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Solar Trade Tariffs Are A Drag

Remember that old school-yard comeback? “I’m rubber and you’re glue…”? It looks like the unfair tradeĀ  claims that the U.S. and Europe lobbed at China’s solar industry have bounced back and stuck.

Last October, the U.S. Commerce Dept. made good on a months-long threat to impose a 24-36% tariff on solar panels imported from China. And last week, China completed the tit for tat by putting a tariff on U.S.-made polysilicon, the main raw material used for solar cells. [h/t Washington Post]

Suntech solar panels

The U.S. slapped a tariff on Chinese-made solar panels. Suntech’s was the highest. Credit: Suntech

Originally, the U.S. accused China of unfair trade practices – saying the government heavily subsidized the industry and manufacturers were selling modules at less than the cost of production, a practice known as dumping. The EU took similar action early this summer.

China pretty quickly started to point out that the U.S. has given large grants to polysilicon producers, which has helped them quickly build huge new, more efficient production facilities. Those facilities export a lot of polysilicon to China. C&EN has covered this part of the industry pretty closely – both Hemlock Semiconductor (majority owned by Dow Corning) and Wacker Chemie had big expansion plans, some of which are now on hold.

So let’s review. Tariffs don’t tend to take an unfair situation and make it fair. What they do reliably produce is uncertainty and higher prices – at a time when what the world needs now is not love, sweet love, but cheap, renewable energy (well, and love, too).

The general idea is that the solar panel tariff will protect U.S.-based manufacturers of solar panels, but frankly, we lost that war a long time ago. At the time the original complaint was lodged, China already had a 2/3 global market share. Will any of the solar companies that folded because they couldn’t compete on price now re-open their doors?

It has truly been an awful downward spiral for developed-world solar makers. Trying to stay in business while panel prices plummeted was like trying to catch a falling knife. But in the time that was happening, guess what industry was booming in the U.S.? Solar power! That is, the projects built to create electricity from the sun. Cheap panels plus renewables mandates and tax incentives magically created several utility scale solar farms. [Take that, shale gas!]

And while the U.S. doesn’t compete very well with China on commodity crystalline silicon solar panels, we do lead the market in new and efficient types of inverters, which convert DC current from the panel to the AC current that runs your TV. More demand for cheap solar panels has meant a boom time for makers of inverter equipment.

U.S. companies that innovate can still make a buck in solar these days. But it is a mature, consolidated industry and not every player is going to stay afloat, regardless of where they do their manufacturing.

 

2 Comments

  • Jul 30th 201305:07
    by Chad

    You never really do answer the question of what a nation should do when one of its industries is being crushed by subsidized foreign competition. Nothing?

    In any case, we have the US subsidizing solar production some, and the Chinese a lot. Both then retaliate with tariffs. In the meantime, both are massively subsidizing the competition, sometimes directly but mostly by giving them free rights to dump their trash on other peoples’ or the public’s property without compensation. Oh, and the government generally directly subsidizes the customers of everyone involved as well. Oh, and don’t forget currency manipulation and IP theft.

    Viva la free market!

  • Aug 1st 201314:08
    by Melody Bomgardner

    Hi Chad,
    You’re right – I don’t have a great plan for what the U.S. might due in lieu of tariffs. I don’t even think we really disagree. My understanding is that there was an effort to work out the issue without tariffs, but that those negotiations failed.

    This industry has subsidies, tax breaks, feed in tariffs and trade tariffs – some are working at cross-purposes. My main issue was that the trade action came too late, that the U.S. also subsidizes, and that tariffs aren’t a great equalizer.

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