Tariffs on Chinese Solar Products

As announced in the Solar Press, it appears that a tariff is likely to be put onto Chinese imported modules, cells and wafers in an effort to "balance" world trade. This tariff could add an additional 20-60% to module prices, and many within the industry will be wondering whether or not to support the move.

Background

Reports suggest that there has been a subsidising of Chinese manufacturers to ensure their survival amid significant losses. This has led to several key names in the EU and US Solar industries being left in a position from which they cannot compete. A number of these have had to close with significant losses, given that they have not received similar subsidies.

Some manufacturers, for their own survival, have spearheaded campaigns to have tariffs imposed upon certain Chinese goods. This has had a significant impact in the US and is likely to have a significant impact in the EU.

Should this be supported?

At first glance, a fair, balanced trade environment in which all parties can flourish on their own merits would appear to be the best way forward. EU manufacturers could prosper, if they get their strategy correct. All manufacturers have a chance of making a profit, employees are kept in EU manufacturing.

Looking deeper into the situation, however, one can take a different view. If reports of subsidies are correct we are then in the perverse situation that China has been paying for EU renewable energy installations. This means that FIT rates in the EU could be lowered, reducing any “burden” that renewables may place on EU countries. This is, in effect, Chinese subsidising of the EU solar PV market.

Removing the subsidising of EU Solar will have a number of knock-on effects. Firstly, price reduction will reverse. This will put pressure on policy makers to reconsider the FIT rate mechanisms. Increases in FIT rates are not without precedent (France has increased rates previously). Secondly, projects developed in a world of “reducing prices” will need to be renegotiated, amended or postponed. This will knock developer and investor confidence in the market (which was just gaining strength in the UK).

Whether or not the measure is supported will clearly, therefore, depend upon which sub-sector of the industry you are in.

What about the way the action is developing?

By announcing action that is not yet confirmed, and could be subsequently be applied retrospectively (legally, apparently), it would seem that the uncertainty has already taken hold. Not only have large stock inventories now been sold at record rates, but future incoming supplies have been reduced.

Developers here in the UK, trying to complete projects prior to the ROC reduction date and receiving modules after 8th March will face an anxious wait to see if their project costs suddenly increase. For installers on fixed price contracts, perhaps negotiated last year, the effects may be more severe - leading to significant losses.

In a sector where the main volume of business is based upon significant investment that can take many months to put in place, this level of uncertainty over a three month period may ultimately do significant harm to the wider EU solar industry.

In conclusion

Ultimately, the tariffs (and even the threat of tariffs) are set to be implemented in a similar way to the FIT reductions in the UK at the end of 2011. The effects then were significant and the effects this time look set to be just as significant - depending upon where you sit in the PV sector.

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