WP
China’s growing share of solar market comes at a price
By Steven Mufson, Published: December 16, 2011
China was mentioned 59 times when Energy Secretary Steven Chu testified last month before a House
subcommittee on the U.S. loan guarantee program for renewable-energy projects.
“Countries like China are playing to win in the solar industry,” Chu said.
“My big thing is that I worry about China,” said Rep. Brian P. Bilbray (R-Calif.).
“The Chinese are eating our lunch,” said Rep. John D. Dingell (D-Mich.).
Yet if Chinese solar companies are eating our lunch, they’re also choking on it. Growth in global solar
manufacturing capacity is outpacing global demand, and prices of solar energy products are plunging. And
while U.S. politicians portray Chinese firms as heavily subsidized rivals gobbling up global market share,
Chinese solar companies are suffering from some of the same ills afflicting their U.S. competitors.
Some of China’s biggest companies are losing money, shelving capital expenditure plans and looking to
conserve dwindling reserves of cash. To avoid going deeper into debt, they have borrowed only a tiny
fraction of $34 billion in loans available to them from the China Development Bank.
For consumers, the cutthroat competition is a good thing. Wholesale solar panel prices have dropped as
much as 50 percent this year, and retail prices are less than half what they were five years ago. Industry
experts say that the day is near when solar can compete against other energy sources without subsidies. In
certain places and at certain times of day, it’s already viable. Meanwhile, analysts say, if China wants to
subsidize solar products, Americans can buy more of them.
For some U.S. companies, China’s expanding industry has meant more jobs. Cheap panels fuel greater
sales — and installation accounts for more than half of U.S. solar industry jobs.
Moreover, the United States has a trade surplus with China in solar goods, led by exports of polysilicon, the
raw material needed to make photovoltaic cells, which in turn are the building blocks for solar panels.
The United States also exports the solar manufacturing machinery. Applied Materials, which made its name
in the semiconductor business, beat analysts’ expectations earlier this year thanks to sales of equipment for
making solar cells. To promote sales, the Santa Clara, Calif., company has set up a research center in the
Chinese city of Xian and moved its chief technology officer there. “Now we are doing for the green
economy what we did for the Information Age,” the company says on its Web site.
GT Advanced Technologies, which sells furnaces and other equipment for making the polysilicon and
ingots used in making solar cells, does 98 percent of its business in Asia, much of it in China. “We compete
very effectively as a U.S.-based corporation in spite of the fact that my Chinese competitors sell at half my
price,” said Tom Gutierrez, chief executive of the New Hampshire-based firm. “We beat them through
technology and innovation.”
But U.S. solar panel manufacturers and people who believe that solar manufacturing can become part of a
new “clean technology” economy are unhappy. They believe that the flood of Chinese solar cells is a
textbook case of dumping — an economic term to describe when foreign companies overwhelm a market
with cheap goods to drive competitors out of business. Later, after gaining control of that market, the
foreign companies can jack up prices.
The global market for solar cells
Over the past five years, the global production of solar photovoltaic modules has expanded nearly
tenfold, with much of that growth captured by Chinese manufacturers. Government subsidies have
helped promote the rapid growth, but manufacturers say declining costs will make solar power
competitive with other energy sources. China’s share of global solar cell production climbed to almost
48 percent in 2010, up from about 38 percent in 2009. Its rise has come largely at the expense of
Japanese and German manufacturers.
Chinese panels are selling for less than $1 a watt, while those made elsewhere sell for about 20 percent
more, according to Bloomberg New Energy Finance.
China supplies nearly half of U.S. solar panel imports — 44.6 million units in the first eight months of the
year, up from 3.8 million in 2008, according to an anti-dumping petition filed by a group of U.S. firms.
Those sales rocketed to $1.69 billion through August of this year from $233.3 million in 2008.
The biggest of those panel makers, Suntech, promotes its products in ads that show two panels hooked up
to an electric American flag. “Now Power America, from America,” the ad says, even though only
2 percent of Suntech’s manufacturing capacity is in the United States.
But volume doesn’t guarantee profits and for Chinese solar companies, it has been a painful rise to the top
ranks of the global market. Suntech, JA Solar and LDK Solar, the top Chinese solar panel makers, reported
losses for the third quarter and warned investors the outlook was grim. JA Solar reported operating losses
and a writedown on the value of its inventory. Suntech, which lost $116.4 million in the third quarter, said
it expected shipments to drop 10 percent in the fourth quarter.
“This will be challenging for all solar companies,” Suntech chief executive Shi Zhengrong said during a
conference call with investors in November. Many of China’s more than 100 solar cell firms and 300 solar
module companies with lower-quality products could close down.
In addition, Chinese solar panel makers are facing possible tariffs as the U.S. International Trade
Commission weighs charges in the dumping case. In a 6 to 0 vote Dec. 5, the ITC found a “reasonable
indication” that Chinese imports are “materially injuring” the U.S. industry. It is considering whether to
impose duties, and at what level.
