One to Watch: Uncertainties in Suniva's Trade Case and Hidden Takeaways for the Solar Industry
Yao Zhao
/SOURCE : Yicai
One to Watch: Uncertainties in Suniva's Trade Case and Hidden Takeaways for the Solar Industry

(Yicai Global) Aug. 1 -- Low-cost solar panels from China used to be the single victim of trade tariffs in America, but not anymore. In April this year, Suniva filed a petition to the US International Trade Commission asking to impose a minimum price of USD0.78 per watt on crystalline silicon photovoltaic modules and a tariff on solar cells of USD0.40 per watt regardless of manufacturing origin.

Solar modules are a number of individual solar cells interconnected in a sealed, weatherproof package in order to increase its utility.

Greentech Media posted a dire look in their debate-provoking report that the tariff, if approved, would wipe out two-thirds of solar power systems forecast to be installed over the next five years. This article aims to decipher three questions: 1. Why is it an important case to watch? 2. What are the uncertainties ahead? 3. What should everyone take away from this seemingly complicated case?

Why Is It a Big Case to Watch?

The first reason is that the trade complaint targets not just a single manufacturing country, but all imports.

In contrast to an anti-dumping petition, which usually targets one or a small group of countries, such as the one in 2011 targeting Chinese solar panels, the petition filed by Suniva is a Section 201 petition which is an industry-wide remedy. Section 201 trade petitions are rarely invoked. This is the first since 2002, when the US offered Section 201 relief for the American steel industry.

Secondly, if the tariff sought by Suniva is imposed, it would double the cost of solar modules in the US.

The current solar module price is around USD0.35 to USD0.4 per watt, considerably lower than the minimum import price requested of USD0.78. Doubling the price of solar modules could mark a big hit on the US solar industry, given that 87 percent of its installed solar capacity comes from foreign imports (source: Solar Energy Industries Association).

The third issue is whether or not the case actually moves forward.

Section 201s are rarely invoked because of their stringent requirements. The USITC has to rule that "domestic industries won't be seriously injured or threatened with serious injury by increased imports." It wasn't guaranteed that the ITC would take up the case, but in late May they had decided that Suniva's petition, later joined by Oregon-based solar maker SolarWorld, was enough to represent domestic solar manufacturing. The commission has now started the investigation.

What Are the Uncertainties Ahead?

Let's first review what's to come. The ITC will base their investigation on whether or not they find "serious injury or threat of injury" by Sept. 22. If they do, they will recommend remedies by Nov. 13. The remedies may or may not be the same as asked by Suniva. The recommendation will go straight to US President Donald Trump's desk and he can choose to accept, modify or dismiss the commission's recommended relief measures. So, what uncertainties are we left with?

First, we don't know if the tariff sought by Suniva will actually be accepted. There also seems to be a lack of clarity on what they are actually asking. Greentech Media's report modeled the impact of the worst case at a USD1.18-a-watt minimum price. However, Suniva has countered this price saying that the USD0.78-a-watt price includes the tariff. Essentially, we don't know what price the ITC will set the remedy at, if they rule on "serious injury" at all.

We also face an unpredictable Trump administration. On one hand, it would make a good story for his administration to fulfill the campaign mantra about saving American jobs, though it would actually be disastrous to the US job market. Last year there were about 260,000 people employed in the US solar industry, with only about 38,000 of those in manufacturing (source: Solar Foundation). Most people are employed in installation.

On the other hand, President Trump doesn't care about renewable energy or climate change. This case could be one of the earliest tests of the Trump administration's trade policy and his real stance on renewable energy. An opportunist like him is impossible to predict. There are so many issues on which he has reversed his attitudes.

What Are the Bottom Lines?

This Suniva case bears complication, but it also seems to me to be a speculative move, particularly after SQN Capital Management LLC, Suniva's largest creditor, told the Chinese Chamber of Commerce that they could make the trade complaint disappear if the Chinese bought out their bad assets.

Despite all the noise, there are a few bottom lines in this case.

First, the global solar industry is experiencing a trough in its business cycle: oversupply is causing low prices and many are suffering, exemplified by the bankruptcy of Suniva and others. This case could potentially lead to a further industry-wide crisis.

This leads to a more important point for this case: simply blaming lower-cost imports won't help the US domestic solar makers survive the cycle. Many claim that the cheap manufacturers are winning because of loans and other trade-distorting subsidies that have allowed manufacturers to scale up while everyone else is cutting back, as this article in Christian Science Monitor mentioned. Government subsidies are usually inefficient and a waste of resources. The more important side of the story is that Chinese factories are efficient in their production process, which gives them the ability to make more investments and expand manufacturing even when the business cycle is at a low.

The final takeaway is that technology in factories is equally, if not more, important than technology in laboratories. By the technologies in factory, I mean operational details accumulated over a long period of production. As the Massachusetts Institute of Technology's Dr. Nahm argued in a paper in 2014, this "intentional, cumulative refinement of the manufacturing process, coupled with small changes in the product itself" is the primary reason of sustained decline in product prices in the solar industry.

It will be a quiet summer until Sept. 22, but we in the clean energy industry should pay close attention to the development of this case.

Yao Zhao is Renewable Energy Specialist at the World Bank.

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Keywords: Solar , Suniva , Trade