More Solar Outrage Over EU Probe

Doug Young
September 07, 2012 | 8 Comments

The headlines are filled this morning with chatter on the latest news that the European Union is launching an anti-dumping probe into Chinese solar panel makers, following a similar investigation by the US that is likely to result in punitive tariffs by the end of this year. In addition to news of the probe itself, most of the major Chinese panel makers have issued their own statements protesting the move, and Beijing has also expressed regret over the decision. Rather than always turning to these predictable displays of outrage and disappointment each time they receive a setback in this year-long dispute, the Chinese players might consider trying a more conciliatory approach if they really want to avoid a trade war over an industry that everyone agrees will be critical to the development of long-term sustainable energy sources.

In a widely expected development, the EU on Thursday announced it was launching a probe into allegations that Beijing unfairly supports Chinese solar panel makers through policies like low-interest loans and export rebates. (English article) That probe follows a similar US investigation that resulted in a recommendation that punitive tariffs be levied against Chinese panel makers in May. (previous post)

The response from China to the new EU probe has been quite predictable, mostly because we've heard similar howls of protest at each development in this long and increasingly tortured process that has cast a spotlight on the differing approaches to government support for emerging sectors in China and the West.

Beijing responded by saying it deeply regrets the EU decision, adding that any punitive action will only hurt everyone. Suntech (NYSE: STP), Yingli (NYSE: YGE) and Trina (NYSE: TSL), 3 of the top industry players, all responded with their own statements of protest, again emphasizing the message that the allegations are unfounded and any punitive measures will only hurt the entire industry.

Rather than always make these same protests of their innocence, I'd like to suggest that both Beijing and the Chinese solar companies try a more conciliatory approach to resolve the dispute before it spirals out of control and really does hurt the industry, which is already suffering from a massive supply glut. It's not often that both the US and Europe launch such similar investigations against a specific industry, which should tell Beijing that perhaps many of the complaints are really valid.

Accordingly, government leaders in Beijing should sit down with the solar companies and the local governments that are their biggest supporters and try to work out a comprehensive plan to wean the industry from state support. They can then take that plan to the US and EU, and use it to show their sincere desire to diffuse this issue.

In the meantime, market forces could soon help to diffuse the dispute as well by forcing many of the Chinese players to de-list their stocks as they slowly sink into insolvency. Suntech and JA Solar (Nasdaq: JASO) have both seen their shares trade below the $1 mark for around a week now, and 30 days below the $1 level would trigger a de-listing notification. LDK (NYSE: LDK) and Renesola (NYSE: SOL) are also trading near the $1 mark, and could easily slip below that level in the next month or 2. A coordinated plan from Beijing to resolve this trade dispute could spark a rally in these companies' shares, helping to not only revive their stocks but also their longer term business prospects.

Bottom line: Beijing and China's solar panel makers need to develop a comprehensive plan on weaning the sector from unfair state support to avoid trade wars with both the US and EU.

This article was originally posted by Young's China Business Blog and was reprinted with permission.

Lead image: Flag of China via Shutterstock.

The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

8 Comments

a b
September 11, 2012

" EU and North American industry went to Asia for cheap labor, relief from environmental regulation, etc. "

As far as I know, for the RE sector, european firms stayed home with their production capacity for all the production that was foreseen to be sold in the EU, because that was the smart thing to do. They merely did what every capitalist do, invest in some local chinese production capacity for the Chinese market demand, because it was much cheaper to produce locally than sending stuff from expensive europe to poor china. Until it soured, because the Chinese copied it, made it in new production units with total disregard for existing global patents, and sold it to European customers for half the price of local european manufacturers, because they were not burdened with free health care and pension benefits for their production workers, got plenty of cheap electricity (when available), free loans and free land, and zero environmental regulations to follow, because the communist party apparatchik simply go bribed to look the other way.
Yeah, that how it gets done in the real world, but then again, don't complain if the other side start adding penalties to your stuff, before being allowed to enter your markets, just to make the point that the game shall be played on an even field on BOTH sides.

a b
September 11, 2012

" sorry by everyone I meant countries not entire regions "

Well, this article stated that the E.U. and not some european country will impose penalties on the imports coming from China, and you replied that China invest more than anyone else. You are wrong about that for the past, since the EU economic block invested much more than China, and probably will be the case for the future.

