WASHINGTON, D.C. -- From the State of the Union address in January to a recent California fundraising swing, President Barack Obama has missed few opportunities to tout the nation’s use of renewable energy to fight climate change.
"We've reduced our carbon pollution over the past eight years more than any country on Earth,” the president told supporters recently at the Los Angeles Trade-Technical College. “We now generate 10 times the solar electricity, creating tens of thousands of jobs across the country.”
Less than 24 hours later, however, Obama’s Commerce Department took an action that may threaten those gains: It upheld a complaint by the U.S. unit of SolarWorld AG that China is illegally selling solar panels at prices below their production costs. Pending a final ruling in December, the U.S will impose broader tariffs on imported panels that will increase prices by almost 15 percent.
“It’s going to kill the demand,” said Ocean Yuan, the president of Grape Solar, a Eugene, Oregon-based retailer of imported solar systems.
What happens in this trade case over the next 100 days or so may determine the shape and composition of the American solar power industry. An intensifying lobbying duel pitting one manufacturer against much of the rest of the industry — including firms like Yuan’s — could decide whether there’s meaningful solar-panel production in the U.S. and alter the fate of clean-energy companies seeded with taxpayer subsidies.
The solar industry’s intramural clash reverberates all the way to the White House, where a second-term president seeks to fulfill his promise of “a new clean-energy economy.” How the quarrel ends may hinge on Obama’s ability to balance two priorities: what he describes as the imperative to battle climate change and a desire to thwart China’s bid to dominate a 21st-century industry.
Even as environmentalists welcome solar energy’s rising global profile, they worry that the Sino-U.S. trade dispute may hinder the adoption of a leading form of renewable energy.
“We see that as just adding uncertainty and negativity and a bit of a cloud over the development and — far more importantly — the deployment of solar,” said Justin Guay, director of the Sierra Club’s international climate program.
The battle coming to a head after three years features rival lobbying campaigns from two of Washington’s top politically-connected firms and allegations of industrial espionage by hackers working for the Chinese military.
The dispute dates to 2011 when SolarWorld, a Bonn-based manufacturer with a plant in Hillsboro, Oregon, complained to the International Trade Commission and to the Commerce Department that China was illegally subsidizing production of its panels and selling them below cost.
The government’s process is narrowly focused and generally tilted toward complaining industries. Under U.S. trade law, if officials find that a U.S. industry has been “materially injured” by subsidized imports, then they approve the bid for trade remedies.
In early 2012, Commerce upheld SolarWorld’s complaint, imposing tariffs of 31 percent to 250 percent on the Chinese products.
Chinese companies averted the levies by shifting production to Taiwan, prompting SolarWorld to file a new complaint in December 2013. Last month’s ruling was the second indication that the government was siding with the German company’s appeal for broader protection. In June, the department issued a preliminary finding to levy duties of as much as 35.2 percent to combat Chinese production subsidies.
In recent years, as Chinese imports surged, a number of U.S. solar panel manufacturers failed. Imports of panels from China and Taiwan rose to $2.6 billion in 2012 from $1.8 billion in 2010, according to the Census Bureau.
Mukesh Dulani, president of SolarWorld Industries America Inc., blames “illegal Chinese government intervention.” Chinese panel makers enjoy wide government support, including low-cost credit, free land and utilities and deep discounts on solar glass and other materials, according to SolarWorld.
The company also cites a 2013 study in the journal of Energy and Environmental Science concluding that -- unlike in other manufacturing industries -- China’s low labor costs “provide no significant price advantage when the effects of higher inflation and country risk are considered.”
By 2013, Chinese panels were used in more than half of all U.S. rooftop installations, according to Shayle Kann, senior vice president at GTM Research in Boston.
“China has become over the course of the last five years or so the dominant player in solar panel manufacturing globally,” Kann said. “That doesn’t mean the battle’s over.”
From its first days, the Obama administration sought to compete with China and Germany by helping to jump-start the renewable energy industry. The $787 billion American Recovery and Reinvestment Act of 2009, better known as the economic stimulus package, included tax credits and loans to spur development of green companies and to encourage people to buy their products. Through the end of 2013, the Treasury Department reimbursed taxpayers $4.4 billion for a portion of the cost of installing residential solar systems.