The solar industry usually has great political instincts.
It got President Bush to jumpstart the industry with federal incentives.
In Georgia, solar advocates were able to form an unlikely coalition of Tea Party advocates and the Sierra Club to expand its footprint there.
But in defending Chinese manufacturers against tariff penalties, it’s on the wrong side of history.
If you haven’t followed the issue, solar manufacturer SolarWorld has been waging, virtually single-handedly, a legal battle against Chinese solar makers for the past several years, claiming that they have dumped products in the U.S. in violation of trade agreements. Granted, SolarWorld is German, but it has facilities in Oregon.
And it has been winning. In 2012, the Department of Commerce imposed substantial duties on Chinese manufacturers. This year, it closed a loophole which let Chinese manufacturers funnel products through Taiwan. Forty four manufacturers have been slapped with preliminary tariffs of 26.33 to 58.87 percent in the latest action.
The Coalition for Solar Energy has accused SolarWorld of trying to cripple the solar industry. The Solar Energy Industry Association has asked SolarWorld to sweep the issue under the rug in a settlement. The industry, however, should support SolarWorld, or at least stay silent. And here is why:
1. The Evidence is Pretty Compelling. SolarWorld has had problems maintaining market share, but it’s doing great in court. It has prevailed at every juncture. The E.U. also found for SolarWorld in 2013 — a negotiated settlement followed soon afterward. Chinese military agents may have hacked SolarWorld in retaliation. When Rambus was engaged in a bitter battle with Samsung and other memory makers in a worldwide patent dispute, each side was scoring victories. So far, everything is somewhat one-sided.
2.The Impact Won’t Be Huge Over Time. Greentech Media issued a report this year that the tariffs could raise the price of Chinese solar modules by 7 to 20 percent with the average coming in at 14 percent. It sounds sharp until you put it into context. Chinese module makers have enjoyed a 25 percent advantage in price: even with a tariff they aren’t disastrously behind.
But even more importantly, solar modules account for less than 30 percent of the price of a complete solar system: labor, permitting, financing, electronics and other soft costs make up the bulk of the cost of a solar project. A 14 percent increase thus translates into a 5 percent increase.
But wait, there’s more. Let’s not forget how the cost of solar modules has plummeted over the past several years. In 2008, modules cost $4 a watt, notes Raymond James’ Pavel Molchanov. He expects it to hit 65 cents by the end of the year.
3. The Industry Continues to Grow at an Amazing Rate. 37 gigawatts of solar got installed last year and 40 to 46 gigawatts will get installed this year, according to Solarbuzz. Installations will hit 100 gigawatts in 2018. “PV manufacturing will also grow substantially between now and 2018, reaching revenues of more than $200 billion during that period,” the firm said. Again, the analogy to the electronics world is apt. Unit shipment growth conquers all.
4. Chinese Manufacturers Probably Expected It. Canadian Solar and Trina Solar aren’t the first companies to be hit with dumping penalties Manufacturers of DRAM and other memory chips have been hit with dumping penalties in the past. TV makers have been hit with both dumping penalties and price fixing charges. In some of the price fixing cases, executives went to prison.
Manipulating trade regulations is the expected result when a large number of manufacturers in the same country find themselves saddled with excess capacity. The penalties are the cost of doing business. Increased demand ultimately eliminates the need to dump by soaking up the excess capacity. The problem will be over before you know it.
5. Politically, It’s a Stinker. Solar is a rapidly growing business in 15 states. Over the next decade the industry’s goal is to make inroads into the remaining states. Voters are beginning to understand how the job growth will come from installation, not manufacturing. But it certainly won’t help by asserting that one of the most important things we can do is ship more manufacturing jobs overseas.
6. The U.S. Is Already Exacting Revenge. Chinese investors in recent years have invested heavily in U.S. companies like A123 Systems, Luminus Devices, Evergreen Solar and Fisker Automotive. In other words, we’ve been shipping our flimsy, failing companies to them.
Fair is fair.
Lead image: Working together via Shutterstock