsidies from the Chinese government, including massive cash grants” alleged in the complaint by U.S. solar companies.

And it gets more complicated. After the group of U.S. companies filed the suit, China countered with a claim that the U.S. has been illegally dumping polysilicon feedstock in Chinese markets, putting some of their companies out of business. Chinese authorities have the exact same complaints against American companies – that U.S. manufacturers are selling products below productions costs in a malicious attempt to hurt Chinese business. Fair competition, or illegal trade? It’s a complicated question involving “money, business, and patriotism,” and most importantly, jobs. Some argue that although manufacturers in the U.S. are losing out, the U.S. might actually benefit in terms of job growth from cheap panels since a majority of the estimated 100,000 U.S. solar jobs occur “downstream” or after the panels are manufactured.

In terms of the case itself, the U.S. International Trade Commission (ITC) announced on December 2nd that it agreed unanimously that Chinese solar panels were harming U.S. solar panel manufacturers.   The ITC is slated to make its final determination in July for the anti-dumping question, and in May to determine countervailing duties. Further findings in these areas could result in retroactive duties on imported solar panels. Some Chinese companies are responding to the situation by hedging their bets, with some planning to move their assembly operations outside of China to avoid future tariffs. And just last night during his State of the Union address, President Obama announced the creation of a “Trade Enforcement Unit” intended to root out unfair trade practices, not just in solar manufacturing but in intellectual property and other areas as well. While avoiding mention of the case directly, the statement seems to indicate his willingness to see it proceed.

If the case does continue, it could easily spark an international trade war. Recent events already indicate movement in that direction. Wind turbine manufacturers in the U.S. have joined in with a trade complaint regarding subsidized turbine imports, specifically from China and Vietnam. And on December 15th, China enacted a tariff on large-engine cars made in the U.S., an apparent response to the complaints over solar manufacturing. While this tariff affects only a sliver of U.S. exports, the trend is unsettling.

Reality states that both sides have an enormous amount to lose from a trade war, and it is unlikely the situation will devolve to such a state. Relying more heavily on WTO rulings to govern the relationship in this politically strained situation is one way both sides could diffuse the tension. Unfortunately, that means that U.S. manufacturers will continue to face harsh competition, fair or not, from imported panels. Manufacturers of advanced solar technologies can take comfort in the fact that Chinese manufacturers have mostly targeted the lower end of the solar panel market, producing basic crystalline silicon modules. Higher-value manufacturing – and jobs – has yet to compete directly with Chinese panels on the same scale as more basic models. Unfortunately, consumers have demonstrated that many will still choose the lowest priced panel instead of paying more for a potentially more efficient system.

But the loss of one side of the solar industry is a win for the other – installations, especially when aided by incentives like SRECs, will continue to benefit from inexpensive panels, gradually increasing the share of renewables in the energy mix. If the solar industry has collectively agreed on anything, it is the need for a coherent U.S. energy policy to guide investment and steady markets. Current trends indicate that installations are increasing as installation and panel costs become cheaper, creating jobs and solidifying solar energy’s foothold in the U.S. energy mix. The appeal of solar energy is reaching more consumers than ever before, but using the industry as a test case for larger questions of trade policy could erode this progress and threaten the future of solar energy in the U.S.

About Sol Systems
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilitiesmanage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit http://www.solsystemscompany.com.

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