New Tariffs on Chinese Solar Panels

The United States will impose a tariff on photo voltaic solar panels imported from China [1]. This may slow the growth of the install base of solar power generation in the US because it is not currently cost competitive. Rebates are available through the federal and local governments and electric utilities to increase the adoption of this carbon free source of electricity, and it seems counter intuitive to add a tariff which will increase the cost of a solar installation.

Fair trade is a contentious issue between countries around the world. The US Commerce Department determined that the Chinese government is allowing Chinese companies to manufacture photo voltaic panels below cost by providing subsidies which the Commerce Department considers to be illegal [1]. The actions of the Chinese government, trying to help manufactures in their country, shift the market share away from other places in the world. Since the US can not directly control the subsidies provided by the Chinese government, the choice was made to impose a fee on all panels imported from China into the US.

The import tax, or tariff, is between 2.9 and 4.73% [1]. This should be low enough not to decrease the installation in the US, but a further increase in the tariff may occur in May. Imported panels from China have increased significantly in the last two years shown in the figure below. Solar panels coming from US companies have been reduced to 29% while imports from China have increase to nearly 50%. The manufacturing base in the US should be protected, but it should be balanced by the need to roll out significant carbon mitigating technology to the energy sector like photo voltaics.

The Chinese Chamber of Commerce does not agree that the subsidies given to their manufactures of solar panels violate the World Trade Organisation’s rules of fair trade [2]. The US provides subsidies to solar manufactures, and utilities are required to have a certain amount of a green install base complicating the issue. The Chinese government and manufactures have made official statements that panels are being dumped onto the US market [2]. Tariffs are probably bad for the adoption of solar panels at these early stages. As manufacturing capacity continues to grow, economies of scale may take hold and swing the Chinese manufactures into favor being able to produce lower cost panels even without subsidies. Allowing the US manufactures to compete with the Chinese on a level playing field now, may allow the domestic industry to thrive in the future.

The tariffs were expected to be as high as 20 to 30% and the stock prices after this ruling have increased for Chinese companies and plunged for US based companies [3]. The market was expecting a higher tariff so the US Commerce Department may have found a good balance between protecting US manufactures some without impacting the rate of solar panel installation. Profit margins are razor thin in this competitive world-wide market, so this small tariff may be plenty to keep US companies in business. SunPower has more panels installed in California than Chinese companies, and First Solar has lower cost panels than Chinese companies [3]. This tariff will help to kept US companies competitive, but subsidies their panels more instead of adding a tariff would be another way to level the field. Adding incentives to innovate revolutionary solar panels in the US would possibly be a better way to keep the US solar industry one step ahead of the Chinese instead of simply trying to keep subsidies fair.






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4 responses to “New Tariffs on Chinese Solar Panels

  1. Good article UTexasEnergy. I view the U.S. tariff as being sort of a cheap strategy (not in a pejorative way) of supporting the U.S. solar industry. It’s an interesting tightrope that the Commerce Dept. is walking, on the one hand supporting manufacturers but on the other trying to keep solar panels affordable by allowing Chinese imports. I think the tariff is a short term strategy, and if the U.S. really wants to be competitive with China on the world market, it will need to shell out more of its own dollars rather than simply taxing Chinese imports- especially if the U.S. wants to increase its exports of solar panels. Personally I wonder if it is such a wise strategy by the Chinese to subsidize solar panels so much. I wonder if maybe they’ve started to over-invest, with the marginal costs of subsidizing outweighing the marginal benefits, but then again only the Chinese would know I suppose. I wonder what their investment in R&D for energy storage is. Energy storage will be needed to complement all the solar panels they plan to make.

  2. I believe that the measure the U.S. is taking for protecting their solar panels industry is a good effort for forcing the U.S. manufacturers to become more competitive, especially against Chinese companies. The U.S. and China are two of the world’s biggest markets for solar, wind and other renewable energy technology. Both governments are promoting their own suppliers in hopes of generating higher-paid technology jobs.