In a Nov. 22 conference call about its quarterly earnings, JA Solar chief executive Fang Peng said the
company might move some of its finishing operations to other countries, such as South Korea or Taiwan,
so that its panels would not be considered imports from China. “To be prudent we need to have a workaround solution,” chief financial officer Min Cao said.
“China is not pricing its products to make money,” said Timothy Brightbill, a lawyer at Wiley Rein who is
representing U.S. solar panel makers in the dumping case. “It’s pricing its products to try to dominate this
market.”
A new type of Chinese industry?
There is a measure of irony in the growth of the Chinese solar industry. In its new five-year economic plan,
unveiled in March, China’s government has singled out 35 sectors, including solar and other types of
renewable energy, as priorities for creating a cleaner, technology-based economy, one with a healthier
balance between domestic demand and exports.
“We have to develop our green economy,” Cheng Siwei, former vice chairman of the standing committee
of the National People’s Congress, said at a Brookings Institution event Nov. 1.
Yet Barry Naughton, an economics professor at the University of California at San Diego, noted that China
is, in fact, re-creating “the old pattern of economic development.” Like many Chinese industries from the
past, the solar industry is supported by subsidies and loans from state-owned banks; it imports equipment,
thrives on low-margin, high-volume exports and often violates basic environmental standards in disposing
of waste. In September, riot police clashed with about 500 people who damaged vehicles and stormed a
Jinko Solar plant, which they said had dumped toxic waste in a local river.
The U.S. economy, by contrast, focuses on jobs that add more value — research, design and equipment
manufacture — and it captures profits at the retail level.
“I’m worried that what we see in China is . . . a pattern where existing technologies — sometimes mature,
sometimes not — are ramped up rapidly, expanded quickly, because they have access to government
support,” Naughton said. “That kind of support has a danger because it distorts the overall global
environment for these newly emerging technologies — technologies that are important for all of us.”
Joanna Lewis, a professor of science, technology and international affairs at Georgetown University, adds
that “the part of the process that China excels in is energy-intensive and not environmentally friendly.” She
adds that solar is “clean, green technology, but only after you manufacture it” — and not if it’s all exported.
While China talks about boosting its domestic market, its solar panel manufacturing capacity is 32 times
greater than domestic consumption. Solar last year accounted for just 0.006 percent of China’s electrical
power, Naughton said.
“Solar panel manufacturers in China are not so much in a technology business as a commodity one,”
Massachusetts Institute of Technology professor Edward Steinfeld and MIT researcher Jason Lee wrote in
an unpublished paper. “They get into the game by buying expensive assembly line equipment (mostly from
American suppliers). They produce a product identical to that of their many other Chinese competitors, and
then they try to hang on by producing at massive scale and tiny profit margins.”
Solar subsidies
Yet this is a business that few political leaders in America are ready to concede.
“I’m not going to surrender to other countries technological leads that could end up determining whether or
not we’re building a strong middle class in this country,” President Obama said Oct. 6 in discussing the
bankruptcy of Solyndra, a solar panel maker that received $535 million of federal loan guarantees.
He added, “There are going to be times where it doesn’t work out, but I’m not going to cave to the
competition when they are heavily subsidizing all these industries.”
Seven U.S. solar cell and module makers have banded together to form the Coalition for American Solar
Manufacturing, a new group, to file the dumping case. Many of them thought the existing trade group, the
Solar Energy Industries Association, would not back the petition because its chairman is an executive at
Suntech, the Wuxi, China-based company that also has a small facility in Goodyear, Ariz. On Dec. 12, the
German-based company SolarWorld quit the SEIA board, saying in a letter that it “no longer serves the
interest of our company.”
Over time, academic exchanges and trade have kept the Chinese and U.S. solar industries entwined. For
example, Fang Peng, the chief executive of JA Solar, earned his doctorate at the University of Minnesota,
then held technology and management posts at Applied Materials, working on semiconductors. Suntech’s
chief financial officer earlier worked at Disney, Bechtel and Price Waterhouse, and its supply chain head
got his MBA at Michigan State.
But the dumping plaintiffs say it isn’t just experience that has given Chinese firms a leg up. “We’re really
quite efficient,” said Ben Santarris, a spokesman for the U.S. unit of SolarWorld. “However, it is very
difficult for us to compete with the Communist Party of China.”
SolarWorld’s petition cites likely sources of government aid to Chinese solar panel makers, such as grants
given to exporters by China’s Export Product Research and Development Fund and cut-rate insurance from
a state-owned firm. It alleges that firms such as Suntech and LDK Solar might get help under programs
designed to foster “famous brand names,” from the central government and the province of Jiangxi, where
both firms are based.
Many subsidies are given out at the local or provincial level. The dumping petition points to Shandong’s
$340 million energy fund for solar water heaters, Hunan’s call for a 150 percent tax deduction for solar
research and development, and Yunnan’s grants and low-interest loans.
