by Melanie Hart

Chinese capital is finally flowing into the U.S. clean energy market. Chinese direct investment in the U.S. clean energy economy has grown from just $4 million annually in 2006 to over $260 million in 2011. That increase is attracting attention, and not all of it is positive.

Yesterday Third Way released a report concluding that U.S. private-sector investors are losing interest in investing at home due to the fickle American policy environment, leaving Chinese companies to fill the gap. The report’s authors worry that increasing Chinese participation in the U.S. clean energy market will “dramatically hamper U.S. companies’ ability to compete” and “slow economic growth and American leadership.”

Rather than welcome Chinese direct investments as job-creating, there is a tendency here in the United States to take a zero-sum view and assume that Chinese enterprise successes in this country are not good for American competitiveness. Last month, when China’s ENN Group announced plans to build a massive solar power R&D, manufacturing, and generation complex in Clark County Nevada, some U.S. commentators suggested that the ENN facility would force solar panel prices down even further and drive U.S. firms into bankruptcy.

When it comes to the U.S. clean energy market, Chinese companies must feel like they cannot catch a break.

Over the past few months, many voices in the United States—myself included—have called for stronger U.S. trade enforcement vis-à-vis China, particularly in clean energy manufacturing. It appears that in at least some cases, Chinese manufacturing companies may be breaking global trade rules. If that is true, then U.S. policymakers have to do a better job protecting American companies and making sure WTO-illegal trade behavior does not erode U.S. competitiveness in this sector.

Playing by the rules goes both ways, however. If Chinese companies are willing to come over to the U.S. market and compete on an equal playing field, we should welcome that with open arms, not with knee-jerk protectionism.

Chinese competition is not the problem. As long as the field is level, U.S. companies can handle the competition. And if we open up new clean energy opportunities here in the U.S., ideally that will give the Chinese companies that are willing to play by the rules a pathway for opting in to our rules-based system. If those companies are successful, that success will be a positive contributor to the U.S. market, and it may also help convince Chinese leaders that heavy government subsidization is not the best pathway forward toward Chinese clean energy success.

In reality, the real problem isn’t that Chinese companies are investing too much in U.S. clean energy technologies. The real problem is that they are not investing enough.

The United States does not have a clear policy framework on foreign direct investment. That makes our market difficult to traverse, and that means that in many cases, the only Chinese firms that can succeed here are the well-connected state-owned enterprises who are much more interested in fossil fuels than clean energy.

Growth rates for Chinese clean energy investments in the United States only look impressive when viewed in isolation. When you compare those numbers to the numbers for fossil fuels, clean energy is still just a drop in the bucket. In 2011, for example, China invested just under $2 billion USD in American fossil fuel sectors. Most of those investments went toward U.S. shale gas assets. The $260 million that went toward clean energy projects pales in comparison.

If we want to accelerate the clean energy market, we need to do more to level that playing field for U.S. and Chinese investors alike.

– Melanie Hart is an Analyst with Chinese Energy and Climate Policy at the Center for American Progress.

In a long-awaited decision, the U.S. Commerce Department has issued a preliminary decision to apply tariffs to Chinese-made solar modules being imported into the U.S. The tariffs range from 31 percent to 250 percent.

The preliminary tariffs were issued after a lengthy investigation by the Commerce Department into whether Chinese companies are “dumping” solar panels into the U.S. market below cost. These tariffs follow a March decision to issue small countervailing duties on Chinese module producers that are getting illegal domestic subsidies, according to Commerce.

Today’s issued tariffs are as follows: Trina, 31.14 percent; Suntech, 31.22 percent; and 31.18 percent for all other Chinese producers that participated in the investigation. For companies that did not participate, Commerce has slapped a massive preliminary tariff of 249.96 percent.

The combination of these new tariffs and the countervailing duties will add substantial cost to imported Chinese solar panels. With panel prices hovering in the $1 per watt range, it could add around 30 cents a watt to each panel for leading producers, and vastly more for producers that didn’t get involved in Commerce’s investigation.

These are preliminary fines and can be negotiated and changed before Commerce makes a final decision. The solar industry’s trade group, the Solar Energy Industries Association, has called on the U.S. and Chinese governments to negotiate a settlement — potentially resulting in more moderate tariffs:

“The solar industry calls upon the U.S. and Chinese governments to immediately work together towards a mutually-satisfactory resolution of the growing trade conflict within the solar industry.  While trade remedy proceedings are basic principles of the rules-based global trading system, so too are collaboration and negotiations.

“Importantly, disputes within one segment of the industry affect the entire solar supply chain–and these broad implications must be recognized.  In addition, the U.S. solar manufacturing base goes well beyond solar cell and module production and includes billions of dollars of recent investments into the production of polysilicon, polymers, and solar manufacturing equipment, products which are largely destined for export.  If the U.S.-China solar trade disputes continue to escalate, it will jeopardize these U.S. investments.

“Given these broader implications, it is imperative that the U.S., China, and other players in the dynamic global marketplace work constructively to avert or resolve trade disputes that will ultimately hurt consumers and businesses throughout the solar value chain.”

The solar industry has been on edge since last October, when the manufacturer SolarWorld and six other anonymous companies issued a complaint about illegal trade practices. They argued that China’s subsidies were allowing companies to dump panels below cost, thus driving U.S.-based manufacturers out of business.

However, downstream developers have enjoyed falling panel prices — a factor that has allowed the industry to expand 109% in 2011. A group of solar companies known as the Coalition for American Solar Energy has been staunchly opposed to tariffs, saying they’ll dramatically drive up the cost of solar installations in the U.S.

