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How Short-Term Shipment Delays Could Impact US Solar Market

Two weeks after a trade ruling deepened the rift in an increasingly divided industry, analysts and CEOs alike are still working to assess how the newly imposed trade tariffs will impact shipments, projects and pricing.

There’s a growing acceptance that Chinese companies will work around the tariffs by sourcing solar cells from places like Taiwan before shipping panels into the United States. That move alone would add about 10 to 12 percent additional cost to each module. While an IHS iSuppli analysis recently pointed out that such a shift would in the long-term add only 3.5 percent to the total cost of a ground-mounted installation, it could have other short-term impacts.

According to Michael Sheppard of IHS Research, the anti-dumping penalties of about 31 percent on most major Chinese manufacturers could significantly slow down solar module shipments the country sends to North America. IHS had earlier projected that 2 gigawatts (GW) of modules imported into the U.S. in 2012 would come from Chinese suppliers. That figure would represent about 60 percent of American module imports. Rather than ship right away, many manufacturers now need to set up or strengthen existing supply chains to navigate their way around the tariffs. According to Sheppard, “this could represent the temporary removal of up to 1.5 GW worth of stopped shipments to the region, accounting for 45 percent of the total market in 2012.

That could do a couple of things. First it will help to clear out excess inventory already in the U.S. Sheppard is currently working to assess how big that volume is. It could also cause developers of some larger projects to renegotiate contracts or reconsider where they get their modules. In markets like Germany, large-scale projects can easily amend their module choice, but in the U.S., especially on federal land, a switch in modules requires a resubmission of paperwork. Many of these issues could make developers and financiers increasingly wary in the next few months as some of these pricing and timing issues start to play out.

For some companies, the DOC’s anti-dumping announcement was harsher than anticipated, but it was something for which they had been planning. In the days after the ruling, Trina Solar was among those that said they were going to remain a player in the U.S. market and that they would use their global supply chain to their advantage. The larger Chinese manufacturers are the ones that are best prepared to reorient themselves to the changing American market, if they haven’t done so already.

On the other end of the shipment chain is groSolar, an engineering, procurement and construction firm that deals with large commercial and utility-scale installations. The company’s CEO, Jamie Resor, said in an interview that his company made the switch to modules that did not include Chinese made cells earlier this year when it became apparent that tariffs could disrupt the supply chain.

But even with the switch, it’s been hard for companies like groSolar to pinpoint exactly what the price impacts of the tariff are and will be. This is especially true because of the many factors currently clouding the PV market — from overcapacity, to trade issues to uncertain policies.

It’s becoming clear, though, that the tariff has the potential to turn those Taiwanese cells into a hot commodity. The newfound demand could push up cell prices, and in turn, make the Chinese modules that much more expensive to import. Many Taiwanese cell makers, though, are currently running at about 50 percent capacity, said Sheppard, so they’ll be able to quickly ramp up production. Whether costs will rise is harder to predict. That’s a concern, says Resor, but the biggest issue facing the industry is the disruption that could be felt everywhere from downstream manufacturing to project financing.

“We’ve had a lot of growth, and we’d like to keep the momentum,” he said.

Others, meanwhile, are seeing the tariffs as a business opportunity.

Roger Little, chairman and CEO of Spire Corp., headquartered in Bedford, Mass., is hopeful the new duties and the expected short-term slowdown in imports will lay the groundwork for a new era of American solar manufacturing. If so, that could help his company sell equipment for manufacturing lines in the U.S.

So far, the company has done its biggest business in China with companies like LDK, JA Solar and Suntech. His hopes are that some of those established Chinese manufacturers would decide to set up smaller facilities in America where they’d be closer to the market and could operate without the threat of tariffs.

There are growing questions, however, about whether this would really be the best option for Chinese companies, whose revenues have fallen dramatically in the wake of overcapacity and European policy collapse. Suntech already has a relatively small operation in the U.S., and LDK is facing talk of bankruptcy.

Even if polysilicon solar panel manufacturing doesn’t expand significantly in the U.S., Little sees a growing opportunity with thin films. While thin films are generally cheaper panel for panel, they are also less efficient, meaning you need more of them to make up for the more efficient polysilicon panels. But the plummeting cost of the polysilicon Chinese panels has eroded much of that cost difference. From Little’s perspective, the new tariffs, or any price hikes that come from circumventing the tariffs, could push at least some of the market toward thin film. That’s a bet the Department of Energy put down when it decided to back loan guarantees to thin film manufacturers like Abound Solar and SoloPower. The DOE also backed large-scale solar generating projects that source First Solar’s thin-film panels.

“The U.S. has moved heavily in the direction of thin films with tremendous investment,” said Little. “But when silicon panel prices plummeted, [many of the big manufacturers] pulled back.”

Now, he expects to see some American thin film manufacturers increase their production to serve the U.S. market. Even so, most of the leading thin film companies manufacture outside the U.S., with First Solar’s main CdTe facility in Malaysia and Solar Frontier’s CIS operation in Japan. But there remain hopes within some corners of the industry that manufacturers like Abound Solar will rebound, and eventually boost production. And energy giant GE is already planning a major push into thin film.

“Now with the duty, they’ll come out of the woodwork, and hopefully we’ll see thin film lines set up,” said Little.

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