Half-time in solar-industry dispute: U.S. manufacturers invite media to test top five myths of trade cases

Coalition leader: ‘Let's debate, by all means, but on the facts, not myths'

WASHINGTON, D.C., May 30, 2012 – Halfway through its trade cases against the state-sponsored Chinese solar industry, the Coalition for American Solar Manufacturing (CASM) today invited media representatives to fact-check the top myths that Big China Solar has promoted to divert attention from the reality of its trade practices, which U.S. investigators have now twice found to be illegal.

The top five, according to CASM, are:

Myth 1: Chinese producers and their U.S. importers and installers represent the mainstream of U.S. industry.

Fact: CASM represents more than 210 U.S. employers of more than 17,000 employees in the U.S. industry, at least 85 percent of which are downstream firms such as installers. Each is individually identified on the CASM website's members page. Therefore, CASM represents more downstream firms than the number of companies its opposition counts in its entire membership.

Why does CASM have this much support? Read members' statements in their own words: Illegal trade practices are bad for the U.S. economy or the global solar industry; Chinese environmental, labor and quality safeguards compare unfavorably with U.S. protections; and China's industry domination undermines prospects for solar boosting U.S. energy security.

Many CASM members are veterans of the solar industry's development, compared with recent entrants attracted by the widened gap between wholesale and retail declines in pricing that has come with artificially and temporarily low Chinese pricing, which manufacturers on both sides of the trade dispute agree are unsustainable.

Finally, to initiate the trade cases, the Department of Commerce specifically determined that CASM represents a majority of the U.S. manufacturing industry of cells and panels, and a survey by the biggest U.S.-based industry trade group showed 82 percent of Americans support domestic production.

In contrast, news releases from the "Coalition for Affordable Solar Energy" state that the group is "a coalition of American solar companies representing 97% to 98% of the U.S. solar industry jobs." As demonstrated above, CASE does not represent anywhere near a majority of the U.S. solar industry, let alone "97% to 98%."

Myth 2: Antidumping and countervailing duties will halt the U.S. solar industry's growth.

Fact: The U.S. solar market is growing; in fact, it doubled in size last year. The market can be expected to continue to grow, and the imposition of duties to eliminate China's unfair trade practices will not slow such growth.

The main drivers of U.S. market growth are enduring. They include state renewable-energy portfolio standards for electric power sourcing, 30 percent federal investment tax credits for solar purchases, rising electricity costs in many key solar markets such as California, and increasing numbers of financing options for commercial systems. Moreover, total system costs, of which panels costs are limited to roughly 25 percent, are declining, muting the effects of short-term panel price fluctuations.

CASM's trade cases are based on international law that China itself has agreed to respect: Improper subsidies and unfair pricing that injure a foreign industry are anticompetitive and unacceptable in a rules-based system of global trade.

The trade cases focus on the unfair trade practices of one country: China. Regardless of the trade cases, solar producers from all other countries, including Japan, South Korea and Europe, are fierce competitors in the U.S. market. Moreover, solar prices will continue to decrease, as they have for years, if global competition is restored to spur solar cells and modules to become more efficient.

The consequences of permitting China's illegal trade practices to increase its market domination, however, could be dire. Without competition, China would have no reason to hold pricing at anti-competitive levels below its production costs any longer.

China-based Wuxi Suntech, the world's largest producer, has signaled its intention to raise prices once more competitors are driven out of business. In explaining Suntech's $1 billion in 2011 losses to analysts in March, Chairman Zhedrong Shi said: "Modules are not sustainable at current (pricing) levels, and we expect that as the weaker players exit the industry, prices will rationalize (to) allow the efficient module producers to generate a low-teen gross margin."

Myth 3: U.S. solar manufacturers support these trade cases because they cannot compete with the Chinese industry on production costs.

Fact: In a report on global manufacturing costs, the U.S. Department of Energy estimates that without state sponsorship, Chinese producers face a 5 percent cost disadvantage in making and delivering solar products to the U.S. market. A variety of other industry experts and analysts have confirmed that U.S. solar manufacturers are highly competitive, particularly because labor is less than 10 percent of the cost of solar manufacturing.

Producers such as SolarWorld Industries America Inc. have contended with intense pressure from Chinese dumped and subsidized pricing by exhaustively streamlining their operations and maximizing technological gains to increase efficiencies and reduce costs. The U.S. industry is as cost-efficient and productive as any in the world.

