IN DEPTH: Solar on the brink

It is perhaps the most important decision in the history of the solar industry. Some say it will bring salvation. Others fear it will decimate the sector.

The European Commission (EC) has until 5 June to announce its decision. Yet if the reports are true, it has already made up its mind — it will impose anti-dumping duties on imported Chinese PV cells, wafers and modules.

German solar manufacturers, which have suffered the most from the influx of cheap Chinese panels in recent years, have lobbied hard for the tariff, arguing that state-backed Chinese firms are selling products at below cost and consequently putting them out of business.

Bonn-based SolarWorld — which leads the EU ProSun lobby group and also led a similar successful campaign in the US — recently posted a €476.9m ($624.1m) loss for 2012. Chief executive Frank Asbeck puts the blame squarely on China, telling investors: “[Global] overcapacities, dumping and illegal subsidies of the Chinese solar industry are, without doubt, responsible for the situation.”

But downstream companies — such as installers and developers — have been thriving thanks to the cheaper Chinese products. New installations in Germany have topped 7GW for the past three years, to a cumulative installed capacity of 32GW. Hiking the price of Chinese panels by about 45% — a scenario expected by analyst IHS — could devastate the growing downstream sector.

Upstream players disagree. “If the EU takes action against dumping, the strategically significant PV industry can be maintained and further expanded in Europe,” says EU ProSun. “Furthermore, a Chinese monopoly with all the ensuing negative consequences for customers, installers and suppliers will be prevented.”

Milan Nitzschke, head of EU ProSun and vice-president at SolarWorld, tells Recharge that the tariffs would create a “sustainable situation” in Europe — a market that is 80% dominated by Chinese products.

“The German industry would be completely competitive under normal circumstances,” he adds, pointing out that PV manufacturing is now highly automated, so China’s lower employee costs would have little impact.

“If duties are imposed, we can use our strength again,” he says, arguing that German solar still has a technological edge over its Chinese rivals.

“For years China has been attempting to systematically destroy European solar businesses,” says Robert Kanduth, chairman of Austrian solar company and EU ProSun member Kioto Clear Energy. “Only via the proposed anti-dumping measures will we succeed in maintaining the still remaining PV companies in Austria and Europe.” He says he would expect to see a volume growth of at least 50% if the suggested tariffs — which allegedly range from 37.2% to 67.9% depending on the manufacturer — are enforced.

Yet some analysts wonder if it is too late to save Germany’s once-thriving PV manufacturing sector.

“I’m sceptical whether anti-dumping duties will achieve anything at all,” says Matthias Fawer, a sustainability analyst at Swiss bank Sarasin. “What’s left to rescue anyway?”

In the US, where tariffs were slapped on Chinese-made cells last year, Chinese imports have collapsed, claims Nitzschke. And yet, as Kanduth points out, the US market still grew by 75% last year and continues to expand.

Yet Kanduth is not comparing like with like. The US tariffs were only on cells, and Chinese firms have been able to circumvent the duties by partnering with or buying cells from Taiwanese manufacturers. The EU’s proposal, however, will concern wafers, cells and modules, making it a much more serious prospect for the Chinese, especially as the EU is a far larger market than the US.

Some Chinese suppliers have already shifted production in anticipation of tariffs, such as ReneSola, which is now producing at smaller sites in Poland, Turkey and India.

The issue is so controversial that Germany’s solar industry association, BSW-Solar — which represents both upstream and downstream companies — is refusing to make any comment on the issue.

But most downstream players, if not all of them, are vehemently opposed to any tariff. A downstream pressure group, the Alliance for Affordable Solar Energy (AFASE), has been set up to fight the move.

One of its members, Karl Kuhlmann, below, chief executive of Freiburg-based installer SAG Solarstrom, tells Recharge: “Punitive tariffs would have the effect of increasing prices. Yet the long-term success of PV depends crucially on its competitiveness [compared] to conventional energy sources. That won’t be possible with module prices that have been made more expensive artificially.”

He adds that a punitive tariff would lead to a “market collapse” and job losses at small and medium-sized companies.

Wörrstadt-based developer Juwi, which aims to generate 50% of its revenue outside Germany by 2015, says the tariffs would render large PV arrays in Europe uneconomical.

“The usage of European modules doesn’t pose an alternative as their prices are significantly higher,” complains Christian Hinsch, Juwi’s head of corporate communication.

UK developer Orta Solar has been even more scathing: “We’re astonished that the EU has bought into the protectionist argument of 42 largely bankrupt EU-based solar wafer and cell manufacturers at the expense of thousands of EU-based solar development and installation businesses, who depend on easy availability of low-cost solar panels for their existence.”

Inverter maker SMA Solar, the only solar company remaining on Germany’s technology index TecDAX, says demand in Europe could halve as a result of the tariff. The AFASE, which represents 450 solar companies, says it would cause “irreversible damage” that even a later settlement could not undo.

Politicians aren’t too happy either, especially as the EC is not bound by the opinion of member states.

German Chancellor Angela Merkel is pressing the EC to reach a “mutually agreed solution” over Chinese solar imports, according to her spokesman Steffen Seibert.

Her economics minister, Philipp Rösler, went to Brussels to warn trade commissioner Karel De Gucht that tariffs could lead to a trade war with China.

“We’re concerned that there will be a mutual build-up [of trade duties],” Rösler said. “That should be avoided if possible,”

China has indeed reacted angrily, saying the proposal would “seriously harm” trade relations. It would amount to the EU “dropping a boulder on one’s own foot” and would not help the European economy, a spokeswoman for the Chinese Commerce Ministry told journalists in Beijing.

China is also investigating counter-measures against polysilicon imports from the EU, US and South Korea.

And fanning the flames further, the EC said in mid-May that it was also considering fair-trade probes into Chinese mobile telecom equipment.

“A massive market collapse is already discernible now, and the trade war with China is expanding to other sectors,” warns German Green Party member of parliament Hans-Josef Fell.

“It will greatly damage the European economy, yet the EU Commission hasn’t understood that.”