Georgetown’s Lewis notes that a Hunan company called Sunzone bought industrial land from the Chinese
government at one-third the official rate, then listed the land on its books at full value.
A Suntech filing with the Securities and Exchange Commission in May says most of its subsidiaries qualify
as “high and new technology enterprises” and therefore pay a 15 percent corporate income tax rate instead
of 33 percent.
U.S. solar companies and lawmakers also point to the $34 billion in credit that the China Development
Bank has offered to the big five panel makers. But JA Solar, which in September 2010 announced that the
bank would provide $4.7 billion in financing, told Bloomberg News last month that it has not drawn down
any of that amount. Suntech has used less than 10 percent of its $7 billion facility, said Andrew Beebe, the
company’s chief commercial officer. Other firms have also balked at the bank’s offer for the time being.
The China Development Bank’s interest rates have been “market rates,” according to Beebe and SEC
filings by Chinese solar firms listed on the New York Stock Exchange. Beebe says Suntech paid as little as
4.5 percent over the past couple of years and more than 6 percent this year. That is about three times as
high as the rates Solyndra was paying for five-year loans from the Federal Financing Bank.
SEC filings reveal other advantages for Chinese firms. Suntech describes a guarantee it gave for a loan of
554 million euros provided by China Development Bank to a project developer called Solar Puglia, which
Suntech had acquired. When Solar Puglia’s power projects were not connected to the grid by Jan. 30, 2011,
China Development Bank was entitled to demand immediate payment; it did not.
Another key trade dispute: The price and availability of polysilicon. China has imposed a quota on exports
of polysilicon, the key ingredient of most solar panels. That has kept the price of silicon in China
artificially low. In 2008, the price of polysilicon spiked as high as $450 a kilogram (2.2 pounds).
Solyndra’s panels did not use silicon, an appealing feature at that time, and Energy Department officials
said they could not foresee a plunge in polysilicon prices.
But GCL Poly, a company with ties to the People’s Liberation Army and the Chinese government, was
already revving up production, providing half of the needs of Chinese exporters by late 2010, according to
a report by the research group Fathom China. Today the price of polysilicon has crashed to less than $30 a
kilogram. It’s off 30 percent in the past month alone, the lowest level since around 2003, according to
Bloomberg New Energy Finance group. GT’s Gutierrez says companies can make polysilicon today at less
than $25 a kilogram, after depreciation expenses.
Most of China’s policies until now have been export-oriented, and Chinese companies’ fortunes have risen
and fallen with the size of subsidies in Germany, Italy and Spain.
Beijing’s National Development and Reform Commission for years showed little interest in subsidizing
domestic solar use, and a “Golden Sun” project subsidized by the ministries of finance and construction
was plagued by corruption, poor planning and inferior products, Fathom China said. Ningxia province,
beset by dust and pollution, found that every one of its 160,000 panels needed to be wiped clean four times
a year. And the coal-dominated electricity grid is not suited to accommodate large amounts of fluctuating
solar power.
But in the new five-year plan, the Chinese government has set a goal of generating 20 gigawatts of
electricity with solar by 2020. That would represent just 1 percent of China’s expected power generation,
but it would be roughly equal to the world’s total installed capacity. That could mean subsidies similar to
Europe’s “feed-in tariffs,” which guarantee artificially high prices to solar energy producers. Such subsidies
could tilt Chinese solar panel production toward the Chinese domestic market, potentially a positive
development for U.S. manufacturers.
Will the best win?
China isn’t the only one handing out subsidies.
Indeed, Chinese authorities have said they would investigate U.S. subsidies to solar manufacturers. Those
include a 30 percent production tax credit, investment tax credits, research and development grants, and the
Energy Department’s recent loan guarantees. In addition, renewable energy standards in about 30 states are
requiring electric utilities to boost the share of renewables in their power-generation portfolios, essentially
forcing them to buy solar even if at higher prices, a subsidy hidden in utility rates paid by consumers.
“The support we have received in China is no different and perhaps significantly less than what we’ve seen
many companies in the United States and Europe, and Germany in particular, receive,” said Suntech’s
Beebe.
Meanwhile the U.S. solar industry is divided over the dumping case.
Some U.S. companies opposed to the dumping case note that SolarWorld received aid from Oregon to set
up a solar cell factory there and that it will receive assistance from the government of Qatar for a joint
venture producing polysilicon there. SolarWorld said that it has taken $11 million of Oregon tax credits,
but added that those credits are “available to companies of all nationalities” and offset “less than 2 percent”
of its more than $500 million investment in Oregon.
A SolarWorld spokesman said that the company does not "argue that subsidies are inherently improper,”
but rather “that it is illegal for one country’s subsidies to fund its producers in mounting a predatory export
drive that hobbles domestic producers of a foreign market — exactly what China has done.”
The Coalition for Affordable Solar Energy, by contrast, includes firms involved in installation, which
accounts for 52 percent of the solar industry jobs, the group says. For them, cheap panels mean more
demand, regardless of where the panels come from. (SolarWorld says that installers, not consumers, have
profited from falling panel prices.)