By contrast, China's current pricing has no relation to its actual production costs. Indeed, China's latest Five-Year Plan for Solar sets $1.10 a watt as a production cost target for 2015. World market prices are already below this level, demonstrating the hugely distortive effects of China's dumped and subsidized pricing.

Given the role played by the Chinese government in its economy and industry, it is impossible to determine the true current cost of Chinese production. Because China is a nonmarket economy country, Commerce is relying on costs in Thailand as a market surrogate to get to the bottom of just that question.

In its preliminary determination on dumping, Commerce determined that costs for most Chinese producers are about 31 percent higher than their U.S. pricing has been, and therefore set U.S. import duties for their products at that percentage. CASM expects the percentage to rise as Commerce investigators gather more information from the Chinese producers and audit that information.

Myth 4: The U.S. solar industry enjoys a trade surplus with China and the world.

Fact: While the U.S. solar industry had a trade surplus with China and the world as recently as 2010, the balance of trade dramatically reversed in a single year. Since 2011, the United States has suffered a massive solar trade deficit with China and the world.

In particular, the industry had an estimated $1.6 billion trade deficit with China in 2011, after enjoying an estimated $250 million to $540 million surplus in 2010, according to an analysis based on data from the U.S. Department of Commerce, the U.S. International Trade Commission (ITC) and a prior study by GTM Research.

Why the big reversal? The state-planned Chinese industry undertook two key steps in carrying out the government's export-intensive Five-Year Plan for Solar: 1. The industry drove ever-increasing flows of Chinese exports of solar cells and panels into the U.S. market at artificially and temporarily low pricing and 2. It built up its own state-sponsored production of raw materials and manufacturing equipment to supplant imports from the U.S. market.

The latest Five-Year Plan for Solar, released in February, calls for numerous industry steps to cement its world domination of those industries while targeting another world industry that would be new to China: thin-film solar panels based on copper indium gallium diselenide.

Myth 5: SolarWorld has received millions of dollars in U.S. federal subsidies, including loans from the U.S. Ex-Im Bank.

Fact: Unlike China's system, the U.S. government is open and transparent, so the baseless nature of this claim is easily shown. Again, SolarWorld received not $1 in federal subsidies to offset more than $500 million that the company invested to expand its U.S. operations.

In 2010, the U.S. government granted SolarWorld eligibility to apply for more than $80 million in factory investment tax credits, but the company has applied for none.

On the state level, the company has monetized about $11 million in Oregon Business Energy Tax Credits, covering less than 2 percent of its investment, and it will continue to do so. Unlike in China, all Oregon and U.S. subsidies – and markets – are available to companies of all nationalities.

Moreover, any subsidies SolarWorld has received are irrelevant to the trade cases. Subsidies are not inherently illegal. It is illegal, however, to use subsidies to drive artificially low-priced product into a foreign market to eliminate competition there.

Big China Solar also has alleged that SolarWorld has received subsidized loans from the U.S. Ex-Im Bank for a utility-scale solar project in Ontario. This claim is neither true nor logical.

In 2011, SolarWorld supplied 33 megawatts of U.S.-made solar panels for the Stardale PV Solar Project in rural Ontario. One of the principal project partners received loans from Ex-Im Bank, and while the partner was required to purchase solar products primarily made in the United States, it was under no obligation to make those purchases from SolarWorld. As a supplier, SolarWorld would have no reason to borrow money from Ex-Im Bank, and it did not – another easily verifiable fact.

"Does no one check this stuff before it goes out?" asked Gordon Brinser, president of SolarWorld Industries America Inc., the largest solar producer in the Western Hemisphere and the leader of CASM. "Circulating inaccurate claims on so many topics reflects cynicism about this public process, improperly tries to manipulate media coverage, and insults the intelligence of the American people. Fortunately, we depend on federal trade investigators, not the echo chambers of our opposition's reckless claims, to study the factual record."

"Let's debate, by all means," Brinser said, "but on the facts, not myths."

The Coalition for American Solar Manufacturing, founded by seven companies that manufacture solar cells and panels in the United States, has more than 210 employers of more than 17,000 workers who have registered their support for CASM's case. The founding manufacturers have plants in nearly every region in the United States, including the Northwest and California, the Southwest, Midwest, Northeast and South and support several thousand U.S. manufacturing jobs. For details about CASM, go to www.americansolarmanufacturing.org; email media questions to media@americansolarmanufacturing.org; other questions or comments may be emailed to contact@americansolarmanufacturing.org.

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