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US and China Battling for control of Solar PV Manufacturing Sector

Posted by Chloe Bennett on 5th July 2012

If you haven’t already heard, there is currently a solar PV trade war raging between the US and China. Both governments have realised the importance of this lucrative market to the future energy mix and are keen to protect their manufacturers in this sector.

In the last year a number of American and European solar PV manufacturers have folded as the market has been flooded with cheaper panels and tools imported from China. It has been suggested that the Chinese panels are unfairly subsidised by the Chinese government and as a result the US Government was lobbied by a number of American Solar PV manufacturers, calling for Anti-Dumping tariffs to be introduced. In May 2012 the US government ruled in favour of introducing these tariffs (set at roughly 31%) and are set to finalise the legislation in October 2012. However any final decisions will be applied retrospectively meaning that sales of Chinese PV panels from now could be subject to the tariffs.

US Senator Charles Schumer said: “This proposal is tough, but it’s needed to successfully counter China’s unfair trade practices. This hard-hitting plan will level the playing field for U.S. solar producers so that they can compete, create jobs and become a global leader in this rapidly-growing industry.”

Chinese Commerce Ministry spokesman, Shen Danyang, said "The U.S. ruling is unfair, and the Chinese side expresses its extreme dissatisfaction,"

China denies that the industry is unfairly subsidised and will fight this ruling. We are at the start of a political war waged between the two countries which will ultimately shape the manufacturing landscape of the future PV industry for many years to come.

In terms of US and European manufacturing this is very positive as it protects the companies who have been established for a long time. It also means that both the manufacturing and installation industries can grow in a sustainable manner.

However Chinese manufacturers are already facing problems with a surplus supply of their products. The US and Europe make up around 75% of their PV exports and if Anti-Dumping tariffs are introduced in Europe too this could mean that a number of Chinese PV manufacturers could potentially fold. The European market is actually bigger than the US and generates around 44% of Chinese PV exports. In fact it appears that the European Parliament is already being lobbied by a similar consortium of PV manufacturers and tariffs could be imminent.

The Tariffs could mean slightly higher costs of installation and longer payback periods for investors and this could potentially slow the industry down. A recent report by HIS in the US looked at the potential impact of the American tariffs and found that in fact the impact of these increased costs should not deter most investors as the ROI is still attractive.

Recent FIT cuts in the UK have been made based on the current cost of solar panels. If the European Anti-Dumping tariffs are introduced, it could well mean increased costs for a standard installation and a payback period which could stretch to the length of the life of the panels.

However this is unlikely to happen. It is most likely that Chinese manufacturers will find ways around being subject to these Anti-Dumping Tariffs by sourcing their raw materials from various international sources such as Taiwan.

In fact during the last month in the US the cost of solar panels still reduced very slightly. This may well be due to the surplus supply that is currently available.

As we examine the implementation of these Anti-Dumping Tariffs further it is clear that that there is a trade-off. It is important to protect our manufacturing industry to ensure that we don’t become as reliant on the East for Solar PV production as we have on fossil fuels. However by protecting this industry we are in turn slowing down the growth of this technology, it’s implementation and ultimately the amount of energy generated. This has an impact on the installers and the consumers who want to work with solar PV.

Also and more importantly from a green perspective anything that slows the industry down could be viewed as negative, however there have been accusations of Chinese firms not properly disposing of waste products to reduce costs which could mean the current crop of Chinese solar panels could potentially have a hidden environmental cost.

At the end of the day the Anti-Dumping tariffs have been implemented for a reason, to level the playing field. This means what we should see is continued growth at a level that should be sustainable. In the long term it also means greater stability for all in this still very young industry.

It is likely that the trade dispute will continue for some time. We are also likely to see tit for tat actions from China and the US as the dispute intensifies. One such action has already started with Chinese PV manufacturers demanding that their government impose similar Tariffs on imports of Polysilicon from the USA.

Unfortunately it appears that the business of Solar PV has taken centre stage rather than it’s green benefits. This is not an industry that anyone is going to want to give up or allow to be dominated by one nation and it looks that until the battle lines are drawn the market as a whole may suffer as a result.

Categories: renewable energy, solar pv