Posted: August 01, 2012
State of the state: Energy
Solar industry grapples with Chinese importsAllen Best
After dropping 70 percent in the last three years, prices of solar panels were expected to drop another 10 percent this year. But that was before the U.S. Commerce Department in May slapped stiff tariffs of between 31 percent and 250 percent on solar panels made in China.
Anxious solar installers in Colorado had been awaiting the ruling, worried that the industry’s momentum might stall. Overall, 50 percent of solar panels installed in the Untied States come from China.
"We are worried that we might see price increases, but we haven’t seen them yet," said Don Parker, owner of Golden Solar, in a May interview.
The solar industry is becoming mature and increasingly competitive, and this dispute reflects that maturation. But analysts warn that the dispute with Chinese over solar goods and a parallel disagreement about wind towers are harbingers for a trade war that will stunt the growth of renewable energy.
"We need to think strategically as a country how we want to approach renewable energy going forward in a way that is going to avoid an international trade war," says Joanna Lewis, an assistant professor for science, technology and international affairs at the Walsh School of Foreign Service at Georgetown University. She spoke in a session at the World Renewable Energy Forum held in Denver during May. "If we take it on a case-by-case basis and continue to place duties on imports of renewable energy goods from China and other countries, we are going to have to worry about retaliation."
Neal Lurie, executive director of the Colorado Solar Energy Industries Association, says solar has achieved parity with electricity produced by fossil fuels in some places – including, at times, in Colorado.
"Companies like Wal-Mart aren’t going to solar because they’re looking at things purely for environmental reasons," Lurie said. "They’re doing so to gain competitive advantage, and they see solar as an important part of that."
The United States has been a net exporter to China of items used to create solar panels. That changed in 2011. Prices plummeted as Chinese manufacturers geared up production, and demand from European countries slackened. Solyndra was the most famous casualty of the increased competition, but three American solar companies that together represented one-sixth of American manufacturing capacity in the PV panel sector went bankrupt last year.
Colorado has 6,000 employees involved in the manufacture, installation and servicing of solar goods. Among the companies are manufacturers Ascent and General Electric, neither of which returned repeated phone calls from ColoradoBiz seeking comment. The companies manufacture a variety of panels, not all of them directly in competition with the Chinese modules. Another manufacturer, Abound Solar, filed for bankruptcy in July.
In October, SolarWorld Industries America Inc., the largest U.S. producer of crystalline silicon photovoltaic products, and seven other U.S. manufacturers filed complaints with the U.S. government against Chinese imports. The complaint alleged the Chinese government was unfairly subsidizing Chinese manufactures of PV panels and the manufacturers were "dumping" panels into the world market at below cost, in order to force other manufacturers out of business.
In May, the Commerce Department found the Chinese manufactures had dumped panels at an average 31 percent below fair market value. China’s Suntech, the world’s largest solar company, rejects the charge.
A study by Alan Goodrich of the National Renewable Energy Laboratory in Golden, with additional input by researchers from Stanford University, found that China produces 55 percent of the global product, and exports nearly all of it.
Lower-cost Chinese exports have benefited consumers, including those in Colorado. Panels represent between 25 and 50 percent of the total cost to consumers, depending upon size and configuration.
Boulder-based Namaste Solar, one of the survivors of a shakeout of solar installers in the last two years, sees competition as generally good. "Chinese competition has lowered everyone’s prices," said Blake Jones, chief executive and co-founder of the firm. Lower prices will allow the continued growth of solar, despite the easing of subsidies to consumers as Xcel Energy nears its mandated goals for renewable energy.
That said, he agrees on need for a level playing field.
Parker, from Golden Solar, also emphasizes balance. Lowered prices are good, but so is stability. "They put 25-year warranties on their panels and we want them to be around to honor their warranties," he says.
Chinese manufacturers could avoid the duties, by shifting production elsewhere. As with cars, manufacture of panels is already global. SolarWorld, the Oregon-based company that led the call for tariffs, is actually a subsidiary of a German company.
Ben Higgins, director of government affairs for REC Solar, a California-based firm with 34 employees in Colorado, says the primary trends are consolidation and globalization of the solar industry. "There’s no escaping the global economy, and certainly, solar is not immune from that dynamic," he says.
The NREL study says that the United States remains a leader in early stage technology development. It’s possible that innovations may gut China’s current dominance of solar panel manufacturing. Too, there are always shipping costs to consider. In the end, labor is only 10 percent of the PV manufacturing cost.