US moves to close China PV loophole

In a move expected to blunt or even halt the decline in the cost of solar energy in the US, the US government on Tuesday preliminarily slapped duties on Chinese PV modules that use Taiwan-made cells.

With the exception of two suppliers – Trina Solar and Wuxi Suntech – all Chinese suppliers will pay a 26.9% duty on the product they sell into the US market, undercutting the significant cost advantage that most Chinese companies currently enjoy.

Trina, the world’s second largest module supplier, and a company that derived 17% of its $1.77bn in revenues last year from the US, was given a relatively mild rate of 18.6%.

Trina counts SolarCity, the leading US installer of rooftop PV systems, among its customers.

Meanwhile, Wuxi Suntech, the former manufacturing arm of Suntech Power that was recently acquired by Shunfeng, was hit with a devastating 35.2% rate.

The ruling is also a significant blow to Taiwan's large PV sector.

Although the ruling will not be finalized until October, and could still change, the preliminary verdict will be seen as a resounding victory for the US arm of SolarWorld, the German PV group behind the major solar trade cases brought against China in the US and EU.

SolarWorld USA maintains the largest module factory in the US in Hillsboro, Oregon, and has argued that its Chinese rivals enjoy subsidies like cheap finance and electricity.

The decision comes two weeks after the US Justice Department named SolarWorld USA as one of five companies to have been targeted by Chinese hackers allegedly engaged in corporate espionage for Beijing – in part for a look at its legal strategy in a previous trade case.

In that case, which was finalized in 2012, the US imposed both countervailing and anti-dumping duties on Chinese PV cells. The 2012 ruling has made little difference, however, as Chinese module suppliers simply shifted to using Taiwanese cells in their modules.

But the latest ruling slams shut that “loophole”, and, if cemented, would mean that Chinese PV companies would need to manufacture everything from the wafer through the module abroad, in order to escape the duties.

Some may simply choose not to sell into the US.

A separate ruling on anti-dumping duties is expected next month.

While the ultimate impact of the tariffs is unknown, the finalization of the tariffs would at the very least force significant changes upon China’s largest solar companies. IHS, the market researcher, recently said that module prices would “almost certainly rise” in the US if the Taiwanese loophole were closed off.

SolarWorld’s push for tariffs has attracted the scorn of broad swathes of the US solar industry, with downstream players – such as installers and solar-leasing specialists – having benefited from low-cost Chinese panels.

The US is expected to install more than 6GW of PV capacity in 2014, notching up another record year.

The Washington DC-based Solar Energy Industry Association, the pre-eminent US solar lobbying group, immediately issued a statement saying the ruling “threatens to derail the rapid growth” of the sector, while clinging to hope that a mutually satisfactory resolution could still be brokered.

The verdict does not cover thin-film PV kit – potentially handing an advantage to China’s Hanergy, which has acquired a number of CIGS companies in recent years, including US-based MiaSole and Global Solar Energy.

On the other hand, it will inevitably complicate things further for US-based solar companies hoping to do business in China, which transformed over the past two years into the world’s largest solar market by far.

On Wednesday SunEdison, one of the largest US-based solar companies, announced a deal with China’s Huantai Group intended to see the two jointly built 1.7GW of PV capacity in China over the next four years.

The two largest US-based PV manufacturers by market capitalization, First Solar and SunPower, both have significant ambitions of their own for the Chinese market. Both, however, do most of their manufacturing overseas.