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by Kate Gordon

A simmering trade dispute between the U.S. and China will likely come to a head tomorrow when the U.S. Department of Commerce issues its determination on alleged trade violations by Chinese solar manufacturers.  Surprisingly, the U.S. solar industry is not in agreement on the need to hold the Chinese accountable.  It should be.

On one side are those who claim China has been illegally subsidizing and dumping its solar products in the U.S. market, forcing many American manufacturers into bankruptcy.  These companies, mostly manufacturers of solar panels and related products, claim Chinese solar companies have benefited from government largesse in the form of free land and facilities, electricity and water, and low- or no-cost loans that keep prices for Chinese-made solar products artificially low.  In addition, they claim these Chinese companies are illegally “dumping” their cheap solar panels into the American market, making it nearly impossible for U.S. manufacturers to compete.

On the other side are those, mostly solar installers, who have benefited from the ability to buy low-cost solar panels, which they claim has allowed them to do solar installations at a lower cost and therefore expand the use of solar power in America.  This group of U.S. companies argues that U.S. manufacturers can’t compete with the Chinese when it comes to solar panel production, because the Chinese are simply more efficient and can do production at a lower cost.  They also worry that pursuing a trade case will incite a “trade war” with China, which will erode their profit margins, slow U.S. industry growth across the value chain, and make it even harder for solar energy to compete with traditional fossil fuels.

Both sides have compelling arguments.  So who’s right?

One way to answer that question is to say that we’ll find out who’s right when the Department of Commerce issues its findings.  Commerce has already found that China is unfairly subsidizing its solar industry, and has imposed tariffs on Chinese solar manufacturers as a result.  The upcoming decision, on whether China is also illegally dumping those panels into the U.S. market, may bring larger tariffs if China is found to be in violation of our mutually-agreed-upon, and heavily negotiated, trade agreements.  The entire point of the trade enforcement regime is to figure out whether a country is in fact breaking the rules, and if so, to issue sanctions. It’s a system based on the rule of law, something we Americans hold dear, and for good reason.

But would a decision against China undermine America’s emerging solar energy industry? There is no question that solar energy faces an uphill battle in the U.S.  The combination of century-old subsidies to fossil fuel companies and the lack of any real national commitment to renewable energy makes it difficult for emerging energy technologies to compete here.  But that doesn’t mean that the United States needs cheap Chinese solar panels so badly that we should just roll over and let a foreign government break enforceable international trade rules.  If Commerce finds that the Chinese government has acted illegally, then the Chinese government and the industry it is subsidizing should pay a price for that behavior.

Our faith in the rule of law is too important for us to abandon our international trade obligations in favor of cheap imported solar panels.  So, too, is our need to support the U.S. manufacturing sector by protecting it from unlawful trade practices.  Manufacturing is a crucial piece of the U.S. economy. Our ability to stay innovative and competitive in a time of intense global pressures relies on manufacturing companies, which contribute fully 70 percent of all the private research and development spending in America.  And these companies are major job creators: a recent report by SEMI found that manufacturing jobs had the highest job multiplier of any segment of the American economy.

That’s why we should be supporting clean energy manufacturers in their efforts to compete with China, through programs like the Clean Energy Manufacturing Tax Credit program that President Obama recently urged Congress to extend, or through Senator Sherrod Brown’s “Security and Energy in Manufacturing Act,” rather than punishing them for trying to compete on a level playing field. Because that’s the crucial point:  every American company should be able to compete on a level playing field in the international marketplace.  That’s good for solar manufacturers in the current case, but it’s good for all American companies – and for our economy as a whole – in the long run.

Kate Gordon is vice president for energy policy at the Center for American Progress.

Related Posts:

• Commerce Department Announces Small Tariffs On Chinese Solar Panels
• 5 Myths and Realities About U.S.-China Solar Trade Competition: Our Nation Cannot Capitulate to China’s Solar Technology Ambitions

by Jeffrey Cavanagh

Even in the midst of an economic crisis, most European countries are staying committed to deploying renewable energy. But with demand starting to lag due to fiscal constraints, the region’s leaders are looking to large developing countries as growth markets for European companies.

A leaked version of the European Commission’s latest energy strategy shows how much importance leaders are putting on emerging markets:  “All in all, renewable energy export opportunities will strongly depend on the elimination of trade barriers in and free access to key emerging renewable energy markets such as in China, India and Brazil.”

China is a growth market with the most potential for Europe.

Last week, energy ministers from all 27 EU member countries met with Chinese ministers and energy policy counterparts in Brussels to discuss energy security, sustainable urban development, and electricity market reform. The two sides agreed to set up an energy partnership and work toward more open market access and transparency.

During EU Commission President José Manuel Durão Barroso’s speech to Chinese leaders, Barroso expressed his strong support for a cooperative energy partnership between Europe and China:

The European Union and China are two of the global economy’s main actors, indeed the EU as the largest single market with a value of 12.6 trillion euros and China as the second largest economy in the world with national income of 5.2 trillion euros, respectively…We are both global stakeholders. Although we have had very different pasts, one thing is clear: We share to a large extent a common future, a future which will be determined by the manner in which we use the resources of our planet.

Leaders from both sides stressed the importance of Sino-EU relations, a partnership that recorded a record high trade volume of $567 billion in 2011. This represented more than $1.5 billion in daily trade.

China has accelerated its renewable energy investments, investing over $45 billion in the sector in 2011. This represented a 95 percent increase over the previous five years. China’s 12^th Five Year Plan similarly calls for aggressive renewable energy spending and development, opening up the largest market for renewable energy in the world.

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