Photovoltaics

Tariffs imposed on Chinese solar panel imports by the US Department of Commerce have come in the 30% range as expected with a 31% tariff placed on panels from China’s biggest panel makers.

The tariff hike is designed to be both a punishment on the Chinese solar panel manufacturers that Washington believes have been dumping low cost panels on the US, while also aiming to prevent them and other panel markers from doing so in future and undermining the US panel manufacturing sector.

In total, the Department of Commerce identified 61 Chinese companies (including major players such as Yingli Green Energy, LDK Solar, Canadian Solar, Hanwha solar One, JA Solar Holding and Jinko Solar) as dumpers and they will all be required to pay the 31% tariff.

Name changing

Washington is also wise to the old trick of name changing and shipping under different brand names and third countries and so, therefore, the new tariffs also applies to Chinese panel makers who have not previously exported to the US. Any now wishing to do so will be required to pay a 250% tariff. The changes in duties are expected to be confirmed in October.

Broadly the argument falls into two camps – those, including many US solar panel manufacturers, and foreigners like Germany’s Solarworld with in-country operations in the US, who have been struggling against low-price panels from China and believe the country has been actively “dumping” excess inventory in the US market at below-production-cost.

Double edged sword

Chinese manufacturers, of course, will argue that low cost production and pricing is their essential competitive edge and that America is crying foul because its labour and production costs are too high and that American polysilicon manufacturers are guilty of unfair practices under World Trade Organization (WTO) guidelines, of course a body both the US and PRC are key members of.

The official Chinese response from the Ministry of Commerce’s spokesman Shen Danyang in Beijing was that, "The U.S. decision lacks fairness and China expresses its strong displeasure".

But of course the debate is far more nuanced than this. Some America panel makers, especially those who are successfully exporting, are against the tariff hikes as they believe that possible Chinese retaliation will hurt overseas sales. Li Junfeng, a senior Chinese government official, has already proposed imposing retaliatory tariffs on US polysilicon.

Others point out that there are multiple ways around the tariffs for any determined Chinese solar panel makers (or buyers in the US wanting cheap panels).

The Chinese could just off-shore to plants that they already have in Taiwan, South Korea, Thailand and elsewhere and panels made abroad will not be subject to the tariffs, even if they are assembled into solar modules in China. It has been estimated that using a route through a Mainland firm manufacturing in Taiwan would add on 6-12% to panel cost.

Welcome to America?

Some Americans in the solar industry believe that the tariffs may encourage more Chinese solar firms to move to America and open plant in the USA. US providers of turnkey factory assembly solutions for crystalline and thin-film photovoltaic (PV) factories are working on a Come-To-America programme to target the Chinese manufacturers.

Roger Little, CEO of Spire Corporation’s Spire Solar unit that provide turnkey solutions to the global solar industry says: “We’ll give them the machines, we’ll set them up, we’ll help them do the whole thing in America.” Little has worked out that manufacturers would only incur a 14% tariff if they imported Chinese solar cells. His maths say that the cell would be US$0.53, the cell-to-module conversion US$0.54 cents, making the total cost of an American module US$1.07.

This move-to-America solution is the one offered by SolarWorld, the German company with operations in the US who was among the seven solar firms active in America that helped bring the anti-dumping complaint. However, avoidance via third countries and the rush into other markets now, India, Eastern Europe, Turkey for instance, will limit the impact of these sanctions.

Clearly Solarworld, leading the charge for the seven firms lobbying for higher tariffs is happy - Frank Asbeck, CEO(of SolarWorld, says: "The decision sends a clear signal: free trade does not mean there are no rules". Not surprisingly, as outlined above, Beijing disagrees with that analysis.

It is worth remembering also that the tariff hikes were long rumoured and signalled in advance and so many of the major Chinese panel manufacturers have already built up substantial inventory in America already and will not need to import for some time.

Deep pockets

One final consideration is that larger Chinese panel makers have been able to sign deals in America that account for tariff hikes – i.e. it was stated in the deal that they would cover any hikes with no penalty to the US customer. Large PRC firms, such as Suntech and Trina, have been able to do this as they have deep enough pockets and enough contracts in place going forward. It is the case that the actual panel is typically only approximately 25% of overall project cost after financing, installation and various infrastructure costs.