Wednesday, 20 June 2012

The new solar war
By Robin Whitlock

Some people doubt the economic importance of renewables, particularly solar PV, but you only have to look at what’s starting to happen in the relations between China and America to realise that converting to solar PV makes very sound business sense indeed. 

Every government in the world now recognises the importance of solar PV to the emerging global energy market, writes Emma Hughes of Solar Power Portal. That is very true indeed and it has effectively resulted in a bit of a trade war between certain players in the global solar sector, particularly China and America. The reason for this is that each nation is now determined to maintain their market share and there have been accusations levied against China that they are seeking to dominate the market by artificially lowering the prices at which they sell solar PV equipment to the wider world, a practice known as ‘dumping’. 

America claims that China has been able to do this through state subsidies which make their products increasingly attractive to installers, and therefore also to the consumer. As the Chinese market grows accordingly, it is effectively contributing to the failure of many American and European manufacturing companies. This has been going on for some years, but now America has had enough and the US government has now introduced laws which levy tariffs on Chinese crystalline solar panel imports, termed ‘anti-dumping tariffs’, ranging from 31.14 percent to 249.96 percent. Chinese companies in turn are gathering together to discuss what can be done about this and so a political battle has started between the two countries over solar. 

“This proposal is tough, but it’s needed to successfully counter China’s unfair trade practices” said US Senator Charles Schumer recently. “This hard-hitting plan will level the playing field for US solar producers so that they can compete, create jobs and become a global leader in this rapidly-growing industry.”

However, Chinese Commerce Ministry spokesman, Shen Danyang, has hit back, saying: “The US ruling is unfair, and the Chinese side expresses its extreme dissatisfaction.” In effect, China is saying that the US ruling is unfair and that it will seek ways in which to fight it. But this is not the end of the squabble, in fact it could be just the beginning, because the same group of industry executives that lobbied the US government to introduce anti-dumping legislation is now intending to approach the EU in Brussels. We could therefore see similar anti-dumping tariffs introduced across Europe, particularly as the EU has already considered suing China with regards to dumping back in March this year. 

While consumers to an extent may favour a reduction in costs for solar PV it also means a reduction in Feed-in Tariffs in order to preserve state budgets for solar PV incentives, and that has also meant less accessibility to solar PV for lower income households, given the sharp reduction in companies prepared to offer free panel deals with Feed-in Tariffs taken as payment. More seriously, Chinese competition threatens domestic solar PV manufacturing. The introduction of anti-dumping tariffs could therefore raise costs and extend current payback periods which means that the government would have to look again at Feed-in Tariffs in order to maintain a reasonable rate of return on investment (ROI).  

So there are two aspects to this issue which need to be considered. The government needs to support manufacturing but at the same time it also needs to maintain growth in the sector. Anti-dumping tariffs make sense from the point of view that the renewable energy industry is a key part of measures to reduce our dependence on fossil fuels, particularly foreign oil, the industry therefore needs to be supported as much as possible. The Catch-22 however is that such tariffs will invariably mean higher prices for solar PV, which in turn will affect the numbers of installations with accompanying impacts on jobs in the sector. In effect, the outcome of this emerging political battle is far from clear but one thing is certain, it’s a dispute that will affect the industry for years to come.


Solar Power Portal

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