Then there are solar manufacturers that use thin-film technology, which is cheaper, though less efficient,
than photovoltaic panels using crystalline polysilicon. First Solar, an Arizona company with plants in
Germany, Malaysia and Ohio, is the industry leader and building a plant in Arizona. General Electric is
spending $600 million to open a thin-film plant in Colorado.
GE’s Victor Abate, vice president of renewables, said in an interview: “The price of solar had to come
down for it to become mainstream. . . . The question is, can you compete? And that depends on technology.
The best technology is going to win here.”
“It’s a race,” DeLine said of solar panel manufacturing, “and it’s not just the Chinese.”
NYT
Glut of Solar Panels Poses a New Threat
to China
Workers at Suntech, which is temporarily closing a quarter of its solar cell capacity.
By KEITH BRADSHER
Published: October 4, 2012
BEIJING — China in recent years established global dominance in renewable energy, its solar panel and
wind turbine factories forcing many foreign rivals out of business and its policy makers hailed by
environmentalists around the world as visionaries.
Workers inspect a solar panel on a manufacturing line of photovoltaic products in Huaibei, Anhui Province,
China.
But now China’s strategy is in disarray. Though worldwide demand for solar panels and wind turbines has
grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating
enormous oversupply and a ferocious price war.
The result is a looming financial disaster, not only for manufacturers but for state-owned banks that
financed factories with approximately $18 billion in low-rate loans and for municipal and provincial
governments that provided loan guarantees and sold manufacturers valuable land at deeply discounted
prices.
China’s biggest solar panel makers are suffering losses of up to $1 for every $3 of sales this year, as panel
prices have fallen by three-fourths since 2008. Even though the cost of solar power has fallen, it still
remains triple the price of coal-generated power in China, requiring substantial subsidies through a tax
imposed on industrial users of electricity to cover the higher cost of renewable energy.
The outcome has left even the architects of China’s renewable energy strategy feeling frustrated and eager
to see many businesses shut down, so the most efficient companies may be salvageable financially.
In the solar panel sector, “If one-third of them survive, that’s good, and two-thirds of them die, but we
don’t know how that happens,” said Li Junfeng, a longtime director general for energy and climate policy
at the National Development and Reform Commission, the country’s top economic planning agency.
Mr. Li said in an interview that he wanted banks to cut off loans to all but the strongest solar panel
companies and let the rest go bankrupt. But banks — which were encouraged by Beijing to make the loans
— are not eager to acknowledge that the loans are bad and take large write-offs, preferring to lend more
money to allow the repayment of previous loans. Many local and provincial governments also are
determined to keep their hometown favorites afloat to avoid job losses and to avoid making payments on
loan guarantees, he said.
Mr. Li’s worries appear to be broadly shared in Beijing. “For the leading companies in the sector, if they’re
not careful, the whole sector will disappear,” said Chen Huiqing, the deputy director for solar products at
the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.
The Chinese government also wants to see the country’s more than 20 wind turbine manufacturers, many of
which are losing money, consolidate to five or six. “Wind does not need so many manufacturers,” said Mr.
Li, who in addition to drafting renewable energy policies is the president of the Chinese Renewable Energy
Industries Association.
Chinese solar company executives blame their difficulties partly on the United States’s decisions last spring
to impose antidumping and anti-subsidy tariffs on solar panel imports, and on the European Union’s recent
decision to start its own antidumping investigation of imports from China.
“It is not a Chinese industry problem, it is a global solar industry problem,” said Rory Macpherson, a
spokesman for Suntech Power, one of the largest Chinese solar panel manufacturers. “It is primarily the
result of an imbalance between supply and demand, and the U.S. and E.U. trade investigations.”
Mr. Li said the solar industry’s problems were the result of overcapacity in China, and not the fault of trade
restrictions.
Yet he insisted that if the Chinese government could turn back the clock and revisit past renewable energy
decisions, it would not do anything differently.
The problem lies in the eagerness of Chinese businesses to rush into any new industry that looks attractive
and swamp it with investments, he said. Chinese companies and their bankers are then far more reluctant
than Western companies to admit defeat for investments that prove unprofitable.
Mr. Li added that banking regulators had not yet decided what to do about banks’ exposure to the solar
sector. The central government tried without success to learn from local and provincial government
agencies how much of the solar industry’s bank debt they have guaranteed, Mr. Li said.
http://www.nytimes.com/interactive/2012/10/05/world/asia/too-muchsun.html?ref=global
Chinese solar power companies are making some cutbacks. Suntech, based in Wuxi, is temporarily closing
a quarter of its solar cell capacity. It will transfer a majority of the 1,500 affected workers to other
operations and provide severance payments to the rest.
