The US Department Of Commerce May Be Protecting Utilities From Solar

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Energy Post.

At the end of July, the US slapped new import duties on solar products from China coming on top of earlier “anti-dumping” levies. These measures are damaging for US consumers, the US economy and the renewable energy sector, writes solar power entrepreneur Peter F. Varadi, author of a new book on the history of the PV industry. Indeed, it now turns out that even the vast majority of the US solar industry is opposed to them! So why does the government continue with this solar trade war? Varadi wonders whether the US Department of Commerce is trying to protect utilities from the solar revolution. 

In a recent article on the website SolarWakeup (“Oh, For God’s Sake, SolarWorld, Shut The Hell Up”, 30 August 2014), author Chip Martin quotes Rhone Resch, President and CEO of the Solar Energy Industries Association (SEIA), who has this say about the latest round of import duties imposed by the US government on solar products from China:

“Enough is enough. The Department of Commerce continues to rely on an overly broad scope definition for subject imports from China, adversely impacting both American consumers and the vast majority of the U.S. solar industry. We strongly urge the U.S. and Chinese governments to ‘freeze the playing field’ and focus all efforts on finding a negotiated solution. This continued, unnecessary litigation has already done serious damage, with even more likely to result as the investigations proceed.”

Mr. Resch on July 28, 2014 informed The Department of Commerce (DOC) that the US Solar Industry is against its decision to levy import duties on the Chinese solar cells and modules (PV) and urges the US government to settle the matter expeditiously with the Chinese government. If Mr. Resch’s statement was not enough to influence the Department of Commerce I would like to add some reasons of my own why we should end this solar trade war.

The petitioner for this was SolarWorld Industries America Inc. a subsidiary of SolarWorld AG, a German company. It is not understandable why DOC would get the USA into a trade war with China based on the petition of a German company’s US subsidiary (and maybe six other US companies) when at that time (2012) there were based on SEIA’s web site about 5,000 solar companies in the USA employing about 100,000 people.

Who is benefiting from The Department of Commerce decision to levy a huge import duty on Chinese PV modules?

The main beneficiary appears to be SolarWorld, under whose influence The Department of Commerce apparently made its decision. As mentioned, this is a German company which raised money in 1999 in Germany and is listed on the German stock exchange. SolarWorld has some holdings in the USA. It wound up in financial difficulties in 2011 (its stock listed SRWRF:OTC dropped from $2,500 on Apr. 6, 2011 to $561 on October 05, 2011) and blamed it on the Chinese dumping solar cells and modules. To demonstrate the validity of its claim on October 19, 2011 it petitioned the US federal government to stop unfair trade by China’s state-sponsored industry. SolarWorld may have been saved by The US Department of Commerce.

In addition,US electric utilities may well be the biggest beneficiary of the US Department of Commerce ruling. This is because it will slow down the need for them to change their business model. As I argued in a previous paper for Energy Post about the German utilities (“The future of the large German utilities: it’s already here” November 11, 2013), the solar revolution is forcing utilities to re-invent themselves, which is inevitably a painful process. Some have already embraced the decentralized, renewable energy future, but others are trying to resist it. They prefer to slow down the solar revolution as much as possible

Who is not benefiting?

As Mr. Resch makes clear, the US solar industry is not benefiting from The Department of Commerce decisions.

In addition, the people of the USA, the consumers as well those looking for a job are also absolutely not benefiting. As a matter of fact they are the big losers.

As of the argument about job losses, the Department of Commerce should have known that PV cell and module manufacturing is by now a highly automated process requiring relatively few people, while the manufacturing of supporting elements, electronics, electrical interconnections, installation and maintenance offers many more jobs. If the manufacturing of solar modules for a 10 kW rooftop system requires 1 worker for a certain amount of time, the design of the system, manufacturing the BOS (balance of system), installation and maintenance will require about 3 or 4 people. This means that imposing a higher duty increases the price of the system and therefore fewer houses will be equipped with solar. The result of The Department of Commerce’s decision will be to reduce job creation in the USA.

