Are we in a solar trade war with China?
Cross-posted from Climate Progress.
Concerns about China’s support of domestic solar companies have been brewing for years. But they have finally come to a boiling point — and it’s causing some in the solar industry to feel burned.
The German solar manufacturer SolarWorld, along with six other unnamed companies, filed a petition to the U.S. Department of Commerce and the International Trade Commission today, calling for America to challenge China’s “illegal” subsidies to solar companies and develop tariffs for Chinese products:
With a large number of subsidies and preferential treatments, the Chinese government and its state authorities have enabled its solar industry to make price cuts well beyond their own efficiency and to massively expand the export of its goods. Many documented cases of violations of social, quality and environmental standards that regulate production sites in the U.S. and Germany have also been discovered.
SolarWorld, which just laid off 66 people at a facility in California, says that China’s “unfair practices” make it nearly impossible for solar manufacturers to continue operations in the United States. SolarWorld executives hosted an event on Capitol Hill in Washington today with two Democratic senators from Oregon, Ron Wyden and Jeff Merkley. The company’s U.S. headquarters are based in Oregon.
Speaking to reporters at the event, Gordon Brisner, president of SolarWorld’s U.S. business, called China’s subsidies “no different than giving an athlete a bucket of steroids.”
But here’s the problem: No one really knows how potent those “steroids” are. Or if they’re illegal.
Climate Progress and other publications reported recently on the more than $30 billion in loans that the China Development Bank had offered Chinese companies in 2010. However, those are offers to take down the loans over a multi-year period. Many companies have not yet taken the full amount offered, so it’s difficult to make a direct comparison between loans to Chinese and U.S.-based firms.
The terms of the loans are also difficult to dissect. Suntech says it is getting a loan from the China Development Bank at 5 percent interest — far above what an American loan guarantee would provide. But in many cases, provincial governments will pay that interest for the company along with providing other perks. Take this example, from a very detailed investigative piece in The New York Times last year:
To help Sunzone, the municipal government transferred to the company 22 acres of valuable urban land close to downtown at a bargain-basement price. That reduced the company’s costs and greatly increased its worth and attractiveness to investors.
Meanwhile, a state bank is preparing to lend to the company at a low interest rate, and the provincial government is sweetening the deal by reimbursing the company for most of the interest payments, to help Sunzone double its production capacity.
Heavily subsidized land and loans for an exporter like Sunzone are the rule, not the exception, for clean energy businesses in Changsha and across China, Chinese executives said in interviews over the last three months.
The 3,000-page petition from SolarWorld details many of the specific accusations, but it has not been released publicly.
China’s support for the sector has helped companies produce massive amounts of product, causing a structural global oversupply of modules and dropping prices dramatically. That has been a great thing for developers and consumers, but extremely difficult for manufacturers. In the last year and a half, seven different U.S.-based manufacturers have closed or scaled back facilities in the U.S. — with China being blamed in some way each time.
But SolarWorld appears to be going it mostly alone. Although the other six manufacturers are anonymous, some of America’s largest solar producers didn’t sign.
The industry’s trade organization, the Solar Energy Industries Association, is also staying neutral in the dispute, explaining in a statement:
Solar companies — whether foreign or domestic — have the right to request investigations into alleged unfair trade practices. It is important that these allegations are thoroughly examined and, if unlawful trade practices are found, action to remedy those practices is taken.
On a conference call this morning from the Solar Power International trade show, some leading solar executives took a much more direct approach.
“This is not in the interest of American consumer,” said Arno Harris, CEO of the project developer Recurrent Energy. “The best thing the industry can do is drive down the cost of solar. We don’t want to see this kind of development.”
The mixed responses from folks in the industry highlights a major split in thinking about Chinese subsidies. The astonishing price drops in the last three years — due largely to a massive influx of Chinese panels — has helped make solar far more competitive. But it’s also knocked a lot of companies out of the game.
The rhetorical battle over China’s solar subsidies has been raging for sometime. Is it now turning into a full-on trade war?