Jiangsu province, where Suntech has its headquarters and most of its factories, issued an unusual appeal to
state-owned banks several weeks ago to continue lending money to the company, a step that Mr. Li
criticized as inappropriate. Mr. Macpherson of Suntech wrote in an e-mail that the Jiangsu government had
not guaranteed any of the company’s debt, which totaled $2.26 billion at the end of the first quarter,
including some convertible bonds in addition to bank loans. Trina Solar, one of its biggest rivals, also has
said it will “streamline its operations” and shrink its work force, but did not provide details.
Trina shares have dropped 85 percent in the last three years and Suntech shares have fallen more than 98
percent in the last five years. Both trade on the New York Stock Exchange.
The modest cutbacks in production barely put a dent in China’s overcapacity problem. GTM Research, a
renewable energy consulting firm in Boston, estimates that Chinese companies have the ability to
manufacture 50 gigawatts of solar panels this year, while the Chinese domestic market is on track to absorb
only 4 to 5 gigawatts. Exports will take another 18 or 19 gigawatts.
The enormously expensive equipment in solar panel factories needs to be run around the clock, seven days
a week, to cover costs.
“You want to be up at 80 percent, so they’re half of what they need,” said Shayle Kann, the head of GTM
Research, which is a unit of Greentech Media.
Chinese companies have struggled even though a dozen solar companies in the United States and another
dozen in Europe have gone bankrupt or closed factories since the start of last year. The bankruptcies and
closures have done little to ease the global glut and price war because China by itself represents more than
two-thirds of the world’s capacity.
To reduce capacity, foreign rivals have clamored for China to subsidize the purchase of more solar panels
at home, instead of having Chinese companies rely so heavily on exports. But the government here is
worried about the cost of doing so, because the price of solar power remains far higher than for coalgenerated power.
The average cost of electricity from solar panels in China works out to 19 cents per kilowatt-hour, said Mr.
Li. That is three times the cost of coal-fired power. But it is a marked improvement from 63 cents per
kilowatt-hour for solar power four years ago.
China’s official goal is to install 10 gigawatts of solar panels a year by 2015, using 20-year contracts to
guarantee payment for electricity purchased from them. If costs stay where they are now, the subsidies
would be $50 billion over 20 years for every 10 gigawatts of solar power installed, based on figures
supplied by Mr. Li.
Even if solar power costs fall by a third, as the government hopes, he said, “it’s big money.”
China may soon stop flooding the world
with cheap solar panels
Posted by Brad Plumer on March 23, 2013 at 9:00 am
Over the past few years, China has utterly dominated the global solar industry. Firms like Suntech, Trina,
and Yingli have received hefty government subsidies to sell photovoltaic panels at ever-shrinking prices
and capture 80 percent of the global solar-manufacturing market.
In trouble. (AP)
But in the process of flooding the world with cheap solar panels, many of those manufacturers were taking
on big losses. And now there are signs that the Chinese government won’t prop up those ailing companies
indefinitely.
This week, the main Chinese subsidiary of Suntech, the world’s largest solar manufacturer, was forced into
bankruptcy court. The company had missed a $541 million payment to bondholders and owes roughly $1.4
billion to China’s state-owned banks. The manufacturer had been struggling in the face of an oversupplied
solar-panel market and new tariffs imposed by the United States. (There were also accusations of
mismanagement.)
So what happens now? Suntech, which employs some 10,000 workers, will face some sort of restructuring.
On the whole, the Chinese solar-manufacturing industry will likely have to shrink and consolidate so that
some companies can still survive. An endless frenzy of subsidized overproduction and cut-rate prices isn’t
sustainable. According to a recent report by GTM research, 54 Chinese solar firms may disappear by 2015.
In the near term, that means the recent rapid decline of solar prices could slow or even reverse. As Todd
Woody of Quartz reports, Chinese manufacturing has helped drive solar photovoltaic prices down 75
percent since 2007.
“The Chinese solar expansion set off a boom in Europe and the US as installers took advantage of cheap
solar panels to expand their business,” Woody writes. “The collapse of Suntech and other Chinese
manufacturers could leave installers like SolarCity on the hook for hundreds of millions in warranties.”
Not everyone is convinced that China’s solar consolidation will be a terrible thing, though. Here’s Kevin
Bullis of MIT Technology Review: “That could be a good sign for the solar industry and for innovation.
We need more companies to fail [in order] to reduce oversupply, stop prices from plummeting, and allow
companies to start buying more equipment and implementing new technologies that are needed long-term
for solar to compete with fossil fuels.”
In other words, the glut of cheap Chinese panels has helped bolster the rooftop solar market in recent years.
But if solar power is ever going to become a truly widespread technology, we may need to see newer, more
efficient technologies or even alternatives to conventional silicon panels. In some key ways, Bullis explains
at length here, China’s onslaught was standing in the way of that.
Further reading:
–Solar is getting cheaper. How far can it go?
–A prescient story from last year by my colleague Steve Mufson about how China’s growing share of the
solar market was coming at a steep price.
