China Bends to U.S. Complaint on Solar Panels but Plans Retaliation

Chinese solar panel makers plan to shift some of their production to South Korea, Taiwan and the United States in hopes of defusing a trade case pending against them in Washington, according to industry executives.

But at the same time, the Chinese industry is considering retaliating by filing a trade case of its own with China’s Commerce Ministry.

The most likely target would be American exports to China of polysilicon — a prime ingredient in solar panels — Chinese industry executives and officials said on Monday. American manufacturers exported about $873 million of polysilicon to China last year, nearly as much in dollar terms as the value of the solar panels that China shipped to the United States.

The Chinese moves come after the United States Commerce Department opened a trade case against China’s solar panel makers earlier this month, at the request of SolarWorld Industries America and six other American solar companies.

The Commerce Department said it was considering punitive tariffs of 50 to 250 percent on Chinese solar panels, based on preliminary evidence that China was “dumping” solar panels in the United States below the cost of making and marketing them. The department is also investigating whether the Chinese government is breaking international trade rules by subsidizing the export of solar panels — if such a finding was made, it could result in additional tariffs.

Having hired trade lawyers to advise them on the Commerce Department case, Chinese solar panel manufacturers are increasingly gloomy about their chances of winning it, said Ocean Yuan, the president of Grape Solar, a big importer of Chinese solar panels that is based in Eugene, Ore.

Mr. Yuan said that Grape Solar was already negotiating with several Chinese manufacturers, whom he declined to identify, to perform final assembly of solar modules in Oregon. That would be the last step in new supply chains the Chinese industry intends to set up that would start in China then run through South Korea and Taiwan in hopes of avoid any new tariffs.

But because final assembly of solar panels is relatively low-tech manual labor, any Chinese expansion into Oregon would be unlikely to add many valuable American jobs.

Currently, the only Chinese solar panel assembly site in the United States is near Phoenix and owned by Suntech Power. That plant has a capacity equal to about 3 percent of the American market for solar panels.

Even before the filing of the trade case, Suntech had begun preparations to increase output at that operation, planning to add a work shift and double the size of the factory. But that will expand the current work force to 260, from 110 now. And even then, its capacity would serve only a small fraction of the American market. By contrast, companies based in China supplied more than 40 percent of the American market for installed panels in the third quarter of this year, according to GTM Research, a renewable energy consulting firm based in Boston.

Meanwhile, the Chinese solar panel industry is seeking legal advice on filing its own antidumping and antisubsidy trade case against the United States, industry executives in Beijing said Monday.

The most likely target would be American exports of polysilicon, the main material used in making conventional solar panels, said Wang Shijiang, a manager at the China Photovoltaic Industry Alliance based in Beijing.

The manufacture of polysilicon requires enormous amounts of energy — so much electricity that it typically takes the first year of operation of the panel to generate as much power as was required to make the polysilicon in it. The process requires superheating large volumes of material in electric-arc furnaces, including the melting of quartzite rock at more than 3,600 degrees Fahrenheit.

The United States is one of the world’s largest producers of polysilicon, in states like Tennessee and Washington, because it has access to a lot of inexpensive hydroelectric power. And most of that polysilicon is exported.

China’s own polysilicon industry is controversial because it relies heavily on electricity generated by coal-fired power plants, and because weak environmental controls at Chinese polysilicon factories have resulted in toxic spills that have fouled streams and rivers.

Solar fare up

Slashing the solar panel rebate will undermine homeowner’s confidence in green programs, according to Ally Tesoriero from the solar power installation company Solar Switch.

Premier Barry O’Farrell will introduce retrospective legislation to cut the solar scheme from 60 cents to 40 cents in a move that is expected to save $471 million. More than 120,000 households already signed up will have their rebate slashed by 20 cents.

Mr Tesoriero said Mr O’Farrell was setting “a very dangerous precedent” that would undermine public confidence in the solar industry and the government itself.

“It will be shooting itself in the foot as it will say that NSW isn’t a safe place to invest your money,” he said.

More than 500 customers, employers and solar industry workers rallied in the city on March 18 to protest against the government’s decision to scrap the plan.

Maroubra MP Michael Daley slammed the decision to downsize the $1.9 billion program to help reduce the budget blowout that Energy Minister Chris Hartcher said was “threatening” the state.

“I think what the O’Farrell Government has done is a terrible thing, it is terrible for people who want to do the right thing and generate renewable energy and it says that when you enter into an agreement with this government, it can be changed at any time,” Mr Daley said.

But Mr Hartcher said the NSW Government was committed to renewable energy -“our focus will be sensible, sustained and affordable progress”.

Mr Hartcher said about 400,000 people are still waiting for their panels to be connected or have applications still pending. They will receive either a 40 or 20 cent rebate depending on which contract they signed up to.

The Greens have slammed the Government’s management of the scheme. Greens MP John Kaye said the suspension and the cuts would effectively gut the solar energy industry in NSW, cutting jobs and further opportunities. The scheme is slated to finish up in December 2016.

DID YOU KNOW?

During its first 10 months, from January last year, 99,000 customers connected or applied to connect under the solar scheme.The former Labor Government was forced to slash the feed-in tariff to 20 cents for new customers in November after a massive surge in installations. When former premier Kristina Keneally announced on November 18 that new applicants to the scheme would have their rebates scaled back from 60c to 20c, 37,000 people still applied to the scheme in three weeks. The three weeks of sign-ups cost $500 million and pumped 79 megawatts into the state electricity grid. The entire scheme has now blown out to 365mW.