There’s a lot of consternation surrounding the Department of Commerce’s July 25 decision to levy heavy tariffs on Chinese and Taiwanese panel manufacturers. Here’s what it means for you.
By Frank Andorka, Senior Editor
When Hillsboro, Ore.-based SolarWorld USA (a subsidiary of SolarWorld, a German panel manufacturer) filed its second trade complaint against Chinese panel manufacturers in three years, members of the industry across the country held their breaths.
After all, the 2012 complaint — that Chinese companies received unfair governmental subsidies and dumped excess inventory at below-market prices into the U.S. market — pitted the U.S.-based panel manufacturers against downstream solar providers. Predictions that heavy tariffs would throttle the thriving U.S. industry by driving up panel prices to unsustainable levels abounded.
Those predictions, as it turned out, were largely unfounded. Chinese manufacturers, who had almost a year to devise contingency plans, moved manufacturing plants offshore to produce “non-Chinese panels” and ship them to the United States tariff-free.
This year’s SolarWorld complaint aimed to close that loophole by asking the Department of Commerce (DoC) to levy tariffs on Chinese and Taiwanese panels — which it did on July 25.
The voices are howling again about how these tariffs will destroy the U.S. industry, and panel prices have risen incrementally since the decision.
But will the tariff decision have a catastrophic effect on the U.S. market? We asked panel manufacturers on both sides to weigh in — and here’s what they had to say.
“Everyone Benefits”
Ben Santarris, director of strategic affairs at SolarWorld, believes the DoC’s ruling was critical to holding Chinese panel manufacturers accountable for what he sees as unfair trade practices.
“Commerce’s decision was an important step on the long road to restoring fair competition among solar manufacturers selling in the U.S. market,” Santarris says. “The U.S. industry should not have to compete against foreign governments that are resolved to interfere in the marketplace.”
Santarris says the incremental panel-price increases have not changed the dynamics of the market significantly.
“Virtually everyone benefits long term from fair competition — the manufacturing industry, installers, employees and consumers,” Santarris says. “Competition drives efficiency, research-and-development (R&D) and therefore pricing.”
But imposing tariffs isn’t enough — the next step is creating sufficient enforcement.
“Enforcement is essential to ensure that fair competition returns to the U.S. market,” Santarris says. “We have worked closely with U.S. Customs officials to help them understand our industry, technology and products so that they are better positioned to stop evasion and circumvention of the trade-remedy orders.”
“Deeply Disappointing”
Not surprisingly, companies that do the bulk of their panel manufacturing in China aren’t as sanguine about the ramifications of the decision. Thomas Koerner, general manager of Canadian Solar’s Americas division, says his company couldn’t believe the Department of Commerce would senselessly try to destroy the U.S. solar industry.
“We are deeply disappointed by the DoC’s decision,” Koerner says. “This preliminary announcement will negatively affect the achievements in the last few years — solar industry job creation and affordable clean energy — across all segments of the industry, from small residential installations to large utility-scale power plants.”
Koerner says while the company applauds the U.S. government’s vocal dedication to sustainable development and job creation by fostering the solar market, the pattern of protectionism directly contradicts these commitments.
“This decision will cost tens of thousands of jobs across the U.S. solar industry, which currently employs more than 140,000 local workers,” Koerner says. “We believe the decision will drive up panel prices, which is unfortunate because affordability has been a key driving-factor behind the U.S. solar market growth.”
‘This Is Not A Simple Issue’
This is not a simple issue, says Nigel Cockroft, general manager of JinkoSolar US. After all, Chinese manufacturing offers intrinsic advantages — proven by the worldwide movement to manufacturing there. While Cockroft believes all segments of the industry will be affected by the decision, the effects won’t be equal across them all.
“Residential solar may preferentially increase its share of the U.S. market because it is slightly less sensitive to pricing than other segments,” Cockroft says. “It would be unfortunate if the United States falls behind in the deployment of clean solar energy compared to other developed nations and even many less developed nations.”
Jinko believes the recent decisions are not in the best interests of any participant in the U.S. solar industry, Cockroft says. But it won’t affect Jinko as much as it might other Chinese panel manufacturers because it is now supporting the U.S. industry with products manufactured in China and covered by the first trade case rather than the products covered by the July 25 announcements.
Cockroft feels sorry for the downstream solar industry players, such as distributors, installers and the like.
“The users of panels are the most affected,” Cockroft says. “Developers and EPCs of utility-scale projects in particular are seriously affected by the increased pricing which simply makes some of those projects non-viable now. In all market segments, we expect to see job losses in the United States in the installation, maintenance and development areas resulting from the reduced overall deployment of solar energy.”
Fossil Fuels Rehabilitation?
Vikram Solar is of two minds on the July 25 decision that hammered some of its closest competition. On the one hand, it supports free trade and decries tariffs, even in its home country of India (the company recently went on record against its own government’s intervention). On the other, it can’t hurt a non-Chinese manufacturer with similar pricing advantages.
“The punitive tariffs announced in July will provide a tailwind to Vikram’s U.S. sales, since buyers are now discovering that pricing is the most competitive available,” says Ken Oatman, head of U.S. business development Vikram Solar. “Manufacturers from non-tariff countries like India will serendipitously gain marketshare because of the decision.”
But Oatman worries the solar industry is taking a step back in its ongoing battle against the further proliferation of fossil fuels. “The coal, natural gas and electric-utility industries will undoubtedly gain, since solar energy prices will be less competitive in the short-term,” he adds.
For factory direct orders, post-tariff average sale prices are already at least five cents higher, Oatman says. There is a limited amount of U.S. inventory stock, ordered prior to the tariff, still available on a spot basis from a scattered number of distributors and Chinese manufacturers.
“When this inventory sells down, prices will rise further, likely in the fourth quarter of 2014,” Oatman says. “Certain large scale projects will not pencil out at the higher pricing and will be cancelled or re-negotiated, so there will be a drag on future industry growth.”
In the end, Vikram believes a free market will be the best solution for everyone, Oatman says.
“The free market rewards enterprises that think on their feet and anticipate customer needs,” Oatman says. “For module manufacturers, this is usually evidenced by a focused R&D strategy, with regular commercialization of improved technology. That’s where the future battles will be fought and won.”