–Back in May, the United States imposed a 31 percent tariff on imports of silicon photovoltaic cells from
Suntech and other manufacturers in response to allegations of dumping.
–The best reporter on the Suntech bankruptcy is Todd Woody, who’s following the story as it progresses at
Quartz.
How far can solar go? A less-optimistic
take.
Posted by Brad Plumer at 03:55 PM ET, 11/12/2011
Earlier this week, I wrote about how solar power is steadily getting cheaper, but there are still plenty of
questions about just how cheap it can get — and whether it can ever get cheap enough to become a major
energy source in the future. The International Energy Agency, for one, projects that solar could provide
more than half of the world’s energy needs by 2060, but that assumes a huge drop in costs, to around 50
cents per watt installed. So is solar on that path? Here are a few reasons to be skeptical.
(JIANAN YU/REUTERS) First, over at Forbes, Michael Kanellos argues that “Moore’s Law” — the
tendency for computer chips to halve in price every 18 months or so — doesn’t really apply to solar.
“Moore’s Law is all about getting small,” he notes. “Transistors exist to ferry electrons from point A to
point B. Thus, smaller transistors mean better performance.” As engineers figure out how to place more and
more transistors on a chip, performance improves. But there’s no way to shrink solar panels in the same
fashion. So, Kanellos notes, we can’t reasonable expect solar prices to tumble at the same furious rate that
processor technology has done.
Tyler Cowen, meanwhile, links to a Bloomberg story that suggests that solar’s been getting cheaper lately
because there’s been a glut of polysilicon, the key semiconductor material in photovoltaic panels. A few
years ago, polysilicon producers expected a far bigger boom in solar power than actually materialized, and
produced way too much of the stuff. That’s made solar ridiculously cheap, but the good times may not last.
As Bloomberg reports, “About 90 percent of China’s polysilicon plants comprising half the country’s
production may suspend production because of the price slump.”
Jesse Jenkins is likewise skeptical that solar will automatically keep getting cheaper. “In recent years,” he
writes, “China’s emergence into the market has driven intense competition, and forced firms to invest in
innovation, scale, and other methods to drive down costs. But what China did to get lower costs—take
yesterday’s conventional crystaline silicon panel designs, take advantage of falling silicon prices, achieve
gigawatt-scale manufacturing supply chains and economies of scale, and tap free land, subsidized loans,
and an artificially depreciated currency—are not really repeatable into the future.”
So how can solar power keep getting cheaper? Will it take some big, dramatic lab breakthrough? Perhaps.
Though I was struck by a comment that energy consultant Alan Nogee left here. Nogee recounts how, in
the late 1970s, the Energy Department was frantically researching ways to develop big (as in, one- to fivemegawatt) wind turbine designs. Those lab efforts failed.
But then the wind industry started deploying smaller-sized turbines and, over time, it got steadily more
skilled at building the things, and the design improved. Nowadays, wind companies regularly build twomegawatt turbines, with still-bigger ones on the way. That’s hardly a case against R&D. But sometimes this
sort of “learning through doing” can produce big breakthroughs, as well.
Solar is getting cheaper, but how far can
it go?
Posted by Brad Plumer at 03:17 PM ET, 11/07/2011
The usual take on solar power is that it’s a niche energy source, too pricey and erratic to meet more than a
sliver of our electricity needs. Bill Gates has mocked solar as “cute.” But, as Paul Krugman reminds us
today, that’s changing far more quickly than people realize. “In fact,” Krugman writes, “progress in solar
panels has been so dramatic and sustained that, as a blog post at Scientific American put it, ‘there’s now
frequent talk of a Moore’s law in solar energy,’ with prices adjusted for inflation falling around 7 percent a
year.”
A couple of things are driving the drop in costs. Solar-panel technology is getting more efficient, true, but
that’s just part of the tale. China is also heavily subsidizing its domestic industry, driving a 40 percent
plunge in prices over the past year (and bulldozing a few U.S. companies into bankruptcy). But it’s not all
about over-production from China, either. Solar companies are figuring out how to set up systems cheaply:
installation and other non-module costs in the United States dropped 17 percent in 2010.
One big point to add to Krugman’s column is that solar is already being deployed on a large scale. Tom
Dinwoodie, chief technical officer at SunPower, notes that the industry has been growing at a 65 percent
annual rate in the past five years. In 2010, some 17 gigawatts of solar power were manufactured, shipped
and installed — the equivalent of 17 large nuclear power plants. So just how far can solar go?
One key question is whether solar can reach “grid parity” — the point at which it can compete with fossil
fuels without subsidies. As Shayle Kann explains at Greentech Media, this could happen in two ways. One,
solar would become attractive to utilities even after accounting for the fact that the sun doesn’t always
shine. At some point, for example, power companies may decide to rely on solar for hot, electricitygobbling afternoons instead of relying on dirty natural-gas peaking plants. Alternatively, solar could reach
the point at which huge numbers of retail consumers see big savings on their energy bills from installing
rooftop solar.
