Solar Trade War? Accusations of China’s Illegal Solar Subsidies Stirring Debate in the Solar Industry

Concerns about China’s support of domestic solar companies have been brewing for years. But they have finally come to a boiling point — and it’s causing some in the solar industry to feel burned.

The German solar manufacturer SolarWorld, along with six other unnamed companies, filed a petition to the U.S. Department of Commerce and the International Trade Commission today, calling for America to challenge China’s “illegal” subsidies to solar companies and develop tariffs for Chinese products:

With a large number of subsidies and preferential treatments, the Chinese government and its state authorities have enabled its solar industry to make price cuts well beyond their own efficiency and to massively expand the export of its goods. Many documented cases of violations of social, quality and environmental standards that regulate production sites in the U.S. and Germany have also been discovered.

SolarWorld, which just laid off 66 people at a facility in California, says that China’s “unfair practices” make it nearly impossible for solar manufacturers to continue operations in the United States.  SolarWorld executives hosted an event on Capitol Hill in Washington today with two Democratic Senators from Oregon, Ron Wyden and Jeff Merkley. The company’s U.S. headquarters are based in Oregon.

Speaking to reporters at the event, Gordon Brisner, president of SolarWorld’s U.S. business, called China’s subsidies “no different than giving an athlete a bucket of steroids.”

But here’s the problem: No one really knows how potent those “steroids” are. Or if they’re illegal.

Climate Progress and other publications reported recently on the more than $30 billion in loans that the China Development Bank had offered Chinese companies in 2010. However, those are offers to take down the loans over a multi-year period. Many companies have not yet taken the full amount offered, so it’s difficult to make a direct comparison between loans to Chinese and U.S.-based firms.

The terms of the loans are also difficult to dissect. Suntech says it is getting a loan from the China Development Bank at 5% interest —far above what an American loan guarantee would provide. But in many cases, provincial governments will pay that interest for the company along with providing other perks. Take this example, from a very detailed investigative piece in the New York Times last year:

To help Sunzone, the municipal government transferred to the company 22 acres of valuable urban land close to downtown at a bargain-basement price. That reduced the company’s costs and greatly increased its worth and attractiveness to investors.

Meanwhile, a state bank is preparing to lend to the company at a low interest rate, and the provincial government is sweetening the deal by reimbursing the company for most of the interest payments, to help Sunzone double its production capacity.

Heavily subsidized land and loans for an exporter like Sunzone are the rule, not the exception, for clean energy businesses in Changsha and across China, Chinese executives said in interviews over the last three months.

The petition from SolarWorld details many of the specific accusations, but it has not been released publicly.

China’s support for the sector has helped companies produce massive amounts of product, causing a structural global oversupply of modules and dropping prices dramatically. That has been a great thing for developers and consumers, but extremely difficult for manufacturers. In the last year and a half, seven different U.S.-based manufacturers have closed or scaled back facilities in the U.S. — with China being blamed in some way each time.

But SolarWorld appears to be going it mostly alone. Although the other six manufacturers are anonymous, some of America’s largest solar producers didn’t sign.

The industry’s trade organization, the Solar Energy Industries Association, is also staying neutral in the dispute, explaining in a statement:

Solar companies – whether foreign or domestic – have the right to request investigations into alleged unfair trade practices. It is important that these allegations are thoroughly examined and, if unlawful trade practices are found, action to remedy those practices is taken.

On a call this conference call this morning from the Solar Power International trade show, some leading solar executives took a much more direct approach.

“This is not in the interest of American consumer,” said Arno Harris, CEO of the project developer Reccurent Energy. “The best thing the industry can do is drive down the cost of solar. We don’t want to see this kind of development.”

The mixed responses from folks in the industry highlights a major split in thinking about Chinese subsidies. The astonishing price drops in the last three years — due largely to a massive influx of Chinese panels — has helped make solar far more competitive. But it’s also knocked a lot of companies out of the game.

The rhetorical battle over China’s solar subsidies has been raging for sometime. Is it now turning into a full-on trade war?

12 Responses to Solar Trade War? Accusations of China’s Illegal Solar Subsidies Stirring Debate in the Solar Industry

  1. Michael Tucker says:

    Competing with the communists…It becomes very problematic when ALL western market economies are fighting to maintain growth, fighting to avert another worldwide recession or even depression, while the mammoth nation of the Peoples Republic of China is the world leader in economic growth. The US depends on communist loans, western businesses depend on communist loans, but we don’t like communist economic practices. Yeah, a problem of our own making.

  2. prokaryotes says:

    Related, more latest from German solar manufacturer

    Q-Cells chosen by PG&E for UOG program, unveils Q.PEAK PV

    On October 17th, 2011, Q-Cells SE (Bitterfeld-Wolfen, Germany) announced that it has been chosen by Pacific Gas and Electric Company (PG&E, San Francisco, California, U.S.) as the preferred partner for its 250 MW utility-owned generation (UOG) program.
    Also on October 17th, 2011, Q-Cells unveiled its new Q.PEAK series premium monocrystalline silicon solar photovoltaic (PV) modules at the Solar Power International trade show in Dallas, Texas, United States. The company notes that the modules offer yields up to 265 watts.
    “Q-Cells’ partnership with PG&E is another example of our highly competitive solar PV solutions for the North American market,” said Q-Cells North America Managing Director Marc van Gerven.

