China’s solar energy capabilities are unrivaled by any other nation, but much of their success has come at the expense of U.S. solar manufacturers, and the Trump Administration may be readying to step into the fray.

China Revolves Around the Sun

In the 1990s, China was nursing a nascent rural-oriented solar program that showed little potential to be scaled up in any meaningful way. Fast forward 20-some years later and China has entrenched itself as the preeminent global leader in the solar energy market.

In 2016 alone, China’s solar capacity more than doubled to 78 gigawatts, dwarfing the capacity of every other country in the world. China was also able to lay claim to five of the world’s six largest solar-module manufacturing firms in 2016.

China further flexed their solar energy muscle just this summer with the unveiling of the world’s largest floating solar farm, a 40 MW example of China’s increasingly sophisticated solar energy capabilities. The farm’s 160,000 solar panels float atop a lake that was formed after the collapse of a coal mine – an appropriate piece of symbolism for a country redoubling its efforts to turn the page on coal.

 
China’s Solar Sugar Rush

China’s position atop the world’s solar market makes for good headlines, but the devil is in the details.

The glut of Chinese product on the market in recent years has been fueled in part by attractive subsidies being doled out by the state government. These subsidies were the result of growing political pressure to wean the country off of coal power after chronic air pollution became a public health crisis in some parts of the country.

(Photo Source: BBC)

Attractive solar subsidies, such as feed-in-tariffs, allowed China to quickly get drunk off solar, but also led to the same sort of supply and demand imbalance that the country has become notorious for in other sectors of its economy. The result? A sugar rush that could not be sustained forever.

Facing billions ($USD) in outstanding financial commitments to solar developers and an overabundance of new solar farms that weren’t even being connected to the grid in some cases, the state government intervened. Last year, China announced their plans to cut tariff rates by July 1, 2016 in an effort to bring some normalcy back to the market. The move ended up having the opposite effect as solar installers rushed to take advantage of the subsidies before the July 1 cut date, compounding the country’s solar supply/demand problem.

U.S. Solar Manufacturers Feel the Pinch

To compensate for government subsidy cuts, Chinese solar panel manufacturers have slashed prices by more than a quarter from their 2016 highs, and when you control so much of the global market, such a price cut has a profound ripple effect.

The move caused global prices for solar panels to plummet, which is good news for U.S. consumers, but spelled doom for many U.S. solar manufacturers unable to compete in such an environment. A proverbial graveyard of bankrupt or downsizing U.S.-based solar manufacturers has popped up in just the last several months alone.

(Photo Source: PV Magazine)

Announced layoffs, since last year of American solar workers from companies like First Solar, Mission Solar, SolarWorld, Suniva, SunPower, and Sungevity total well into the thousands.

Suniva Trade Case and the Trump Wildcard

President Donald Trump isn’t a man with well-established policy positions, but he has made a few things abundantly clear in his brief tenure as a politician; 1) China is benefiting from unfair trade practices that come at the expense of U.S. manufacturers, and 2) he has no interest in making renewable energy a priority of his administration.

When it comes to domestic solar energy policy, these positions are seemingly in conflict and the pending Section 201 trade petition filed by Suniva with the U.S. International Trade Commission (ITC) sets up a collision course for the U.S. and China that could add even more volatility to a global solar market in need of some stability.

Suniva filed their petition with the ITC on the grounds that China has so flooded the market with solar products being exported to the United States that domestic companies like Suniva cannot fairly compete. The ITC expects to render a decision in September, with a formal report submitted to Trump in November.

And that’s where things get interesting.

(Photo Source: CNN Money)

If the ITC finds that an American industry has been seriously injured in a Section 201 case, it will be up to the President of the United States to administer appropriate penalties. Given Trump’s aggressive rhetoric denouncing Chinese trade practices, the hope from Suniva is that he will levy harsh penalties and seek to make an example out of China.

The tea leaves indicate that the Trump Administration may be readying to do just that.

Just last month, the United States notified the World Trade Organization (WTO) that it is considering slapping emergency tariffs or quotas on imported solar cells from China, as part of a separate safeguard investigation into crystalline silicon PV cells that was filed on Suniva’s behalf. The Obama Administration took similar action in 2012 when it levied tariffs ranging from 2.9% to 4.8% on Chinese silicon solar cell imports, which comparatively speaking, is peanuts compared to the possible 20% tariff being considered by the Trump Administration.

More Ripple Effects on the Horizon?

Interestingly enough, many solar energy stakeholders, like the Solar Energy Industries Association (SEIA), have forcefully come out against Suniva’s ITC petition, fearing that a decision in Suniva’s favor would trigger a global solar trade war with few winners.

(Photo Source: Business Around the Clock)

SEIA opposes the petition on the grounds that a ‘win’ for Suniva would be counterproductive and disrupt the global supply chain in a manner that would only further stack the deck against U.S. solar manufacturers.

In a recent interview with PV Magazine SEIA CEO, Abigail Hopper, laid out the rationale for the trade group’s opposition, stating in part:

“We knew early on that this filing could result in the loss of tens of thousands of American jobs as Suniva’s requested trade remedy would significantly raise the price of PV panels in the United States. This would jeopardize demand for both rooftop and large-scale solar projects and cause great uncertainty in project finance. I’m not being an alarmist when I say this could be devastating to the U.S. solar industry.”

The pending Suniva case notwithstanding, China is not letting off the gas anytime soon when it comes to their long-term commitment to solar energy. Earlier this year the Chinese government made a vow to invest $361 billion into renewables by the end of 2020.

China’s dominance in the global solar market, coupled with their commitment to invest heavily in renewables, and the advantageous position they now find themselves in after the U.S. dropped out of the Paris climate accord, are enough to make any solar loving red-blooded American queasy.

I don’t pretend to know all the answers about how we can make U.S. solar great again, but I hope the Trump Administration knows what they’re doing. The U.S. solar industry can ill-afford to cede any more ground to China.

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