This means that instead of raising import duties The Department of Commerce should let PV modules into the USA free of duty. This would result in more job creation.

I would like to add one more point that is rarely discussed.

As mentioned SolarWorld is a German company, and most of its capital was raised in Germany. On the other hand most of the Chinese PV manufacturers built their production facilities with mostly on US money and are listed on one of the US stock exchanges. How did that happen?

What nobody talks about is that eleven Chinese companies raised over 2.1 billion dollars of capital on US stock exchanges during the years 1997 to 2010. The miraculous ascent of the Chinese PV industry started when this money was raised for them by the most prestigious US underwriters Morgan Stanley, Credit Swiss First Boston, Goldman Sachs, Merrill Lynch, Lazard, Piper Jeffrey, and CIBC World Market. Ownership in these Chinese Companies mostly by US investors ranged from 5 to 90%. Compare that to the fact that during this time only two successful US solar companies were able to raise a total of $545 million (Let’s forget about Solyndra which was able to raise $1.2 billion but was uncompetitive).

The result of the investment in the Chinese PV manufacturers from the US and from other (e.g. UK , Hong Kong etc.) stock markets resulted in the establishment of brand new automated turnkey manufacturing facilities in China. The result can be seen in the following chart:

Varadi graphic

How was the Chinese PV industry which from 1970 until 2005, for 35 years was not able to produce more than 1% of the total World PV production, but was able 6 years later in 2011 to produce close to 50% of the world’s production of good quality PV products? This was only partly achieved because of the huge capital influx.

In retrospect it is obvious that the Chinese PV industry had a large overproduction in 2011 and 2012 and wound up with large unsold inventory which they wanted to get rid of. It is very likely that the Chinese PV industry was heavily subsidized and sold PV modules at a price, below cost. Because of my long experience in PV I was able to collect information and explain this in my recently released book on the history of solar PV: “Sun Above the Horizon” (which can be ordered from Amazon).

But should we be concerned about this?

First of all we should take advantage of the Chinese government’s generosity in subsidizing US homeowners, corporations and IPPs to install non-polluting clean electricity energy sources and also creating jobs in the USA.

From Mr. Resch’ statement it is obvious that the US Solar Energy Industry is not concerned. The public is obviously not concerned either.

It is understandable that SolarWorld was concerned to try to explain to their stockholders their financial difficulty.

So why is the Department of Commerce concerned? Is it trying to protect the US electric utilities and trying to postpone the time when the 100-year-old electric utilities have to face their transformation, which the German utilities are already facing? Some of the German companies have already turned around and are turning green. They know that the solar revolution can’t be stopped.

© Peter F. Varadi. All rights reserved

Source: Energy Post. Reproduced with permission.

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14 thoughts on “The US Department Of Commerce May Be Protecting Utilities From Solar

  • India Government has abandoned import duties on China Solar, and offer local producers contracts to develop local Solar production.
    this system is a win win win for all.
    USA should implement this system rather than impose new import duties on Solar.
    and a shame that USA must learn from India.
    China Solar production, India import rules, USA stuck with coal.

    • The fossil fuel lobby has strangled progressive federal government policies for the last 2 decades. When Bush Cheney were in the White House, they didn’t need to do it openly-they owned the oval office

  • Killing 3 jobs to save 1, that sounds like a good idea; and in fact the number is much higher since most the jobs to be saved were already gone. I think your idea that the US Dept of Commerce; was trying to protect Utilities might be what was really driving this. I live close enough to Ky to hear their political aids on the airways and the “War on Coal” aids are in full swing. There is a lot of coal and utility money being fed into the political machine in the US. That fact that some impacted Commerce Dept, is not unlikely.

  • another tired BS story how tariffs hurt US solar or US jobs. All evidence points exactly to the opposite: according to SEIA, even DESPITE tariffs, US solar installations over the last year increased 79%, average system prices form US consumers reduced by 6%, more jobs created….all despite average Chinese panel pricing INCREASING 14%!!
    Those are the facts: with tariffs, the US got lots more of cheaper solar, benefitting consumers, workers, and solar companies.
    Oh, and yes, we also got a fairer playing field which is now directly resulting in increased US solar manufacturing. So, more jobs + more manufacturing + lower prices for US consumers + fair trade.

