Last October, SolarWorld led a U.S. manufacturer coalition that asserted trade law violations by Chinese makers of solar cells. The coalition’s filing with the Department of Commerce led to significant tariffs being levied on solar products originating in China entering the U.S.
According to filing by the U.S. manufacturers, Chinese
manufacturers received lavish incentives from China’s government
that gave them an unfair cost/price advantage over U.S.
manufacturers. In addition to this advantage, it is asserted
that the Chinese makers sold product to U.S. customers at below
manufacturing costs, a practice often referred to as dumping.
Chinese manufacturers and the Chinese government argue that they
did not receive unlawful or excessive incentives and did not
sell solar cells and modules at below cost. Also, they allege
that not enough attention is given the other factors that allow
a cost advantage over U.S. makers, namely “know how” and scale.
They claim the solar manufacturers coalition’s trade case was
brought forward because SolarWorld had lost its competitive edge
and couldn’t compete successfully in a highly competitive
marketplace.
Now, because of a loophole in the tariff judgment, only the
solar cell, not the entire module, has to be manufactured
outside of China to avoid all tariffs.
The case has been presented that SolarWorld itself was the
recipient of large amounts of incentives from the German, U.S.,
and Oregon governments and has no right to complain about the
special treatment received by Chinese makers from their
government. There are also rumors of SolarWorld modules
occasionally being sold in the U.S. for extremely low, below
market prices.
The result of all this chest pounding and legal maneuverings
(the extent of which might not be resolved for years) is that
the U.S. solar industry and all its participants—from
manufacturer to end-user—has suffered. The only winners are
Taiwanese cell makers. Solar modules from China that are being
sold in the U.S. are now more expensive because of retroactive
tariff penalties that must be paid and the additional cost of
securing “out of country” cells. That price increase is
magnified as the product moves from maker to EPC to end-use
customers in the case of project business, and from maker to
distributors and dealers to end-use customers in the case of
sales through channels. Each organization marks up the increase
as the modules moves from manufacturing to installation. This
higher price is even more striking today as euro weakness has
caused a lowering of the module price in Europe creating a 20
percent or more difference between U.S. and European pricing.
Threat of unresolved tariff amounts (that might change in the
future) also has caused uncertainty among buyers which creates
insecurity in the market and damages the efforts of U.S.
sellers.
The reputations of both SolarWorld and the Chinese manufacturers
have been tarnished, and profits, which are in short supply
throughout the global solar industry, have been further squeezed
by this action.
But let’s be realistic. Yes, the U.S. manufacturers have a
difficult time competing pricewise with Chinese makers because
the cost of doing business in China is less than in the U.S. for
many reasons—including cost of labor, taxes, insurance,
property, and the steadfast support of an exceedingly generous
government. But also, the Chinese solar industry has been
willing to take risks to establish scale which lowers solar’s
total cost, and the Chinese makers have learned to refine
silicon, make wafers and cells and build modules as well as or
better than any other group of manufacturers.
I believe there is a “third way” of moving forward for the
benefit of the solar power customer and industry participant:
Foster collaboration between U.S. and Chinese entities that
lead to jointly owned factories in the U.S. that service the
domestic market. The Chinese makers want access to the U.S.
market and the U.S. market needs investment and the ability to
create more jobs. Let the Chinese use Chinese-made cells—without
penalty tariffs—if deployed in U.S.-assembled modules. Encourage
the Chinese solar industry to invest in U.S. factories that
produce solar products “made in the USA.”
Of course this simple suggestion is not so simple. The
complication lies in keeping the cost low for normally more
expensive U.S. labor and non-silicon expenses. However, I
believe U.S. manufacturing could benefit from the challenge. The
same ingenuity that created commercially produced photovoltaics
in the first place can be used to develop new, low cost
manufacturing procedures and practices.
Also, for this idea to become a reality a “Buy American”
provision needs to be put in place where taxpayer-funded
incentives (including tax incentives) would be tied to mandatory
American content. This idea is not loved by all, but my view is
that if the taxpayers are funding the programs then taxpayers
should be given some of the jobs thus making incentivizing solar
power twice as valuable.
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Ron Kenedi is a solar industry veteran with more than 30 years of experience, including senior management roles at LDK Solar, Sharp Electronics Solar Division, Kyocera Solar Inc., and Photocomm, Inc. He currently heads up his own advisory practice, Ron Kenedi Consulting.
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