Worlds Apart: The Growing Complexity Behind the Solar Trade Dispute

On one side is the camp that says we must ride cheap solar panels all the way to grid parity. On the other side are those who contend such an approach will only hand China the keys to the solar industry.

In the middle are the rest of us wondering how this trade complaint will play out, and fretting about the unintended consequences that always seem to accompany high-stakes gambles.

The trade complaint filed by SolarWorld and six other unnamed American companies accuses Chinese crystalline silicon panel and cell manufacturers of dumping their products in the U.S. at artificially low prices. Companies like Suntech, Trina and Yingli can absorb these prices, the accusers say, because they receive illegal subsidies from the Chinese government.

From the perspective of at least those seven American companies, they’ve been playing a game they can’t win. The problem is a whole bunch of other American companies say they’re doing just fine – often times because their success is tied in some way to those prices coming out of China.

In early November, the U.S. International Trade Commission (ITC) ruled it had seen enough to move ahead with the investigation. The move sets the stage for the possibility of hefty tariffs on incoming panels and it lays the groundwork for a new giant brick wall that threatens to severely dampen the solar industry in both nations.

Perhaps the biggest question in this standoff is, “Who has more to lose?”

International companies are salivating over the prospect of a widening large-scale pipeline in the U.S. A healthy — and surging — market for American development would fuel all corners of the industry. China gets this and the country has been scaling up its home-based manufacturing operations in part to better accommodate this lucrative new growth.

But there are other factors at play here. China has become the world’s manufacturing giant while seemingly neglecting its own development at home. Well, that isn’t the case anymore. There are indications that China may have a project pipeline nearly as wide as America’s, and the nation certainly has fewer self-imposed barriers to actually building some of those projects. And they’d likely do it with their own panels. Meanwhile, another market is emerging to the west as India looks to combine one of the world’s best solar resources with some of the most ambitious plans. Add in potential market growth in Africa and the Middle East, and you can envision the long-term market for China’s panels. The future of solar extends far beyond the U.S. and Europe, and price will be what drives this growth. This, of course, bodes well for China.

In the U.S., a more insular battle is playing out. Regardless of how the ITC or the Department of Commerce see it, some changes are necessary, according to many voices inside the solar industry. A lifetime ago in the solar industry, but as recently as the late 1990s in real time, the U.S. dominated a much smaller global market. But the U.S. never truly invested in solar growth while China saw it as a matter of increasing national importance. So now, the American solar industry looks disjointed as it plots its next step. While most companies are pointing to the federal government for more support, others are pointing at levels of support coming from China as the reason to enact stiff tariffs. The recently filed trade complaint has only underscored this divide in perceptions – it didn’t create it. The lack of a clear and predictable government policy stretching back decades led us to this point.

So, is it too late? In the short-term, yes, because America’s manufacturing capacity doesn’t line up with its development needs. Those needs will too often be filled with panels made anywhere but the U.S. or China. Over the long-term, though, the U.S. industry may look back on these past few months as the moment energy policy gained some clarity.

To get there, the industry will have to overcome a bitterly divided Washington badly in need of a new narrative on energy. Republicans have happily used the Solyndra fiasco to de-legitimize the solar industry, and renewable energy in general, as a job creator and a vehicle for economic stimulus. And the SolarWorld complaint has been backed by many Democrats, including Sen. Ron Wyden of Oregon and to some extent President Obama.

The trade dispute may in the end reinvigorate the energy debate in America — and that’s a good thing. If it’s true that Americans, as recent polls have suggested, show bipartisan support for the increased development of all renewables, then it’s up to leadership to push past the pressure from vested interests, and work on a roadmap that will allow the U.S. to lead in developing, manufacturing and installing solar and other emerging renewable technologies like geothermal, offshore wind and biofuel.

If not, someone who wants it more may claim the keys to those industries as well.

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