" China intends to spend $485B in the next 5 years "

Yeah, and in 2000 they stated that for their next two 5 year 'plans', everyone of their millions of peasants living far away from any electrical grid connection, would be equipped with a solar PV installation coupled to a small battery storage, to allow them to switch from expensive and polluting petrol lamps to electric fluorescent lighting, projections were 1500 MW installed per year for the next decade. The reality is that they didn't reach the intended target by a mile (5000MW installed instead of the forecast 15 000 MW). The same for their windmills, thousand have been erected in the north, but the transmission power cables that have to bring the juice to the south consumers are not available, so they are now merely white elephants standing in the wind, while coal plants have to take up the slack.

" As far as domestic content rules (DCR) and/or region of origin (ROO) regulations go, there's plenty of shame to go around. Capitalism is a peachy system until it stops making errors in our favor. "

Well I agree completely, but then the Chinese should not start whining about unfair pratices from the US and EU when the US and EU start "blocking" access to the US or EU markets for specific Chinese goods, because the Chinese are playing the same game in their turf. Chinese also do not respect patents, give free loans and free land to their own companies, while european companies active in RE that are investing hard currency in China the form of local production capacity aren't receiving those advantages.

Gerry Wootton
September 10, 2012

"you are wrong to say that china outspend everyone else on renewable energy" ... sorry by everyone I meant countries not entire regions. And I meant present tense and going forward. China intends to spend $485B in the next 5 years, Germany $108B, USA $65B. To be sure, China has been the 'shoemaker whose kids have no shoes' in the past but they seem to be changing. It's easy to mock the poor kid's shabby shoes - China's per capita GDP is less than 1/3rd that of EU economic powerhouse Greece.
As far as domestic content rules (DCR) and/or region of origin (ROO) regulations go, there's plenty of shame to go around including Ontario's FiT DCR, US Recovery Act DCR, Italy's FiT ROO, etc. Then there's the cleverer guys like Germany with it's 100% DCR for renewable energy generation even though it makes more sense to put those solar panels in Spain or Southern France or Italy as opposed to Germany. Or consider Brazil with it's domestic content constraints on project financing. Japan - have a look. Turn over 100 rocks, find 300 worms. Just look at the WTO dockets to see who's who.
No one forces anyone to buy the cheapest goods available - although, you'd never know it to hear some complaints. EU and North American industry went to Asia for cheap labor, relief from environmental regulation, etc. Unfortunately, some Asian countries seem to be rejecting indentured servitude as a long term arrangement. Capitalism is a peachy system until it stops making errors in our favor.

a b
September 10, 2012

"Foreign turbine firms are completely frozen out of that market. The Chinese decided they want to promote their own national champion companies." The foreign companies operating in China currently are Vestas, GE, Gamesa, Suzlon and Nordex. Most set up their local manufacturing in China in the early 2000s and have steadily lost market share, going from 75% in total in 2004 to just 24% by 2008. Market share for foreign firms dropped to 13.8% in 2009, equalling 1.9GW of newly installed capacity that year.

The government power contract tendering process in 2009 saw all 5.25GW go to seven domestic suppliers.

Since 2005, no international wind turbine manufacturer has won a major national tender."You've got proven foreign companies producing over there, and yet the project tender winners were for turbines that don't have the quality and the warranty backup that the foreign manufacturers were offering," says the unnamed US official.

