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Analysis: U.S. ITC backs SolarWorld's dumping action


Felicity Carus

Fierce competition in the solar industry between China and the U.S. has taken a further step closer to becoming an all-out trade war, after the U.S. International Trade Commission (ITC) concurred with the CASM that China has a dumping case to answer.

SolarWorld Industries America, the largest PV producer in the U.S., together with an (as yet) unnamed group of solar companies making up the Coalition for American Solar Manufacturing (CASM) – recently filed a petition alleging that Chinese manufacturers are dumping solar modules onto the U.S. market, with margins in excess of 100%. It also claims that the Chinese Government is giving its manufacturers illegal subsidies and credit lines worth US$40 billion.

And SolarWorld’s legal challenge has won the first salvo in a battle that looks set to get increasingly acrimonious. The United States International Trade Commission (USITC) has said it believes there is a “reasonable indication” that U.S. solar companies face unfair competition from Chinese silicon solar photovoltaic (PV) manufacturers. The determination was unanimous in the USITC.

Following the ITC's verdict, the U.S. Department of Commerce will, based on this determination, continue anti-dumping and countervailing duty investigations on imports. 

Fallout splitting the industry

But SolarWorld’s action has not only angered Chinese manufacturers, which could result in duties of US$1bn on Chinese PV imports. It has also divided the U.S. solar industry, over fears of job losses due to increased costs.

The U.S. subsidiary of the Bonn-based company said that China had more than doubled its capacity - from 6GW to 16GW between 2009 and 2010. Ninety percent of its output, it said, was destined for the U.S. and Europe, despite a domestic target of 20GW by 2020.

Market analysts Solarbuzz estimates that in the last decade, prices per Watt have dropped from US$5.40/€5.47 in December 2001, to US$2.49/€2.33 in November 2011.

Thomas Maslin, a senior analyst at IHS Emerging Energy Research, said that prices had dropped dramatically so far this year: “We have seen a pretty substantial price collapse in panels, with prices coming down 30% or more, on an average basis over the course of this year. There has been significant capacity expansion in China, and only moderate expansion in the U.S. and the EU. Growth of demand has not kept pace, particularly in Europe, where the general financial situation is such that nations are really pulling back on their incentives.”

SolarWorld’s petition claims that “Chinese exports of crystalline silicon solar cells and panels to the U.S. rose more than 350% from 2008 to 2010. Exports in July 2011 alone exceeded those from all of 2010. From 2008 to 2010, Chinese volume of cells and modules surged by 358%, far beyond the percentage increase in actual installations, and at prices that were well below the domestic industry’s.”

Gordon Brinser, president of SolarWorld told the ITC at the recent hearing, “even for China this kind of tremendous volume increase is remarkable. Massive Chinese underselling of these import volumes has caused U.S. prices to fall by 40% to 50% in the last 12 months, and these dumped and subsidised Chinese imports have caused material injury to the US industry.

“The Chinese industry, backed by its Government, has made no secret that it would use dumping and subsidies to take over this market...notably, they want to take the U.S. market at precisely the point where it is poised for strong growth...this should be a booming U.S. industry, adding thousands of jobs. Instead, it is fighting for its very life.”

In August, Solyndra and a number of other well known American solar energy companies filed for bankruptcy, citing competition from low-cost Chinese modules. In September, SolarWorld closed its Camarillo facility in California, which had been making crystalline silicon since the first solar boom in the 1970s.

Tim Brightbill, an attorney for SolarWorld’s lawyers Wiley Rein believes that the U.S. industry has a strong case: “The three elements that are being considered are: dumping, subsidies and injury. We have an extremely strong case on all three of those fundamental components. The level of subsidies that we’re talking about in the Chinese solar industry is virtually unprecedented. We’re talking about more than US$40bn in either loans or directed credit, including billions of dollars to individual companies. It’s just on a scale that is unheard of compared to other industries.”

Lack of support

But despite recent support from political figures in the U.S., a limited number of companies from the U.S. and China have taken CASM’s side. U.S. representatives of leading Chinese manufacturers Suntech, Yingli Green, and Trina Solar, joined U.S. developer SunEdison and U.S. manufacturer MEMC, in giving testimony to the ITC.

Richard Weiner, attorney at Sidley, told the U.S. ITC panel: “to the extent the petitioner is suffering injury…that injury is caused by the company’s own poor supply chain management, which has locked SolarWorld into undesirable contracts for key inputs, such as polysilicon. “The petitioner has launched an ill-advised attack, threatening the foundation of an entire U.S. industry.”

Since the hearing, industry opposition to the SolarWorld challenge has galvanised into the Coalition for Affordable Solar Energy (CASE), including manufacturers that appeared before the ITC, and developers such as SolarCity, Sungevity, SunRun and SunEdison.

