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Are Chinese solar panel manufacturers competing unfairly with the United States?

Chinese solar panel SUBSIDIES & Trade Commerce tarrif wars?

Over the past four years, production of solar cells has largely migrated to China, stirring controversy over Chinese government solar subsidies and the imposition of stiff tariffs on imported solar modules entering into the United States.  Those among the discussion are U.S. trade officials, including the U.S. solar industry, which currently employs around 100,000 people in the United States.

Since 2008 there has been widespread speculation that Chinese government subsidies to Chinese panel manufacturers might have a serious influence on the industry at large, and in particular, the United States.  As a result, officials may approve a 31% duty tariff on Chinese imported solar panels arriving into the United States.  

Suntech Power Holdings Co. is one of over 60 Chinese firms who work to assemble and export solar panels, and who would be affected by the tariff. They’re the world’s largest solar panel manufacturer, along with Trina Solar Ltd., both of whom would face the same duties. All other companies exporting solar cells from China could face a much higher tariff of 250%.

Around half of solar panels sold in the United States are made in China. U.S. Commerce Department officials stated that imports were worth $3.1 billion in 2011-2012, while they were worth $640 million in 2009. In an effort to combat what is perceived as illegal subsidy activity, duties were levied in March, 2011 by the Commerce Department valued at around 2.9 to 4.7%.  Although these taxes sent a message to the Chinese government and module makers, it did little to affect change upon the Chinese solar energy industry at large.

Solar panel manufacturers based in the United States say that higher tariffs on Chinese goods are an excellent way to protect domestic jobs. Companies like Solar World Industries America in Hillsboro, Oregon feel that Chinese manufacturers who were allegedly dumping solar cells into U.S. markets will now be punished.  

However, some domestic agencies weren’t pleased with the news.  Solar panel developers,  installers and solar brokers rely on imported components, and representatives of these industries fear a coming trade war with China as a form of retaliation for the imposed tariffs.  Commentators to the issue feel that importing components helps to speed up the rate of installed solar capacity, while helping consumers take advantage of the 30% tax credit for solar installations, thus driving the market and sales in a positive economic direction.  According to an industry representative, access to low cost Chinese solar panels has made it possible to outfit a typical home today, which costs half of what it did around three years ago.

One issue at the debate is the year 2016, when the U.S. may likely see the 30% tax credit disappear or face ratcheting down.  Developers are concerned, as they have little time to become competitive with other sources of electrical energy.  Adding to this dilemma is speculation by some industry individuals who have suggested that companies in China might outsource their labor to other countries in order to avoid the tariffs.  Additionally, Chinese authorities may exercise a combative approach as hefty tariffs reach a melting point for lack of negotiation.  A prime example is Beijing, who has already implied that they could retaliate against American imports to China.

The ruling by the Commerce Department could have serious repercussions on U.S. employment. Installers employ over half of all people working in the American solar industry. Only around a fourth actually work in manufacturing. The remainder is made up of sales and distribution personnel.

Nevertheless, there are those who hope that domestic solar manufacturers will resurrect and reinvent themselves to become nimble with the competitive price challenges that currently daunt them. Some companies have shut down or experienced cuts because of slow growth in European markets. Others have seen domestic growth, but these same companies are often tied to the panel installation segment of the industry.

Time will tell.  But in the interim, we may witness unprecedented change; some companies celebrating for the better, or bracing for the worst.

 

Article written by Jennifer Coleman of Sun Source Solar Energy Brokers, providing solar brokering and solar energy consulting services in Santa Rosa, Marin, Sonoma, Napa, Solano and San Francisco Counties.  For more information, please visit www.SunSourceSolarBroker.com.

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