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The solar trade dispute

The recent anti-dumping tariffs imposed by the EU on imported solar panel components from China, highlights a crisis not only in trade relations between Europe and China, but also the divisions within the renewable energy sector in Europe. Within Europe’s solar panel industry, there appears to be two conflicting interests between the producers of the panels and the installers of the panels.

In July 2012 EU Pro Sun, a trade association complained to the EU about Chinese manufacturers of solar panels, cells, and wafers who were dumping their products on the European market and thus undercutting the European producers. Dumping occurs if a company is selling its products abroad at prices, which are less than the prices the company would have to charge in its home market. Dumping at below the market price can happen if the exporters – in this case the Chinese solar component manufacturers – are subsidized by their own government. In a press release ref IP/13/501 of 4th June 2013, the European Commission said:

Highly innovative EU companies are currently being exposed to immediate threats of bankruptcy because of unfair competition from Chinese exporters, who have taken over more than 80% of the EU market and whose production capacity currently amounts to 150% of global consumption. In 2012, China’s excess capacity was almost double total EU demand. The Commission’s assessment indicates that imposing provisional measures will not only secure the existing 25,000 jobs in EU solar production, but also create new jobs in the sector.

The European Commission imposed tariffs on the imports of Chinese solar panel components after an investigation into the solar market. The tariffs imposed were provisional as explained in the Commission’s press release IP/13/501 which said:

The duties will be imposed in two stages, starting with 11.8% for the first two months and followed by 47.6% for another four months to alleviate the harm that is caused to the European industry by this unfair trade practice, dumping. In total, this provisional duty will be in place for a maximum of 6 months.

However, these tariffs have not been welcomed by many of the companies in Europe that are involved in the installation process of solar panels. In the United Kingdom the Solar Trade Association (STA) has warned that the increase in costs as a result of the tariffs, will adversely affect its members’ businesses. In a press release published on 6th June 2013 on STA’s website entitled ‘EU anti-dumping provisional duties – STA fact sheet update’ it said:

As Europe currently imports approximately 70% of its solar panels from China, the net result is likely to be higher install prices to the end customer, which will suppress demand. This will have a significantly negative effect on solar jobs and PV deployment across Europe. The STA along with AFASE and many other PV companies across the European PV supply chain do not support any form of duties on imported products. A majority of 18:4 European Countries agree with this sentiment, so these provisional duties come as a body blow. Safeguarding 8,000 manufacturing jobs at EU ProSun and its supporters or even 25,000 manufacturing jobs at all EU solar producers overall whilst jeopardising 200,000 jobs makes no sense. Europe needs solar growth to capture its share of the 15% 2020 renewables targets. With reducing financial support from governments, growth is dependent on cost effective deployment, utilising economies of scale currently available from only a few countries such as China.

The STA is correct to be concerned that tariffs will suddenly cause a hike in the cost of the components used by solar panel installers. However, if the EU did nothing to help save the manufacturing sector of Europe’s solar panel industry, then in a short time the Chinese would have a complete monopoly over the supply of the components needed by European solar industry. It may have been easier if the EU had not imposed these tariffs, but the market would be far less competitive if it was dominated by the Chinese government. The cheapness of supply that is required by Europe’s solar panel installers could not be guaranteed once the last European manufacturer is put out of business by dumping. Although there may be thousands of factories in China that can produce solar panel components cheaply, competition within the market would not be guaranteed – if those suppliers acted as a cartel to raise prices, or the Chinese government used the solar panel industry in China to place political leverage on Europe by raising the price of solar panels, cells, and wafers – this at a time when Europe is in need of a secure renewable energy source through the generation of electricity from the sun.

©Jolyon Gumbrell 2013

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