    • So a when an imported part of solar power systems, that people were free to purchase or not purchase as they saw fit, increased in price due to tariffs it caused the cost of solar in the US to decrease? That’s pretty impressive. If this effect holds true in other areas then imagine how cheap US oil would get with tariffs on foreign oil.

      • No, you misread what Steven Geiger wrote.
        The introduction of tariffs simply didn’t prevent prices to continue to decrease overall, derailing Peter Varadi’s long tirade above.

        • Ah, so the ongoing decline in solar costs hid the damage caused by the tariffs on Chinese panels.

  • Not to mention that the automated pv production lines in China (video of Jinko’s here – link) are made in Germany.

    It would pay the rest of the industry to buy SolarWorld and close it down.

  • I sometimes see the phrase “the war on coal” and at first I thought “right on” but it turned out to be a phrase the right wing was using as a defence of coal! Jeez, thank you for helping us out. It is a great slogan the sensible people of the world should run with: “make war on coal, before it kills us all!”
    Ahem, now back to solar tariffs. I thought the U.S. lost the decision in the World Trade Organization ruling, am I wrong? And next. Marking up Chinese pv is insanity, in the long run the amount of pv is miniscule economically, but more pv showing up on rooftops can at least be word of mouth advertising to get the ball rolling for what needs to be an avalanche of pv, plenty of jobs and many benefits.

    • I can tell you from first-hand experience that modules made elsewhere work just as well to get the word out.
      Furthermore, even if one insists on Chinese modules, tariffs on those have very little impact on the total installation costs, at most a few percents. Recent price drops more than make up for this, it a complete non-issue.

  • So PV pricing is dropping like a stone and has already reached socket parity is most (all?) of the US, but somehow a tiny and likely temporary increase in modules prices from only one country would derail all this? Of course not.

    This guy is barking at the completely wrong tree. What dampens adoption in the US is absolutely not PV modules costs, but “soft costs” (labor, installer profit etc), which remain many times higher than most other places.×348.png

    • That’s an awesome graph! And I would say it is super accurate if not even worse than that, at least for California. My dad and I designed and installed a 1.5KW E-W actuated surface mounted array at our home for about 4k (not including cash back from rebates), 2k of which was for the actual panel hardware (inverters and modules), other costs were for the mounting system, actuator, permitting and the electrician. If we had a roof mounted system installed it was going to be at least 10k, if not more because our roof was East/West facing and to meet peak demand we would probably have needed double our current capacity. Even so, that’s at least 50% of the cost as “non-hardware” related expenses. Modules last year were super cheap, less than 1USD/watt for Class A tier 1 manufactured panels (no material deficiencies, sold by a fully integrated panel manufacturer). There are also companies selling micro inverters which are much cheaper than a centralized inverter if have a small system (like $100-150 per panel, instead of 2k for the whole inverter). After the rebates, I think we have a 5-6 year payback period, which is not uncommon, but at a much lower capital expenditure.

      Anyway, solar is totally doable and affordable. I feel a bit bad for our neighbors who had a 3KW system installed for like 25k in 2005 when it was still a new industry, but the price has come down so much it seems like such an obvious decision. Also messing up PG&Es business model is great, bastards took 3 months after our system was online before sending someone down to declare us “officially” connected to the network.

      • Sounds like a typical tactic for a Utility Co. Delay, Deny, and Destroy (if possible).

        • Right… So surely you have a logical explanation why PG&E encouraged its customers to go solar with almost 900 million$ of subsidies then?

          PG&E, like dozens of other utilities, is so-called decoupled: their revenue doesn’t depend on how much energy they sell. Their generation and transmission costs does affect their bottom line though, so they promote, and benefit from, conservation and distributed generation, including customer-owned PV.

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