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US-China Trade Dispute Disrupts Solar Success

Next week, the International Trade Commission (ITC) plans to announce its initial decision regarding the expansion of the trade restrictions on imported Chinese, Taiwanese and other solar cells and modules in response to a complaint filed by SolarWorld earlier this year. This decision comes on the back of a previous finding in 2012 that imposed both anti-subsidy and anti-dumping tariffs on Chinese-manufactured solar cells. Barring an eleventh-hour agreement to settle the claim, the solar industry in the U.S. is going to suffer from this litigation. And unless this trade dispute is settled soon, both sides will lose out.

In the last five years, the installed cost of PV solar has dropped about 75 percent, driven largely by the falling price of solar cells as a result of major increases worldwide in polysilicon manufacturing capacity and in Chinese cell and module manufacturing capacity.  These rapid cost reductions set the stage for an incredible industry expansion here in the U.S. We’ve ridden this cost reduction wave and grown into an industry employing nearly 150,000 people in all 50 states. The decline in module prices was simply the catalyst for cost reductions all across the value chain.

Two years ago, the price of modules was about 68 cents per watt, and represented about 30 percent of the total cost of medium to large scale distributed generation (DG) solar PV projects. Many in the industry predicted that by the end of 2014, that price would be down to 50-55 cents per watt and we’d be well on our way to a DG cost of about a dollar and 75 cents. With numbers like that, solar is able to compete with traditional sources of energy, even without considering the greater environmental impacts. Unfortunately, we are just not there. In fact, module cost has recently risen to around 78 cents a watt!

This litigation and the uncertainty of this situation has caused has quite frankly sapped the strength of the industry. In response to the ITC’s first ruling in 2012 that mandated tariffs as high as 250 percent on Chinese-manufactured solar cells, the Chinese government levied a hefty tariff on U.S.-manufactured polysilicon, the raw material from which solar cells are made, and which represents upward of 70 percent of the world’s supply. Chinese manufacturers are now buying less U.S. polysilicon and more from Europe and other areas. The back and forth has triggered an increase in the price of solar modules, one that is in my mind artificially high.

Regrettably, none of this is helping the U.S. solar industry. Cell manufacturers are bringing down inventories and slowing production because of the uncertainty of the fallout from these tariffs, project development has taken a hit and sales have slowed. This has also affected many of the American manufacturers of other components involved in solar development, from inverters to mounting systems.

In order for solar to truly take off and be a real force in the energy field, the industry needs to continue to make strides in cost reduction, both in hardware and soft costs like permitting and financing. The cost reductions need to happen by the 2016 expiration of federal tax credits for solar development. Right now, this trade dispute is a huge distraction from the greater goal of utility cost-competitiveness. If the focus isn’t shifted it will spell major trouble for solar, whether manufacturers or installers, designers or sales people. Increasing the cost of solar modules as a result of artificial trade barriers is not going to get the solar industry to cost-competitiveness before the federal tax credit expires in 2016.

I believe that it’s important for the governments of both countries as well as the companies involved to come to the negotiating table with this in mind. Right now, the U.S. government is unfortunately not fully supporting the solar industry. We have one part of the government that gives tax incentives to promote solar and another agency that has ensured a state of chaos such that the industry can’t move forward. While SolarWorld believes there is a justifiable basis for their complaint, the rest of the solar industry has not rallied behind their cause. It is seen by many as a “shooting oneself in the foot” scenario. Instead of strengthening the manufacturers of solar modules in the U.S. and creating more jobs in that sector, the litigation has caused a slowdown across the industry while manufacturers are still losing ground in the market.

The Solar Energy Industries Association (SEIA) has been actively involved in trying to bring both sides to the negotiating table, and developed a blueprint for what would be an equitable solution. Unfortunately, this has yet to spur a resolution. Next week’s decision (and those beyond-there are more to come later this summer) related to this will likely have a significant impact on the industry as we know it. But, one thing at least remains constant—America needs a strong solar economy now and for the future—we have to get beyond this distraction and move forward.

Lead image: Broken train tracks via Shutterstock.

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