Home > Uncategorized > US Solar Tariffs Against China, Hypocritical and Fuzzy Math

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.

 

 

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  1. Zack
    June 8th, 2012 at 17:34 | #1

    nice article, BlackPhoenix,
    and thanks to SolarWorld’s own greed and incompetance, they’re about to shut themselves out of the massive Chinese market!

  2. June 8th, 2012 at 19:28 | #2

    For a long time, the meme was “cheap labor”. Then US Secretary of Energy, Steve Chu, visited China’s big solar producers. Being a scientist, he couldn’t help blurt out the truth:

    The formidable competitiveness of the Chinese solar companies comes from the higher-quality, lower-cost products they have generated. The Chinese industry leaders Suntech, Yingli and Trina produced the lowest-cost solar cells in the world, while maintaining the highest profit margins (19-22% in 2009-2011) in the industry, according to the consulting firm Greentech Media Research.

    What is the source of Chinese competitiveness in solar? US solar companies claim that the Chinese companies enjoy government subsidies, including cheap loans, research and development assistance, and export subsidies. Of course, every industrial nation provides these types of subsidies to its companies. But subsidies do not sell solar energy products. In 2010, when the US secretary of energy, Steven Chu, visited Suntech, he saw “a high-tech, automated factory”. So, China’s competitive advantage is not cheap labor. In 2012, MIT’sTechnology Review noted the world-record efficiencies in Chinese-made solar cells, achieved over the years by Chinese companies through developing better ways of manufacturing, or what is called incremental innovation.”
    http://theairnet.org/perspectives/?p=279

  3. Charles Liu
    June 9th, 2012 at 14:11 | #3

    Seems this is not the first time US has lost a case in WTO due to the illegal practice of “zeroing” higher priced exports which artificially decrease average export price:

    http://thehill.com/blogs/on-the-money/1005-trade/208811-obama-bows-to-wto-zeroing-rulings-trade-move-opposed-by-key-dems

    “WTO has repeatedly ruled that the United States improperly imposes antidumping duties on imports. Trade allies of the U.S. have for years challenged the zeroing practice at the WTO.”

  4. Black Pheonix
  5. no-name
    June 10th, 2012 at 05:42 | #5

    The western nations are totally dishonest. Even in my place the leaders are just the same as those in the west. Read http://www.scribd.com/doc/96587641 for descriptions on how people are dishonest.

  6. daxue
    September 21st, 2012 at 03:35 | #6

    A tariff will only distort people’s behavior. imports from other countries make a country realize where its comparative advantage lies. I went to http://www.daxueconsulting.com, and read several articles giving information about china’s advantages and disadvantages.

  7. daxue
    September 26th, 2012 at 22:47 | #7

    Actually I don’t think tariffs will work. The world is inevitably internationalizing, and opening market to products from different countries will help a country learn more about its own relative advantages and allocate resource to its advantage industries. In this way resource is better used and we all improve efficiency.

  8. Black Pheonix
    July 29th, 2013 at 11:02 | #8

    EU settles with China, stabs US in the back.

    http://www.bostonglobe.com/business/2013/07/28/china-europe-solar-panel-agreement-shows-complexities-trade-talks/RRn9EedaHvDdl9HHZZoAHP/story.html

    European makers of solar panels were furious about receiving so little after a year of litigation, and vowed to sue. The European settlement also undermined Obama administration officials, who had taken a tough stance toward China on solar panel trade and had tried for months to persuade European leaders to side with them.

    After nearly a full day of silence from Washington, the administration issued a thinly veiled criticism late Saturday of Europe’s decision to cut its own deal.

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