Solar 'smackdowns' resume in reaction to China’s 5 year plan07. May 2012 | Top News, Global PV markets, Industry & Suppliers, Markets & Trends | By: Cheryl Kaften
Like an unrepentant child confined to a "time-out" corner, China is not only irate at accusations that it has over-subsidized its solar industry and underpriced its products, but it is plotting a market rally strong enough to scuttle its competition.
The growth of China’s solar sector during the past five-year cycle has catapulted the country to number one in production and international sales. A February 2012 report from the People’s Republic (PRC) touted the finding that, by last year, China’s domestic solar industry accounted for more than 95 percent of total solar cell production worldwide.
The report implies that, without China’s aggressive growth policies, the international solar sector would not have advanced at nearly the same rate. "During the 11th Five-Year Plan period, China’s PV industry broke development bottlenecks in materials, markets, and human resource development. The size of the industry grew rapidly, and a complete upstream and downstream industrial chain was emerging," it states, adding, "The rise of China’s PV (photovoltaic) industry led the development of the global PV industry, effectively promoted technological progress, reduced costs of PV products, and accelerated industry application of PV around the world."
Now, Beijing plans to do more of the same. In its 12th Five-Year Plan for the Solar Photovoltaic Industry (translated and analyzed by Wiley Rein LLP, a Washington, D.C.-based law firm), China acknowledges that, "from a global perspective, it will take some time before PV power generation becomes competitive in the market price-wise."
Therefore, the PRC says that demand for solar systems should be driven "mainly by policy support and price subsidies provided to the PV industry by governments in all countries. The continued growth of the market will also facilitate expansion of the industry size and reduction in product costs."
Beijing’s leadership team sees solar production and sales as a vital cornerstone of its economy – one that cannot and should not be compromised. "From the perspective of the strategic path of China’s social and economic development, promoting the solar PV industry is essential to guarantee energy supply, establish a low-carbon society, promote economic restructuring, and foster strategic emerging industries. During the 12th Five-Year Plan period, China’s PV industry will continue to maintain rapid development, facing great opportunities and formidable challenges."
As in previous iterations of the plan, analysis by Wiley Rein LLP found that solar is designated among seven "strategic emerging industries" that warrant massive PRC government support, preferential treatment, and tight control. News reports put total subsidies for all seven industries at US$1.5 trillion.
Furthermore, according to the analysis, the solar Five-Year Plan calls for the Chinese industry to continue global expansion and "internationalization," in keeping with China’s "Going Abroad" strategy.
When world's collide
Of course, China’s strategies still do not sit well with SolarWorld Industries America, which, along with six other manufacturers, filed the trade CVD and anti-dumping complaints in October 2011. The seven original petitioners have formed The Coalition of American Solar Manufacturing (CASM) – and they continue to contend that "China’s broad portfolio of subsidies spurred its producers to build huge excesses of manufacturing capacity, export more than 95 percent of production, and sell product at artificially low prices to unfairly seize … market share at the expense of domestic producers."
While CASM was satisfied with the punitive single-digit tariffs that were levied against Chinese manufacturers by a preliminary Commerce Department finding on March 20, the group now states that, "Aside from the more than 30 Chinese subsidy programs that CASM has identified as illegal – including the 10 that the Department of Commerce has preliminarily sanctioned – the new 12th Five-Year Plan for the Solar Photovoltaic Industry unveils a host of new government initiatives to continue to fuel China’s export campaign."
According to CASM, the plan to expand China’s export-intensive solar-industry calls for a number of government initiatives, including new policy, financial, and price subsidies; more support in industry, financial and tax policy; and further aid with development and production of equipment used to produce polysilicon, silicon ingots, wafers, cells, and panels within the crystalline silicon solar industry. Moreover, the portfolio includes plans to support industrialization of China’s as-yet-undeveloped thin film industry – specifically, harnessing silicon and copper indium gallium dieseline solar technologies.
What’s more, CASM complains that the plan covers virtually every detail of each phase of industrial development, including:
- Where new industrial sitting should take place;
- Precise levels for environmental performance improvement; and
- Strict standards for cost and power-conversion efficiency improvement.
