The EU Commission has announced it will impose tariffs on Chinese solar panels, following complaints the Chinese solar industry is flooding Europe with cheap products. But, experts warn the measure could backfire.
The solar industry is big business in China. China exported 21 billion euros ($27.4 billion) worth of solar panels and equipment in 2011 to the EU alone.
That success has changed the industry in Europe considerably. EU solar panel producers are struggling, with many companies declaring bankruptcy. It's no surprise, local experts say, as Chinese-made panels are reported to now be as much as 45 percent cheaper than those made in Europe.
But the good times are now due to come to an end, at least temporarily, for Chinese solar product manufacturers. The European Commission, the EU's regulatory arm, announced on Tuesday (04.06.2013) that it was imposing temporary duties as of Thursday on Chinese solar products. They would be phased in, starting at 11.8 percent and rising to 47.6 percent by August 6 if no agreement between China and the EU can be reached by then.
Stopping Chinese solar ‘dumping'
The move comes after complaints by European producers to the EU Commission, that China is flooding Europe with cheap solar panels sold at below the cost of production.
"Since 2012 the European Union has been investigating the issue of dumping Chinese solar products into Europe," Shyam Mehta, global solar energy analyst for GTM Research in the US, said. That, Mehta said, means an investigation into whether Chinese manufacturers "have been selling wafers, cells and solar panels below their fair value in Europe."
Over the past few years, between 60 and 70 percent of solar products used in Europe have come from China, Mehta says. "It's simply because the Chinese have been easily the lowest priced in the market."
Fast growth, rude awakening
The current trade war has been a long time coming. In the early 2000s, the solar market grew exceptionally fast in places like Spain, Germany and Italy, encouraged by government subsidies.
That led to the emergence of new solar manufacturers in Europe, the US and China, drastically increasing the number of solar products being produced. But, as subsidies were cut, many manufacturers found they were unable to make a profit in a market saturated with solar goods.
German-based company, SolarWorld claimed Chinese manufacturers were getting unfair support from their governments and that they were selling panels below cost. Many European competitors — led by SolarWorld – have charged that Chinese competitors are underpricing them in order to keep their grip on the lucrative European market.
It's not the first time that Chinese solar manufacturers are facing a backlash. In 2012, the US levied its own duties on Chinese solar energy products, arguing that China's rapid expansion into the industry had created a massive oversupply.
Moving part or all of the panel manufacturing processes to other countries to avoid the tariffs - like Taiwan, Malaysia, Korea – is already being done by one Chinese producer, CSun, so as to avoid tariffs placed on them by the US.
Others have followed suit. Eric Yuan is the marketing manager at the Chinese government-owned company, Phono Solar. Like many of his Chinese solar counterparts, he isn’t interested in speaking about whether the anti-dumping tariffs leveled against Chinese companies are fair or not. Instead, he’s focused on what his company can do about it.
"Actually, before we received the news from the media at the end of last year we already started to make some preparations against the anti-dumping duties," he told DW.
"Currently we are co-operating with some Taiwan manufacturers and other overseas manufacturers, so by doing this, we are ready."
The dangers of tariffs
So far, Chinese solar companies are putting on a brave face despite the prospect of their products becoming less attractive in Europe.
At the recent seventh annual SNEC solar trade fair in Shanghai, China, over 150,000 experts and buyers had gathered at what is the world's largest solar industry conference.
Many experts, however, point out that the EU tariffs on Chinese solar panels might end up hurting the European industry in the end.
"The motivation for putting them in, is just silly," Martin Green, an expert on solar technology at the University of New South Wales in Australia, said. “They've already been counter-productive. In the case of the US, they've crippled the parts of their industry that were competitive,” he said.
It's a concern echoed by some European producers too who have urged German Chancellor Angela Merkel to defuse the looming trade conflict and push for a mutual solution instead as tariffs would hurt jobs and undermine solar growth.
Chinese premier Li Keqiang who met Merkel in Berlin last week also voiced concern about EU duties.
"This decision will not only harm jobs in China as well as development in the affected industries, but it will also affect development and endanger industry in Europe," Li Keqiang said.
Building a new niche
Martin Green pointed out that the tariffs could also end up dealing a blow to a niche growth area for Europe.
"The European industry in the manufacturing area is very much dead. Europe has been superb in developing equipment and so on to supply the manufacturing industry that has now moved to Asia," Green said. “And that seems like a very good role for it to continue to do and pioneering the use of the technology and developing the support infrastructure and so on needed to fully exploit the potential of photovoltaics."
This specialized solar equipment and consulting business is currently worth around 7.5 billion euros ($9.8 billion) a year to the EU.
While that's far smaller than the value of the solar panels now being imported to Europe, it could be a business niche that grows, as solar starts to take off in places beyond the EU like South America, the Middle East and Africa. But only if European solar companies are prepared to change their focus.
200 days to the Paris UN Climate Change Summit -- the latest on the EU’s GMO crop controversy -- and how the tiny German village of Feldheim became an energy role model.