It’s hard to know when, exactly, grid parity will arrive. Kees van der Leun, of the energy consulting firm
Ecofys, predicts that solar could be competitive with fossil fuels by 2018 or so. On the other hand, as Tyler
Cowen notes, energy markets don’t appear to be betting on this development. If it does happen at some
point, though, a steep plunge in solar costs could be incredibly transformative. The International Energy
Agency projects that solar could provide more than half of the world’s energy needs by 2060 if costs fell to
$100 per megawatt hour — around 50 cents per watt installed. (At the moment, solar panels are gunning
for the $1-per-watt threshold.)
A lot depends on government policy. The progress being made by the U.S. solar industry will likely slow at
the end of this year if a federal grant program that makes a production tax credit more accessible is allowed
to expire. A price on carbon would also make a big difference in giving solar a leg up against fossil fuels,
which currently offload some of their total cost into the atmosphere. And the Energy Department is pushing
research into energy storage and other technologies — check out the Optical Cavity Furnace — to bring
prices down. So there are a lot of variables here. But at this point, it’s safe to say that solar has moved
squarely out of “cute” territory.
NYT
U.S. and Europe Prepare to Settle Chinese Solar Panel Cases
Solar panels at Yingli Green Energy Holdings in Baoding, China. Massive shipments from China have
driven solar panel prices down by three-quarters in the last four years.
By KEITH BRADSHER
Published: May 20, 2013
HONG KONG — The Obama administration and the European Union have each decided to negotiate
settlements with China in the world’s largest antidumping and antisubsidy trade cases involving China’s
roughly $30 billion a year in solar panel shipments to the West, officials and trade advisers in Beijing,
Brussels and Washington said.
The plan that is starting to take shape would essentially carve up the global solar panel market into a series
of regional markets. It would sharply raise the price of solar panels exported from China, the world’s
dominant producer, by requiring Chinese companies to charge more while limiting the total number of
solar panels they could ship.
In exchange, Chinese companies would no longer be charged steep taxes on their exports of solar panels.
The United States is already collecting tariffs totaling about 30 percent while the European Union is
expected to impose similar tariffs of about 50 percent on June 5, and may backdate them to March 5.
Parallel decisions by the Obama administration and the European Union to separately negotiate high prices
for imported solar panels may prove unpopular among environmentalists. Some environmental groups are
already upset that the tariffs have made solar energy less affordable, making it less competitive with more
polluting fossil fuels.
Huge shipments from China have driven solar panel prices down by three-quarters in the last four years.
American and European producers contend that much of that decline represents the effect of Chinese
government subsidies and Chinese dumping of solar panels below the cost of producing them, which means
that a negotiated settlement could need to push prices up significantly.
The goal of the current tariffs, and of the price and quantity regulations that could replace them, is to
protect American and European manufacturers from what they and the Obama administration describe as
unfair competition. Western manufacturers and the administration say that Chinese solar panels are heavily
subsidized by the Chinese government and then dumped in foreign markets at prices far below the cost of
production.
Two dozen American and European solar panel manufacturers have already cut back production or gone
bankrupt in the last three years, moves widely attributed to Chinese imports.
Francisco Sanchez, the under secretary of commerce for international trade, has just flown to Beijing for a
visit to discuss civilian nuclear power trade issues, people with a detailed knowledge of his visit said. Mr.
Sanchez has a long agenda of bilateral trade issues to discuss that includes mentioning an American interest
in negotiations, a person with detailed knowledge of his visit said.
The Commerce Department deferred on Monday to the United States trade representative’s office about
what Mr. Sanchez would say in Beijing about solar panels.
The Obama administration is in the earliest stages of sounding out Congress about the shift toward
replacing tariffs with a negotiated settlement. Senator Ron Wyden, the Oregon Democrat whose state is a
center of solar panel production, said that he supported a negotiated deal.
“We are really at a fork in the road with respect to producing renewable energy technology in the United
States,” he said. “This is the moment for the administration to obtain a global agreement that levels the
playing field for American producers and provides the certainty needed for America’s renewable energy,
and solar sector in particular, to survive.”
Chinese producers have partly bypassed the American tariffs by performing one stage in the solar panel
manufacturing process outside mainland China: turning solar wafers into solar cells in nearby Taiwan.
A negotiated deal would close the loophole in the American tariffs; the European trade case does not have
the same loophole.
China has retaliated for American and European tariffs on solar panels by moving to impose steep tariffs on
imports of the main raw material for solar panels, polysilicon. A negotiated settlement would also involve
China’s removal of these retaliatory tariffs.
Under American and European laws, antidumping and antisubsidy tariffs cannot be replaced with a
negotiated settlement unless the domestic industry agrees. European and American producers have been
wary of accepting any negotiated deal that does not set a large increase in prices.
“It has to be reasonably high to really exclude the impact of dumping,” said a European industry official
who insisted on anonymity.