    U.S. energy officials say China spent more than $30 billion last year to subsidize its solar industry. Obama said in November that China has “questionable competitive practices” in clean energy and that his administration has fought “these kinds of dumping activities.” The administration will act to enforce trade laws where appropriate, Obama said.[1]

    The new tariffs are low, making the Commerce Department decision “a relatively positive outcome for the U.S. solar industry and its 100,000 employees,” said Jigar Shah, president of the Coalition for Affordable Solar Energy. Helping U.S. manufacturers will be good for boosting this sector.[2]. For this to happen, the U.S. government should we willing to support local manufacturers with more incentives and subsidies. I totally agree with your point that adding incentives to innovate revolutionary solar panels in the US would possibly be a better way to keep the U.S. solar industry one step ahead of the Chinese instead of simply trying to keep subsidies fair. Obviously, China will fight against this increase in tariffs, but the U.S. should be prepared to prove that the Chinese government has been involved in dumping activities.

    [1] & [2]

  3. jillkjellsson

    I agree with you that the U.S. Commerce Department seems to have found a middle ground in regards to the issue of Chinese solar panel dumping in the U.S. The price of Chinese solar panels in the U.S. is approximately 10% less than American ones [1] so a tariff between 2.9 and 4.73% seems reasonable to keep U.S. solar panel manufacturers and American consumers and solar panel installation companies complacent. It is unfortunate that a tariff be placed which will undoubtedly slow the spread of solar panels. Renewable energy is great for the environment as well as job growth. Solar panel related jobs rose 7% in 2011 even as overall employment barely grew [2]. It’s a shame that anything, such as this tariff, should hinder such progress. If the Chinese government wants to subsidize Chinese solar panels, essentially paying for a part of the solar panels American consumers buy, I think that’s something we should be happy to take advantage of.

    I understand that the Chinese dominating the solar panel industry is something that Americans fear. But like you said, there is another way to improve U.S. competitiveness without hurting the industry. For instance, if the U.S. government subsidized American manufactured solar panels than the playing field would also be leveled but the difference would be that solar panels would be even more desirable. I think that solar energy is still at a stage where it cannot compete with other energy forms and should be supported in these early stages anyway.

    Another aspect that complicates the issue is the fact that solar panels in China are manufactured on equipment that is made in the U.S. and the U.S. uses parts manufactured in China to create their solar panels. This complicates the situation in that the tariffs will likely affect American companies that specialize in making solar panel manufacturing equipment. So by placing a tariff on Chinese produced solar panels we are helping American solar panel manufacturing companies but hurting other American industries. It is an unfortunate outcome that strengthens the case for not imposing tariffs on Chinese manufactured solar panels.

    [1] Joyce, Christopher. “Cheap Chinese Panels Spark Solar Power Trade War.” NPR. NPR, 19 Jan. 2012. Web. 27 Mar. 2012. .

    [2] Walsh, Bryan. “The Coming U.S.-China Solar War.” Time. Time, 31 Jan. 2012. Web. 27 Mar. 2012. .

  4. energiaypolitica

    Good post UTEXASENERGY :). I realize this wasn’t the main topic of your post, but I would just like to make a note on your comment that solar panels are a “carbon free source of electricity”. I am a huge supporter of the adoption of photovoltaic (PV) systems because their creation indeed releases much less CO2 than conventional power generation technologies, such as coal plants (see Table III of [2]). However, solar panels are not completely “carbon-free”. According to [1] and [2], the energy required to make a solar panel (by Siemens-like processes in 2007) was 4354 MJ/m2, which equates to 1210 kWh/m2. If this panel produces about 168 kWh/m2 in a year, then the estimated energy payback time (EBT*) is of about 2.2 years. This is incredibly fantastic; however, if you look at the carbon footprint of creating this solar panel and divide it over the panel’s lifetime (25-30 years), the carbon emissions amount to 32 g/kWh. Fortunately, given improvements in technology, this value is expected to drop to 24 g/kWh by the end of 2011. So even though solar panels do not release CO2 during their operation, their making does emit greenhouse gases. The great side of the story is that this value is still much smaller than the one coming from coal, oil, and natural gas.

    *“EBT is defined as the number of years a PV system must operate before it generates sufficient energy to equal the amount it consumed in manufacturing” [1]


    [1] P. Zhai and E.D. Williams, “Dynamic Hybrid Life Cycle Assessment of Energy and Carbon of Multicrystalline Silicon Photovoltaic Systems,” accepted for publication by Environmental Science & Technology (Sept.3, 2010).
    [2] Y. Jiao, A. Salce, W. Ben, F. Jiang, X. Ji, E. Morey, and D. Lynch, “Siemens and Siemens-like Processes for Producing Photovoltaics: Energy Payback Time and Lifetime Carbon Emissions” JOM, 63 (1) (2011), pp. 28–31.

    By the way, I found this site also quite relevant to this topic:

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