Solar in the USA: A House Divided
Just when solar power was starting to gain tremendous momentum in the U.S., the industry has hit a colossal bump in the road. Surprising to some, that bump is not in the form of oil tycoons funding politicians threatening to cease government subsidies to solar companies (though post-Solyndra, many would expect that to be the demise of the solar industry). No. The bump in the solar industry is the solar industry itself, which has become a house divided over the last couple weeks.
Much like the NBA, the solar industry is spiraling into an inward debacle. On Oct. 9, SolarWorld and six unnamed solar panel manufacturers filed a complaint with the Department of Commerce and the U.S. International Trade Commission (ITC) alleging that Chinese solar panel makers and cell manufacturers are making it hard to compete in the U.S. market. The companies claim Chinese panel makers and cell manufacturers are receiving unfair subsidies from the Chinese government and dropping their prices at artificially low levels.
Meanwhile, more than two dozen solar companies formed the Coalition for Affordable Solar Energy (CASE) last week in response to SolarWorld’s filing. CASE asserts that the competitive PV prices the U.S. has benefitted from over the last couple years has…well…benefitted us.
Kevin Lapidus, senior vice president of legal and government affairs for Sun Edison, and one of the Coalition founders, said that the companies filing the complaint have not taken into consideration a number of issues that have caused the continuing price decline of solar modules. These issues include declining incentives for solar developments in the U.S. and the continuing price decline of polysilicone, which has fallen 40 percent this year.
“In order to succeed, each step in the production chain must reduce its cost,” Lapidus said. “Only if this is achieved across the entire solar industry can we be successful.”
After a visit to Trina Solar’s manufacturing facility in Chanzhou, China in May this year, I got a peek of how Chinese manufacturers reduce production chain costs. It’s true, they do pay less for labor. While the middle class is burgeoning by the day, China is still at a point economically where it can pay less for labor. Aside from labor costs, Chinese PV manufacturers also have a highly streamlined system that some American and European counterparts have not quite been able to duplicate. These elements result in Chinese manufacturers being able to offer PV products that are on average 10 percent cheaper than their European, Japanese, or American competitors.
But the crux of SolarWorld and crew’s argument is not just that Chinese modules are cheap, but that the prices have been dumped at illegal rates. According to a report by investment bank Jefferies, the Department of Commerce is looking at a few factors to determine whether or not panel prices are being illegally dumped:
1) “Has money been granted outright, or below market rates
2) Are taxes lower for targeted industries, or by regions.
3) Is land given, or
4) Are there other subsidized inputs.”
In the end, it won’t matter if the U.S. is simply benefitting from low prices. What will matter is if illegal dumping has indeed taken place. If the case goes through, SolarWorld and friends may end up looking like the goody two-shoes kid in class tattling on the bad kid. And even if the case does not end in SolarWorld’s favor, the company has paid a heavy price over the last month as its stock has dropped dramatically. But more importantly, if their case does go through, the cost of modules will go up and solar jobs in the U.S. will be impacted.
About a month ago, before any of this frenzy began, Tom Doyle, president and CEO of NRG Solar, took part in our Power Engineering Renewable Energy Executive Roundtable, which will run in the January 2012 issue. His point of view – the developer’s point of view – is ultimately what should matter to PV manufacturers. Here’s what he had to say about the matter:
“What’s important to developers right now is the intense competition to drive down PV panel pricing,” Doyle said. “It’s such an aggressive market that it’s significantly surpassed our expectation of what we thought we could see as a buyer of PV products.”