Negotiations with China are still in a very early stage, so it may take several months before a final deal, if
any, is struck. And it is possible that no deal will emerge at all, in which case steep American tariffs will
remain in place and European taxes will also be imposed.
Carol J. Guthrie, the spokeswoman for the White House’s Office of the United States Trade Representative,
declined to comment on whether the administration was negotiating with China.
“Our goal is to support a healthy global solar industry in conditions that foster the adoption of renewable
energy and continued innovation and a level playing field for all,” she said. “Toward those ends, we will
continue to work with industry and our trading partners to explore ways to resolve concerns.”
China’s Ministry of Commerce had no comment on Monday in response to questions submitted by phone
and by fax about the American initiative. But Li Junfeng, a senior energy policy maker at the National
Development and Reform Commission, the country’s top economic planning agency, said that China would
welcome negotiations.
“Negotiations are better than a fight — a fight hurts both sides,” said Mr. Li, who is also the president of
the government-controlled Chinese Renewable Energy Industries Association. “You should have some
quota or market share, that would be fair.”
But a European Union official cautioned that reaching a negotiated settlement would be difficult. European
negotiators have already met three times with Chinese officials at the request of the Chinese side, but at
none of these meetings has China put forward any plan to limit export volumes or raise prices, said the
official, who also insisted on anonymity.
The solar panel issue has emerged as an unexpected challenge for when the world’s trade ministers gather
from Dec. 3-6 in Bali to negotiate a global deal to broaden the World Trade Organization. If no negotiated
settlement is reached before then, inflexible European Union regulations require a final decision by Dec. 5,
in the middle of the Bali talks, on whether to turn preliminary antidumping duties on Chinese solar panels
into tariffs that would last for five years — a move that could antagonize China, a major player in the
global trade talks.
WSJ
July 5, 2013
China, EU Remain at Odds on Solar-Panel Tariffs
By


MATTHEW DALTON
CONNECT
BRUSSELS—The Chinese government is adopting a tough line with Europe in talks to resolve a
multibillion-dollar trade dispute over solar-panel equipment, leaving the two sides with significant
differences after weeks of negotiations, people familiar with the discussions said.
The talks aim to prevent the dispute from mushrooming into a full-blown trade war involving French wine,
German luxury cars and other goods that form the backbone of one of the world's most important trade
relationships. Negotiators from the European Commission, the European Union's executive arm, have been
in Beijing for more than two weeks trying to reach a settlement that would prevent sharp increases in tariffs
on Chinese solar-panel equipment on Aug. 6, possibly sparking a series of retaliatory measures from
Beijing.
With the tariffs, the commission is seeking to offset alleged Chinese "dumping" of solar-panel gear on the
European market at unfairly low prices. Plunging European solar-panel prices have led dozens of European
producers to close their plants in the last two years, costing the region thousands of jobs.
Positions appear to have narrowed somewhat, but people following the talks say significant differences
remain. The two sides are negotiating a settlement that would impose a minimum price on panels, solar
cells and silicon wafers exported from China in exchange for the commission backing off a plan to impose
average tariffs of around 47%. Last month, the commission imposed the tariffs at the temporary lower rate
of 11.8% to allow some time for negotiations.
The commission wants the minimum price to be above 55 European cents (71 U.S. cents) per watt of solarpanel energy, the current average price of Chinese solar panels sold in Europe, an EU official said.
But that price is already well below the €1.12 per watt the commission suggested just last month as an
approximate price that would offset the economic damage inflicted on European producers by dumped
Chinese exports.
Meanwhile, the Chinese government is insisting on a price of no more than 50 European cents per watt, a
person familiar with the negotiations said.
"The Chinese believe they are in a fairly good position to strong-arm the commission," said Fredrik Erixon,
director of the European Centre for International Political Economy, a Brussels-based think tank.
Chinese officials in Brussels declined to comment. Neither side has spoken publicly about progress in the
talks.
The commission's negotiating position in part reflects the fact that the price of solar panels has fallen
sharply since the year ending in July 2012, which was the period the commission examined during its
investigation. That's because government subsidies in Europe for solar panels have been cut amid the
region's economic crisis, hurting demand. European solar-panel producers and the commission also believe
that continued dumping by Chinese exporters has further driven down the price.
"The prices in the investigation period are medieval history for the solar industry," said Lourdes Catrain, an
attorney at Hogan Lovells in Brussels representing several companies opposed to the tariffs.
But people following the case say the commission's position may also be the result of a weak negotiating
mandate given to the commission by EU member states, a majority of which opposed temporary duties
during a vote in May. The commission pushed ahead with the tariff plan without their support, but it will
need backing from a majority of EU nations to impose multi-year duties in December.
The Chinese government has been lobbying EU nations to oppose the commission's tariff plan. It has also
taken trade measures that European analysts say are intended to retaliate against the EU for the solar-panel
tariffs. China said it would consider placing tariffs on imports of European wine, while the government is
also considering a complaint it received to place tariffs on luxury cars made in Europe.