The EU is investing more and more in solar energy in order to meet its stated goal of having 20 percent of its energy generated by renewables and reducing emissions 20 percent by the year 2020, compared to 1990 levels. As an essential part of achieving this goal, large quantities of solar panels — in particular, Chinese manufactured solar panels — have been imported and placed on the EU market.
However, the influx of Chinese panels into Europe has had such a detrimental effect on the European solar panel market that in 2013 the European Commission took measures and imposed anti-dumping and anti-subsidy duties on Chinese solar panel companies that are not part of a price-undertaking.
The EU is not alone in imposing trade remedy measures to stem the flooding of the market with cheaper Chinese solar panels. The United States (U.S.) took similar measures in 2012. Specifically, the U.S. government imposed a series of separate anti-dumping dumping duty rates on individual companies. In addition, the U.S. government imposed a nation-wide duty rate for all Chinese producers and exporters of solar panels that were not assigned a separate rate.
Effectiveness of the Measures
The main consequences of the aforementioned measures were that the U.S. market showed a huge growth of domestically produced solar panels on its market. For the EU, the effects of the measures are not yet known, but the European Commission expects that in the long run the solar panel producers will still be able to remain in a leading position and project developers and solar panel installation companies will see an increase in their sales and profit.
With all the growth in the solar industry in the U.S., it is hard to argue that the market is getting better. However, how do the trade remedy measures taken by the EU and the U.S. affect the Chinese solar panel market? Is China taking measures with a focus on only exports or on domestic use? What do these measures entail and who are the real beneficiaries of the measures in question?
Like other countries China sees the importance of having more renewables included in their energy mix. Therefore, the Chinese government has set the goal that by 2020 15 percent of the total domestic energy consumption comes from renewable energy. In order to achieve this goal and boost its domestic renewable energy production the government has put several subsidies in place.
Photovoltaic power station construction projects and power users can receive a subsidy if they meet the specific entry-level requirements, such as the power generation capacity of a power plant. For example, under the Golden Solar Program, the minimum total power generation capacity of a solar power plant must be at least 300 kW in order to be granted a subsidy. In addition to the subsidies granted to facilities constructing solar PV power stations, the Golden Solar Program also subsidizes the power generation process.
Besides having more renewables on their market, the Chinese government is experiencing some reduction of solar panels exported as a result of the action taken by the European Commission and the U.S. Government on Chinese solar panels. For example, China is seeing a reduction of their solar panel export). To cope with this situation, more specifically, to further control and restrict the over-development of solar panels production, the Chinese government increased the threshold requirements for entering the photovoltaic industry in China.
For instance, the Ministry of Industry and Information Technology recently issued the Regulation on the Standardization of Photovoltaic Manufacturing Industry. The regulation further details the minimum entry conditions for a solar panel producer. For example, in the previous access conditions, facilities manufacturing polysilicon projects were only required to ensure the minimum production scale of the project conducted being 3,000 tonnes per year by weight, while under the aforementioned regulation, this requirement is further divided into different product types. For instance, the annual production capacity of silicon ingots must be at least 10,000 tonnes by weight, and the annual production capacity of silicon wafers must not be lower than 200 MW per hour.
The exact effect of the restrictions imposed by the Chinese government on solar panel producers is difficult to establish, as the conclusion is based on whether the major Chinese solar panel exporters have already met the established threshold limits to operate. If the majority does achieve the threshold level requirements, then the amount of solar panels present on the Chinese market and on the EU and U.S. market will likely remain stable. Otherwise, it is reasonable to conclude that less solar panels will be present on all markets.
In addition, the demand for solar panels in a certain market will add to the uncertainty of the impact caused by these restrictions. In the U.S., for example, research shows that the domestic demand for solar panels has been growing rapidly after the trade remedy measures are imposed. This means that U.S. solar panel producers can place more solar panels on the U.S. market, even with the competition from Chinese solar panel producers
As a result, it is difficult to say how the solar panel market will develop. Especially, trade remedy measures, available subsidy schemes, the demand, as well as the government preference on their energy mix (fuels v. renewables) will play an important role in the development of the solar panel market. However, the potentially reduced solar panel production capacity in China, combined with the continuously increased market demand for solar panels, might create an opportunity for other solar panel producers in the near future.
Xiaolu Wang is a regulatory consultant at Enhesa and is based in Washington, DC. She is a China/U.S.-trained attorney with over four years of professional experience, and is licensed in both jurisdictions. She specializes in chinese laws and regulations and is responsible for China-related EHS issues at Enhesa. Ms. Wang’s key experience includes researching legal issues, drafting legal memoranda, and representing clients in courts in multiple issues related to international trade and civil litigation. She has a Master of Laws degree awarded by America University as well as a Bachelor of Laws degree awarded by Capital Normal University in Beijing. She speaks english and chinese.
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