Manufacturers at the annual US wind power conference held by the US wind lobby were questioning how much effort and capital to continue allocating to the Chinese market. This year's event saw an increase in both the number and the size of event exhibits from Chinese wind turbine firms hoping to establish a presence in the US. "We've got to tell them, 'if you're going to sell it here, you're going to make it here and you're going to open the market up the other way,'" says the US official. "We're all about free and open competition but, when people cheat, you've got to play hardball. We've got to better manage trade and say to these guys that they're not going to sell a single turbine here unless we have access to their market."

a b
September 10, 2012

http://www.windpowermonthly.com/go/windalert/article/1019208/?DCMP=EMC-WindpowerWeekly

Concerns have come from both the US and Europe. Earlier this summer, top US trade official, secretary of commerce Gary Locke took the unusual step of expressing concern over China's policies, which he says favour domestic wind turbine manufacturers. "We saw a troubling example of this that occurred late last year," said Locke, speaking at a meeting of the US-China Business Council in Beijing. "China announced a new indigenous innovation accreditation system, which would give favour in China's government procurement process to companies that perform their research and development, and patent their innovations in China.
Many US businesses and other businesses around the world were surprised by this policy, which was made with little input from affected businesses and was not subject to any public comment. This practice may have the laudable goal of nurturing a stronger innovation ecosystem in China, but it could significantly disadvantage foreign companies interested in bidding for contracts worth an estimated $85 billion annually."

a b
September 10, 2012

GeraldR, you are wrong to say that china outspend everyone else on renewable energy. The 27 states making up the E.U., taken as a whole, with a GDP bigger than the US, as a whole, invested past year over US$ 100 Billion in R.E. . China managed to achieve only US$ 70 Billion. Check it on the internet, if you wish. China installed less than 5000 MW in Solar PV panels over the last decade in their huge and solar rich territory. In the EU, we installed 30 000 MW of them in the same time frame, many imported from the subsidized Chinese manufacturers, whose employees don't receive pension benefit or free health care coverage, as is mandatory in Europe for our own employees. In fact, you could say that the sold panels to the EU were used to provide the Chinese government with supplementary tax income, to be recycled inhouse to give subsidies to their own manufacturers of renewable equipment. And do not get me started about the fact that they require European renewable energy manufacturers that want to sell EU equipment to Chinese buyers, to have their EU equipment to contain at least 60% Chinese locally made content. This to subsequently allow the Chinese to gain (read steal) European manufacturing expertise in disregard of existing patents, and resell afterward copies with a Chinese logo on it, to European consumers, for cheaper prices since they Chinese manufacturers do not have to invest in land acquisition, do not have to pay retirement benefits and health care coverage to their employees, while paying them slavery wages for the privilege of being born poor without a job in China, and while having Comrade Hu lavish free loans on them all to install as fast as possible R.E. equipment manufacturing lines to outsell everyone else on the planet, using all available tactics, honest or not. Time to stop this piranah capitalism, and even the playing field.

Gerry Wootton
September 10, 2012

China is outspending everyone else on renewable energy. Chinese subsidies to its renewable energy industry no doubt exceed those of most other countries. Until the US (the wealthiest and most powerful nation on earth) gets around to do something about its own dirty fossil fuel power with its statutory license to polute, best policy would be to stay on the down low.

An interesting side bar is that the coal power industry in the US imports billions of dollars of Chinese equipment each year and no one says boo.

a b
September 8, 2012

thank god that the USA and the EU are reacting in the same way. Better late than never. After all, how can you compete against Chinese corporations that receives free state loans and free land area, never to be repaid or given back, haven't to pay taxes on their export products and can suck up the solar PV panels subsidies delivered by broke states in the USA and EU, in the process killing off their foreign based competitors ? If China wants to really make a solid impact, it should use it's local PV panels poduction capabilities to invest in locally based mammoth solar PV panels arrays, using some of their $3000 billion in foreign exchange reserves. That would allow some of their coal plant emissions to go down, to the benefit of everyone.

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Doug Young

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters, writing about publicly listed Chinese companies. He currently lives in Shanghai where he teaches financial journalism at a leading local university....