Free Markets Must Be Achieved In A Fair Way

REC Group’s Arndt Lutz talks about US Tariffs

Originally Published on the ECOreport

Reactions to the U.S. Department of Commerce’s decision are mixed. Specific amounts vary, but many Chinese solar companies will be paying a 42.33% tariff on their exports to the US. The amounts for Taiwanese manufacturers are also hefty. SolarWorld and its allies applaud these measures as a means to reignite American manufacturing. The Solar Energy Industries Association (SEIA) described this as “ill-advised and unprecedented” and believes it “will harm many and benefit few.” Arndt Lutz, Senior VP of REC Group and head of the company’s North American business, said that as a European company, REC believes in free trade , but free markets must be achieved in a fair way.

“In general, I don’t believe that tariffs are helpful. However, in the case of Chinese dumping, something has to be done to level the global solar market,” he added.

A prominent global solar panel manufacturer, REC Group, has a unique perspective on the solar market. The company has enjoyed significant growth in the U.S. solar sector this year, with announced supply contracts with SolarCity, Recurrent, and others totaling approximately 700MW. The combination of high-quality, cost-competitive products with a tariff-free status has allowed the company to make inroads in all three segments of the domestic market—residential, commercial, and utility. The REC Group is headquartered in Norway and has a fairly extensive sales team in Europe, which sells about 400 to 500 Megawatts annually. Their award-winning integrated production plant is in Tuas, Singapore.

“We produce the cells, wafers and solar panels in Singapore, thus we’re still not affected (by the US ruling),” said Lutz.

The situation in the US reminded him of what happened in the Europe during 2012. The EU Trade Commission sought to curtain Chinese dumping with minimum import prices and an annual ceiling on the amount of supply.

“The Chinese have found ways to circumvent the European rules,” said Lutz.

One example we heard of in Europe is that they agreed to pay penalties for late shipments and then shipped late on purpose which lead to giving their customers the late penalty payment. That’s not the only way they applied these rules, from our understanding. There is basically unlimited imagination and unlimited ways to circumvent tariffs.

Lutz believes that Chinese suppliers will have difficulties in significantly increasing supply into the US without paying tariffs.

“The way this is written it puts tariffs on the Chinese if they produce in their country, regardless of the cells’ origin. Even if they use Taiwanese or Korean cells when producing in China or third countries – like Poland or Mexico – they will still have to pay tariffs.”

He does not think these measures will have a “huge impact” on the global solar market, as the Chinese and Taiwanese companies can still sell in Europe, Asia and Africa. However, the supply of solar panels entering the US will decrease and, consequently, prices will probably not go lower soon.

“Whether or not this achieves the goal of free trade and a free market, remains to be seen,” he added.

As for the idea of a settlement with the Chinese suppliers, Lutz said the petitioner (SolarWorld) would have to be involved in any negotiations that happen between the US and Chinese Governments.

He added, “My understanding is that SolarWorld would agree if there was a certain minimum price at which solar panels could be sold into the US market. Then maybe this trade case could be settled.”

Images above, in descending order

• Solar cell research at the Singapore plant – Courtesy REC Group
• REC’s production plant is in Tuas, Singapore  – Courtesy REC Group
• Arndt Lutz, Senior VP of REC Group – Courtesy REC Group
• Solar Array at Alicante, Spain – Courtesy REC Group