Jigar Shah, a founding member of CASE and SunEdison, said, “SolarWorld is alone here. The rest of the players on SolarWorld’s side have stayed anonymous. It’s unclear how many manufacturers are really siding with [them]. Most manufacturers would like to avoid a trade war if possible. They would rather have more affordable solar panel prices”.

Shah admits that CASE has an “uphill battle” as the US Department of Commerce, which will investigate the case, has “never sided with China on a complaint”. “But we think it’s worth fighting, because we think 100,000 jobs are worth saving in the U.S. We’d like to see the downstream solar industry of 5,000 companies in the U.S. not be turned upside down by the Department of Commerce.”

If the ITC does rule in SolarWorld’s favour, the Department of Commerce could set a very low tariff, or SolarWorld may feel pressured into submission, he said. “They can set damages at a low level - 1.5% tariff settlement out of court. If SolarWorld comes to the table and realises that they’re literally losing the respect of almost everyone in the downstream that buys from them, they might say ‘we have to settle’.”

Shah, who is also the chief executive of Sir Richard Branson’s Carbon War Room, said that allegations of dumping should be investigated, but doubted that the Chinese companies really conduct business in this way. He said: “if people really are illegally dumping we hope that gets dealt with. But many of the Chinese solar companies...are publicly traded to the extent that [if] they have positive gross margins as a business then they’re not dumping. If they are making money from solar panels, then they’re not dumping.”

Is this sustainable growth?

But unbridled growth will ultimately harm the industry, and the SolarWorld challenge could usher in a new era for a sustainable solar industry, believes Brightbill.

He said, “the best thing for the solar industry is to have a sustainable manufacturing base and a strong industry. Basing your business plan on the use of dumped and subsidised products is not a long-term viable solution. The U.S. solar industry has been extremely successful in terms of reducing [its] costs and reducing its pricing every year, and demand is going up as a result. But when Chinese imports cause prices to fall 40% – 50% in one year that is just unsustainable. And that is not good for the solar industry in the long term.”

As part of its investigation the Commerce Department will request that Chinese producers report all costs and information on subsidies, and the Chinese Government will be required to report all of the subsidies it provides. U.S. producers and the Government will have to do the same.

The investigation could yield some interesting results. Although SolarWorld claims to have taken no federal subsidies, Oregon subsidised 50% of the costs of its Hillsboro factory, according to Shah. Treasury records show that SolarWorld claimed US$82,200,000 in 48C manufacturing tax credits for its Hillsboro facility, to “expand the existing 100 MW solar PV manufacturing plant to 500 MW”.

Meanwhile, in China the petition has been met with outbursts of unusually passionate objections, as manufacturers fear the door to the U.S. market will be slammed in their faces.

Press reports have characterised the U.S. solar industry, as “a land swarming with famished refugees”, a provocative statement on how the Chinese view the U.S. market, according to Louis Schwartz, a lawyer at China Strategies: “The Chinese refer to ‘cabbage pricing’, cabbage being one of the cheapest vegetables there is, and they use that language to describe how their own solar industry was pricing modules…one of the effects was to keep lowering the prices to increase the volume in the U.S. and other markets.”

China only introduced a US$0.15 per kWh feed-in tariff for solar in August, but incentives for the domestic market should have come sooner, said Schwartz.

“There’s no question that their gander is up. But the Chinese should have seen the writing on the wall, and they probably should have reined in their own industry. They could have increased domestic purchases of solar equipment. Maybe they should have revved up [the feed-in tariff] at a faster pace. But they should be a little more sensitive to the effect that they’re having on the world.”

Maslin at IHS EER said that the best that SolarWorld and the rest of the industry can hope for is economic recovery.

He said: “SolarWorld is a global company and they are facing these issues throughout the world. I’m not hopeful as to a specific outcome. In this market things change so quickly. They change much faster in terms of the dynamics of the market than you’re likely to see any national-level U.S. policy change. Their best hope is that the conditions of the market change. And that demand outstrips supply again and they are back in the money at some point.”

Editor's note: The countervailing duty determination is due around 12 January and the preliminary anti-dumping duty determination is due around 22 March.The report, Crystalline Silicon Photovoltaic Cells and Modules from China (Investigation Nos. 701-TA-481 and 731-TA-1190 (Preliminary), USITC Publication 4295, December 2011), will be made available to the public after 3 January.

About the author: Felicity Carus previously worked on the environment desk at the UK’s Guardian newspaper. She covers renewable technology and clean energy policy and finance out of San Francisco, CA.

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Comments

lymey said

09 December 2011
These people need to stop whinging and get selling. They've had it too easy for too long in a 'fat' marketplace. The Chinese product still has to be shipped, OEM'd, integrated into saleable modules, sold, installed and supported. The lazy domestic suppliers should be seeking ways to add value at each and every stage of the manufacture to install process rather than trying to spark off something which will be even more damaging to the wider economy in the longer term.

Stop whining... get selling!

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