During 2000s the innovations and initiatives by the private and the public entities disrupted the US solar energy sector to make solar technology more affordable and efficient. The solar energy deployment in the US increased by 17% in 2007, the sector grew at the rate of 40% from 2000 to 2008, initiatives were taken to reduce fossil fuel subsidies and direct those savings towards renewable energy and the per unit cost of solar energy production reduced over that period. The massive expansion in solar energy sector pulled foreign solar manufacturers such as Sanyo (Japan) and SolarWorld (Germany) among others to set manufacturing units in the US. The glory began to fade for US manufacturers in 2011 when the US companies (Konarka and Solyndra) started to file for bankruptcies. General Electric put on hold its upcoming solar production expansion. The industry immediately acknowledged that the cost effective solar products from China will disrupt the US solar sector but this time the disruption would soften the US competitiveness in favour of China. In the US in 2014, 140000 people are employed in solar sector.
Without delving into details I will put it simply – ‘A major contention for an end user of solar power concerns the comparison of cost per unit of solar power with the cost per unit of the traditional energy source.’ The cost parity in solar power is achieved when per unit cost of solar energy for an end user is same as per unit cost of power from traditional energy source such as coal. Spain, Italy and Germany have already achieved parity.
Facing the tough cost competition from the Chinese solar product suppliers, SolarWorld (German company operating in the US) with the Coalition of American Solar Manufacturing in 2011, filed antidumping (AD) and countervailing duty (CVD) petition with the US Government requesting tariffs to be imposed on the solar cell import from China.
The petition claims –
- Imported products from China are being sold in the US at unfair prices.
- The Chinese government unfairly subsidizes its manufacturers and exporters.
- The dumped and subsidized imports are a cause of material injury to the US industry.
In response the Chinese Ministry of Commerce initiated an Unfair Trade Barrier Investigation into six State level renewable energy subsidy programs in the US. The investigation targeted five states and covered renewable energy technology incentives, including solar. In 2012 China announced it had launched an official complaint at the WTO against US import duties on 22 Chinese products, including solar cells. The complaint alleged that the US application of CVD on Chinese products was inconsistent with WTO rules and constituted a subsidy to US companies.
In 2012 the US imposed 31% antidumping tariffs on Chinese solar panels. The new tariffs would substantially raise the solar power cost to end users. The law firm representing the US companies said that China posed a particular threat to the developing green energy sector in the US. “Green energy sector would not be developing anymore when cost of green energy is much higher than those from fossil sources”.
Meanwhile in Chinese Solar Industry
The Chinese solar sector was becoming highly competitive and concentrated. After the news on tariff, the large Chinese manufacturers showed interest in shifting manufacturing units to Canada. But the Chinese State owned banks that gave many loans to Chinese solar companies were getting restless from the tariff issue because this would lower profitability of Chinese companies and hence their ability to repay loans. Also the Chinese companies were facing stiff competition nationally so the further cost reduction pressures were mounting. In nutshell, the shifting of manufacturing to Canada would raise costs for Chinese manufacturers and the circumstances did not allow that. At this point please notice that the US is the main exporter of the polysilicon to China and this is the key raw material in the manufacturing of solar cells that Chinese companies produce.
In 2013, China twice increased import duty on the US polysilicon to the net of more than 57%. The EU and China reached an agreement in early 2013 to set minimum price and volume on solar panel imports from China. The tariffs in late 2013 were raised to 42.1%.
The US opened new antidumping investigation into solar panels from China. This was on request of SolarWorld again. The Chinese companies were buying cheaper solar cells (solar cells are joined together to create solar panels) from Taiwan and then assemble the solar panel to be sold in the US. The Chinese companies were avoiding tariffs if they contained solar cells made outside China.
The US solar industry employees can be divided between solar installers and solar manufacturing workers. Only the fraction of workers is in solar manufacturing. For the much larger solar installation group the Chinese products are better as the installers will install cheaper solar panels for end customers. The solar installations were worth $13bn of which 50% of installed solar equipment was imported from China.
The Department of Commerce sent questionnaires to 24 Taiwanese companies in regards with antidumping investigation. Two companies out of those were selected as final respondents based on manufacturing and export-import capacity. The decision on tariffs is under review and will be released within weeks.
- Expensive Chinese solar panels by virtue of higher tariffs imposed on request of a German manufacturer will cause Americans to lose their jobs
- The US wants India to back off a policy that would require local sourcing for solar energy technology and has sought World Trade Organization enforcement action
The US wants to close borders to foreign made solar products in order to support local manufacturers. The US wants India to open borders to foreign solar manufacturers and not protect local manufacturers. What sort of POWER are we talking about here?