    UOG program scheduled at 50 MW annually
    PG&E’s UOG program will enable 250 MW of utility-owned PV to be developed in annual installments of 50 MW over a five-year period.
    As part of the 2012 installment of the UOG program, Q-Cells North American will build a 10 MW and a 20 MW PV plant in California’s Central Valley.

    Q.PEAK modules include 25-year linear warranty
    The company’s Q.PEAK is based on optimized crystalline silicon with improved surface metallization. Q-Cells states that these modules not only offer industry-leading electricity yields, but also an aesthetically pleasing design.
    The company guarantees 97% performance on its Q.PEAK modules in the first year, with a linear degradation of not more than 0.6% for every year thereafter, to reach 83% after 25 years.
    Q-Cells notes that this linear warranty guarantees a 7% higher yield over a complete lifetime compared to market standard warranties.
    The company also states that these modules come with a seal of quality including Q-Cells Hot-Spot Protect, for fire and performance safety, and anti-PID technology.

  3. fish says:

    >at 5% interest —far above what an American loan guarantee would provide.

    would ‘stipulate’ or would ‘impose’ are some better ways to describe loan interest.

  4. mandas says:

    And long may it continue!
    I hope China tips massive buckets of money into their solar industry. And I hope the German and American governments respond by massively subsidising their own solar manufacturers.
    So much so that it reduces the costs to virtually zero, and everyone in the world can buy extremely cheap solar systems for their houses and factories.
    Good onya China! Keep it up. Embarass western governments for their failure to address the most important issue in the world today. You have my unequivocal support.

  5. Stephen Lacey says:

    Point noted, Fish.

  6. Davos says:

    This isn’t the only aspect of global economic interaction where different regulatory and worker environments have generated cost imbalances that jeopardize competitiveness.

    –Vietnam’s minimum wage has been said to be $42 a MONTH.

    –The Chinese version of OSHA isn’t, shall we say, a high priority. (83,000+ worker deaths in 2009)

    –Not only does China control 95% of the rare-earth metal supply chain, they can simply decree that private industry nationalize into the Bao Gang Rare Earth

    and on and on…

    If sovereign nations can’t compel other sovereign nations to change their labor practices, siting regulations, and the like, then the ones that proactively desire to dominate a certain market can do so with a better infrastructure to create mass production and economies of scale. The US can certainly attempt a similar subsidy program as the Chinese if the political will existed, but it still won’t produce a comparable result as the same money does in Asia. It’s a negative feedback process, as there’s a lot of pressure for more US companies to relocate there to abuse the same conditions in order stay cost competitive (executive bonuses notwithstanding)…Who knows, maybe in 20 years the Asian model will fall apart as the number of people making money increases– and summarily desire to not work under such harsh conditions anymore. Perhaps we’re approaching 1905 in Asia? Just 60 years to go…

  7. RedWhiteBlue says:

    Without China panels, the solar jobs market in California could never have grown at a rate 10 times the regular job market did in 2010.

    Note that installation and maintenance labor costs are growing to be a larger part of the total installed cost each year. Lower hardware prices just mean that more projects get funded, and thus more good paying installation jobs are created. Balance the numbers yourself. In the manufacturing process, only about 10-15% is labor. In the installation process, almost all of it is labor. The dollar amts. (install jobs vs. manufacturing labor) has got to be 8-12 times greater on the marginal, in favor of installation.

    Yet the protectionists want to kill good paying American installation jobs, by artificially inflating the prices to be paid for their clearly un-competitive products. WHO is paying for it with unemployment and fewer solar installations?

  8. Dr.A.Jagadeesh says:

    When subsidies for solar Industry are given in China, it is their internal matter. Can you show any country which has not given subsidies to boost up Renewables (including feed in tariffs). If there are apprehensions about the quality of Chinese Renewable Energy products, let outsiders avoid them. As far as I know Chinese products exported to European Countries and US are of better quality than the ones sold in Developing Countries. Developing countries mostly prefer price compared to quality.

    Dr.A.Jagadeesh Nellore (AP), India
    Wind Energy Expert

  9. Raul M. says:

    It is still good to reduce carbon emissions the world over and some believe and act on that more than others.
    Keep up the good growth.
    And how many years has it been that solar world became the sales agents for was it shell panels?

  10. Mike Roddy says:

    National solar subsidy comparison can get really squirrely, since most countries implement incentives in different forms.

    Better to go after the Chinese for commodity price fixing, including their phony currency. Chinese steel now dominates the global market at 500 million tons a year. US firms have been devastated, as we’ve gone from the global leader to about 21% of Chinese production. This is blatant market making, and American politicians have refused to address it. Consequences have included major job losses and trade deficits.

  11. SecularAnimist says:

    Every government in the world should be aggressively and massively subsidizing the development, manufacture and deployment of solar power. If China is flooding the world with ultra-cheap PV, more power to them — because that’s what urgently needs to happen. The rest of the world should join in.

  12. MarkfromLexington says:

    Another way of addressing the issue might be to lower the federal solar tax credit percentage for solar panels manufactured outside of the US.

    This would give a little bit of a competitive tailwind for US solar panels.