U.S. Manufacturers Reap Benefits of Solar Trade War, But at What Cost?

Commercial Solar Farm

By Jonny Wakefield

July 31, 2014

A green tech research firm says a trade battle between the United States and China is leading to double digit increases in the price of certain solar components.

According to Greentech Media Research (GTM), an old school tariff war between the U.S. and China is raising the price of certain solar components by as much as 14 per cent. Analysts say the resulting higher prices will slow down adoption of solar power, which has been spurred on by cheap Chinese technology.

The U.S. Department of Commerce instituted a number of tariffs on the importation of Chinese photovoltaic cells and modules in 2012. The early tariffs were in response to "unfair" subsidies from the Chinese government. The department has since added duties to protect domestic manufacturers from the "dumping" of cheap foreign technology on the U.S. market.

In a release, the Department of Commerce stated the tariffs provide "a transparent and internationally accepted mechanism to seek relief from the market-distorting effects caused by injurious dumping of imports into the United States."

The anti-dumping tariffs range between 26 and 165 per cent, and are adjusted for specific companies based on their market positions and compliance in U.S. investigations. The commerce department singled out a total of 42 companies to assess separate duties.

Among those companies was Canadian Solar, a Guelph-based company that manufactures the bulk of its solar components in China.

Solar proponents say the tariffs could reduce the gains achieved through cheap foreign solar components. “The tariffs in this case are so high as to prohibit basically any [Chinese] manufacturer from selling at a competitive price in the U.S.," GTM's Shayle Kann said.

The World Trade Organization recently ruled that the U.S. tariffs violated global trade rules. What impact the ruling will have on the market remains to be seen, but one U.S. solar manufacture told ThinkProgress the ruling's effect on existing tariffs will be negligible.

The tariffs, somewhat paradoxically, pit the domestic solar industry against itself. The biggest winners are the manufactures. SolarWorld Industries America originally petitioned the commerce department for additional protections.

But increased prices will mean fewer clients, which will hurt the bottom lines of companies that install solar panels. Most of the estimated 120,000 solar jobs in the U.S. are in installation. According to GTM, 31 per cent of the solar panels installed in the U.S. in 2013 were manufactured in China.

Some have pointed out that the U.S. anti-subsidy tariffs are hypocritical, as all levels of government in the U.S. have offered some form of subsidy for businesses and individuals looking to switch to solar.

Overall, though, the days of government support for the solar industry may be behind us. While the U.S. and China remain at loggerheads, the WTO is negotiating a multilateral deal to drop tariffs and government subsidies on roughly 86 per cent of renewable energy goods, including wind turbines and solar components. The WTO reasons that an end of government subsidy would put an end to costly trade wars. Canada is included in the negotiations.

As well, Chinese companies are already considering ways to duck the tariffs by opening manufacturing plants in the United States.