OPINION: Tariffs can help China

The solar trade war between the US and China is about to enter its fourth year, but SolarWorld bashing is still very much in season on both sides of the Pacific.

Within the US downstream sector, there is a weary impatience that slips easily into anger with SolarWorld and its unbending demand that its Chinese rivals be put through the ringer.

The thinking in the downstream sector goes like this: So what if Beijing and local governments give cheap land or loans to domestic PV manufacturers? Or if those companies are a tad too aggressive in their pricing in overseas markets, maybe selling below cost on the odd occasion? Considering how young solar energy is in the US and how many powerful enemies it still has, doesn’t it deserve any break it can get?

Such sentiments are understandable, but no matter how irritating it may seem to some, SolarWorld — which operates the largest PV cell and module factory in North America — has every right to press its case with the US authorities, and a duty to do so as far as its shareholders are concerned.

Perhaps more importantly, there is reason to think that a new round of duties on Chinese modules could make PV more competitive and durable in the long run, in the US and around the world. And no-one would benefit from that more than China.

The importance of China grasping the commercial potential of solar several years back cannot be overstated. The world owes China an immense debt of gratitude for the price declines we have seen for modules over the past five years, which have given solar a seat at the table with vastly larger, more powerful energy sectors.

Yet the situation that emerged over the past few years, in which the supply chain for a global industry so critical to the 21st century came to be dominated by a group of opaque companies with scant technological differentiation, was never going to be sustainable, politically or economically.

That may seem unfair to China, given the vast investment that has poured into its PV sector. But so long as we’re handing out medals for unfair treatment, spare a thought for Germany, which gave birth to the modern PV industry, only to see its role as market and manufacturing leader lost almost overnight to China.

And tariffs would not be nearly as devastating as many people claim. There will be victims, of course. Among them are the Taiwanese cell makers. Some utility-scale projects in the US that had counted on cheap Chinese modules may fall by the wayside, too.

But there will also be positive effects.

One such impact would be to lump even more pressure on Chinese players to lower production costs. It may not be the kind of cost pressure they are looking for, but the strongest players will meet the challenge — and reap the benefits globally.

Some Chinese firms will build or hire overseas production capacity to skirt the tariffs. With labour costs in China rising quickly, and people round the world hungry to see manufacturing jobs created as their governments embrace solar energy, it is not difficult to see how this could be beneficial for Chinese manufacturers in the long run, even if it adds a few percentage points to their production costs.

In any case, tariffs would quicken the pace of much-needed differentiation between the country’s solar companies.

Meanwhile, the timing of announcements in June and July by SolarCity and Suniva that they will build new module plants in the US seems too perfect to be coincidence, whatever the companies may say. A thriving American PV manufacturing sector would go a long way towards exorcising the demons of Solyndra.

Tariffs would also offer a window of commercial opportunity to PV technologies competing with the standard crystalline-silicon modules coming out of China — perhaps jump-starting a round of innovation in materials and manufacturing processes.

None of this is to say that protectionist measures should be adopted lightly. Or that such measures, even when justified, do not cause collateral damage.

The extent to which SolarWorld would ultimately benefit from new tariffs is an open question; some in the industry think they would make little difference to the company. But no-one should question its right to ask whether it is playing against its rivals on an even field.

PV is an industry with virtually unlimited commercial potential over the next half-century. Every country, every company, deserves a fair shot.

Karl-Erik Stromsta is Recharge’s North America managing editor