The US Commerce Department has found that China provided trade incentives on Chinese made solar panels for the US market, and that this was unfair to US solar panel manufacturers. The Commerce Department is in turn charging a tariff on all Chinese imports of modules starting this summer. Here are some answers to help understand the dispute and what it means for solar business professionals.
What do ‘trade incentives’ mean?
The US Commerce Department, through a complaint filed by American solar manufacturer Solar World, charges that the Chinese government subsidized the solar panel market with massive loan incentives, cheaper power costs, and actual cash disbursements. In the world of international trade, this is considered unfair as it obviously lowered the manufacturing cost for Chinese producers.
Doesn’t the US government give incentives to US solar manufacturers?
The US government over the last 6 years has helped domestic solar production with its own incentives. But they are very different than what China offered its own manufacturers. The Department of Energy offered loan guarantees and tax incentives, which essentially made the US government a cosigner on loan applications. And while it while it may seem like splitting hairs, the Chinese government’s actions had a far greater impact on the actual price of the finished product.
How much are the tariffs?
The tariffs are scaled to punish the biggest violators. There are as such:
- Suntech, 2.9 percent
- Trina 4.73 percent
- All others, 3.59 percent
But this is likely just the beginning of the tariffs. The Commerce department is not finished with its review and this decision opens the door to more sanctions. The US government will review the charges of ‘dumping’ (meaning the industry sold its panels at a loss) in May. Industry insiders believe (and hope) that the final tariffs will be closer to 10%.
How will this affect solar panel prices?
It is anticipated that prices will rise briefly, and then continue their long descent down. Many suppliers have spoken of raising prices 10% in April 2012. Those numbers will move closely with the tariffs. But the long term economics of solar won’t change drastically, as technology and manufacturing efficiencies continue to drive the price per watt down. Consumers should not be fearful that the prices will continue to rise.
Why will prices rise now?
Many solar panel manufacturers are operating at or near a loss to compete with the Chinese manufacturers. This rise in price will better reflect the actual economics of solar panel manufacturing and allow some companies to turn a profit and reinvest in research and development. The US buys over $3 billion in solar modules from China every year, and more of this money could be directed toward American made products.
So overall is this a good or bad thing for solar?
This will be tough on installers and designers in the short term. With solar incentives and rebates drying up and labor costs on the rise, this certainly won’t help the economics for home and small business systems. The best a local installer can do is to explain that now American made products will be more in line with Chinese solar panel costs and that the costs were skewed to begin with due to Chinese government interference.
In the long term, this will probably be just a bump in the road for solar panel prices and they will likely keep falling over the long term. Overall the goal is to achieve grid parity with fossil fuels, and solar is on track to do that in the next decade.
The outlook for solar power is still bright, and with global economic recovery on the way, that outlook will only get better.
Kriss Bergethon is a writer and solar professional from Colorado. Visit his website at Solar Panels today.