China’s new Five-Year Plan provides even greater support for exports than previous government plans that delivered more than half of world industry market share to the Chinese industry, according to the analysis. The 2011-2015 plan calls for the consolidation of "the industry’s position in the international market," partly by identifying and promoting "national champions," so that "Chinese PV enterprises’ international influence will be greatly enhanced" and be better able "to cope with international competition and market risks."
Speaking on behalf of CASM, Gordon Brinier, president of SolarWorld Industries America Inc., a subsidiary of Bonn-based SolarWorld AG, took at stand for the rest of the industry. "China is steamrolling American manufacturing and jobs and breaking its trade commitments in plain sight," Brinier said. "No wonder the American public has grown increasingly anxious about the state of U.S.-China trade. China is scoffing at international trade rules."
Throwing stones at glass wondows?
However, many American solar sector professionals think SolarWorld is engaging in the very activities it is so vocally vilifying.
On May 3, the Coalition for Affordable Solar Energy (CASE) called on SolarWorld to stop "falsely charging" that its China-based competitors are selling solar cells below the cost of production. CASE noted that SolarWorld "has openly admitted to selling its solar cells and modules at a loss, as all solar manufacturers globally are struggling to remain profitable amidst a highly competitive market environment for solar cells and modules."
In public testimony to the International Trade Commission, CASE stated, Gordon Brinier alleged that declining solar cell prices caused significant harm to his company and added, "The more product we sell, the more money we lose."
"It’s certainly an extremely competitive global market for solar cells and modules, and we don’t fault SolarWorld for cutting its prices to compete," said Jigger Shah, president of CASE. "But we do fault SolarWorld for hypocritically attacking its competitors at the expense of the American solar industry."
Shah continued, "SolarWorld initially accused its competitors of receiving subsidies, even as SolarWorld received millions of dollars in subsidies itself. When that didn’t work, SolarWorld accused its competitors of dumping products, while carrying on their own dumping activities. SolarWorld should just litigate against itself and stop putting over 100,000 American solar jobs at stake."
Shah was referring to earlier reports that SolarWorld has received more than US$100 million in subsidies and government support in the United States, Qatar, and Germany. Examples of subsidies benefiting SolarWorld, and specifically cited by CASE, include the following:
- According to Handelsblatt, a German publication, SolarWorld has received €130 million in direct subsidies in Germany between 2003 and 2011.
- According to the Portland Tribune, SolarWorld received a US$11 million Business Energy Tax Credit in Oregon that it immediately sold to Wal-Mart for US$7.3 million in 2009. It then applied for a second round of tax credits and received an additional US$19.4 million.
- According the U.S. Department of Energy, SolarWorld was "awarded a clean energy manufacturing tax credit of US$82.2 million to expand its existing 100 MW solar photovoltaic manufacturing plant to 500 MW."
- According to a SolarWorld press release, SolarWorld entered a joint-venture partnership with the Qatar Development Bank, a Qatar government-backed investment bank, for the construction of polysilicon facility in Qatar.
A temporary stalemate
For now, all of this sound and fury signifies nothing – or at least very little. Whatever the decision on punitive tariffs, China will continue to take a competitive international stance. And despite the dialogue between CASM and CASE, the U.S. market remains strong.
"The North American solar market is steadily gaining traction, thanks to a combination of maturing technologies, declining costs and burgeoning regional incentives. California remains at the forefront of the U.S. market, standing as a prime example of the positive impact to be had through investment in renewable energy," said Daniela Schreiber, executive vice president of San Francisco-based EuPD Research USA. "We anticipate approximately 1,020 MW in new installed capacity during 2012, and as many as 8,462 jobs created across the supply chain."
The U.S. Department of Commerce will rule on May 16 (and announce on May 17) whether to impose duties to offset any illegal dumping of solar products at artificially low prices and, if so, at what percentage margins.
Commerce currently is scheduled to make its final determination on the CVD (countervailing duty) complaint in June 2012. If Commerce makes an affirmative final determination, and the U.S. International Trade Commission (ITC) concurs that imports of solar cells from China materially injure, or threaten material injury to, the domestic industry, Commerce will issue a CVD order. The ITC is scheduled to make its final injury determination on July 19.
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