US Solar Tariffs Against China, Hypocritical and Fuzzy Math

U.S. Government slapped hefty tariffs against Chinese solar companies, accusing them of receiving government subsidies and dumping solar panels in US market.

At the heart of this, the accusation of “dumping” actually came from a German based company, SolarWorld.

http://solartribune.com/2012-05-14-case-solarworlds-allegations-against-chinese-pv-firms-are-hypocritical/#.T9KOOZPDDPw

But recently, the Coalition for Affordable Solar Energy (CASE), a US based industry alliance, criticized SolarWorld’s (and US government’s) self-serving political and hypocritical move in the tariff against Chinese companies.

Specifically, CASE argued that (1) SolarWorld also receives subsidies and admits to cutting prices below cost to “stay competitive”, and (2) US government’s analysis of Chinese “dumping” is largely based upon fuzzy math of arbitrary made up numbers conjured up by the US Commerce Department.

Point (1) I do not go much further, CASE already made plenty of analysis on that.

Point (2) I should elaborate:

US Commerce Department “conjured” up a set of numbers for the “cost” of Chinese solar companies, in order to prove that Chinese companies were “dumping” in US market.  That is, they have no factual basis for such “cost” numbers.

But how did they actually arise to such numbers?

Based upon what they think it SHOULD cost the Chinese companies, based upon what the costs of US solar companies are “per megawatt” of solar panel.

Recently, a US Solar company executive told me that he (and others) believe that Chinese companies were selling their solar panels about 20% below cost.

Why?  On the average, US solar panels were about 20% above the Chinese solar panels.

Like I said, Fuzzy math.

If you need further proof, let’s just say that virtually all of the US Solar companies are trying to develop new generation Solar technologies for manufacturing, and whereas Chinese companies are still using older solar technologies.  In essence, the Fuzzy math is based upon the logic that somehow the technology doesn’t matter, and older technologies should cost the same as the newer technologies.

In fact, the opposite is actually true, and prove that the Chinese companies bet on the right techs for now.

Another analogy:  When computers first became available for personal use, people did not buy the best Supercomputers made by IBM, but rather the cheaper personal computers with only a small fraction of computing power.

Why?  When a segment of a market is relatively new, consumers do not want the best in technology, they sometimes go after the “introduction technology” level to buy.  And ONLY when the market become saturated by the basic “introduction technology”, that’s when people start to buy up the better technologies.  For example, if you never had a personal computer, you will likely just want to buy a basic low end computer, because you don’t yet know what you might do with it.  But if you already had a computer, and you are looking to “upgrade”, then you might go for the more expensive higher end computers.

Naturally, higher end technologies are more expensive.

Even more, solar technologies don’t have compatibility/capability needs seen in PC market.  I.e., a low tech solar panel that produces 1 megawatt power is not significantly worse than a higher tech solar panel that produces 1 megawatt.

And if you are a utility company looking to build a 1 gigawatt power plant, you need the QUANTITY, not necessarily the Quality.  (But if you already have an 1 gigawatt solar power plant, then you might shop around for better higher tech for “upgrade”).

And this is why a number of US solar companies are failing.  Their technologies are very advanced, but you can’t sell a Supercomputer to a grandmother looking for a $300 computer to just browse the internet!

Such is the case in Solar tech, where there are not a flood of older technology solar panels.  And by comparison, the older technologies used by the Chinese companies have better quality and reliability record, even if slightly more inefficient.  The newer technologies used by the US companies, on the other hand, are not well proven, not consistent in their hypothetically higher efficiency.  (and the difference in efficiencies are not huge, making it not very attractive to buy the new technologies).

Another point of this market analysis, is the fundamental flaw in the analysis.  I.e. there is NO “fair” market price for solar panels, because the major buyers of all solar panels are the Government paid Utility companies.  So, in essence, the US government pays for the solar panels in US, and thus the US government (and the US taxpayers) is the “market” that determines the price (and what’s fair).

By logic, by slapping a tariff on Chinese solar companies, the US government (as the major market buyer and price determiner) IS conducting unfair trade, by favoring some companies at the expense of other companies.  One can call the tariff itself as a form of arbitrary government subsidy.

*Needless to say, CASE was wise enough to realize that SolarWorld (and other Western nation based companies) do not really have the best interest of the consumer at heart.  SolarWorld wants the US market for itself, pure and simple.

But the natural consequence is, China and India ( and others) are already planning on slapping tariffs on SolarWorld and cohorts.