One of the big announcements during Solar Power International in October was the trade dispute by SolarWorld (SWV.DE), representing a coalition of seven American solar cell and module manufacturers. The coalition filed dumping and subsidy petitions against China on October 19, 2011 with the International Trade Commission. While SolarWorld is actually a German company, SolarWorld has a fully vertically integrated manufacturing operation in the U.S. that does everything from silicon crystal production to manufacturing to modules. Its primary manufacturing facility is in Oregon. SolarWorld recently announced the closure of its Camarillo, California module manufacturing facility. The other six companies in the coalition have not be publicly identified. On November 1, President Obama responded to a question regarding SolarWorld’s complaint.
We have seen a lot of questionable competitive practices coming out of China when it comes to the clean energy space, and I have been more aggressive than previous administrations in enforcing our trade laws. We have filed actions against them when we see these kinds of dumping activities, and we’re going to look very carefully at this stuff and potentially bring actions if we find that the basic rules of the road have been violated.
Congress is obligated to respond within 20 days from the filing of the petition. This would be November 8, 2011. The possible outcome could include further investigation and ultimately anti-dumping and countervailing duties on Chinese module and cell imports. China issued its opposition to such a proposed investigation in late October.
These duties could substantially impact the financial performance of leading Chinese cell and module manufacturers including Yingli Green Energy Holding Co. Ltd. (YGE) and Trina Solar Limited (TSL). Both TSL and YGE had significant market U.S. market share in 2010 which is up from essentially no market share in 2009. Other Chinese companies like JA Solar Holdings Co., Ltd. (JASO) and JinkoSolar Holding Co., Ltd. (JKS) could also be impacted
Suntech Power Holdings Co., Ltd., (STP), the world's largest module manufacturer, could also be impacted since it has significant operations in China; however, STP has also opened a manufacturing facility in Goodyear, Arizona. STP had over 10% market share in the U.S. in 2010. Other Chinese module manufacturers are also considering American based facilities. Increased government scrutiny of trade practices as well as the anticipation that the U.S. will become the largest solar PV market in a couple years will continue to push Chinese companies to consider U.S. manufacturing facilities. Currently, Germany is the largest solar PV market in terms of systems installed. In 2010, it is estimated that Germany installed about 7.4 GW of systems, while the U.S. installed less than 1 GW.
In the case that duties are applied, winners in the U.S. could include First Solar (FSLR) who has a significant manufacturing facility in Perrysburg, Ohio and is the world’s largest manufacturer of Cadmium-Telluride thin film modules with over 2 GW of global capacity as well as General Electric (GE) who has announced construction of a thin film facility in Aurora, Colorado that should begin producing modules in 2012. Abound Solar, a DOE loan guarantee recipient, could also benefit since they have a smaller manufacturing facility in Colorado. SunPower (SPWRA), which is majority owned by Total SA (TOT), a global vertically integrated Oil and Gas Company based in France, could also benefit. SPWRA has manufacturing facilities in Silicon Valley and also recently announced the opening of a manufacturing facility in Mexico. However, these duties would negatively impact solar PV developers by raising the overall cost of solar power. U.S. based MEMC Materials Inc.'s (WFR) SunEdison unit would be hurt by rising module prices.
One possible outcome from this trade dispute is that if developers are currently in discussions with Chinese module manufacturers for sourcing for potential projects, this added uncertainty could either delay project construction or even prevent projects from being constructed, resulting in lost jobs. The question at hand would be who would be responsible for the incremental duties should they be legislated.
Clearly, neither side would want to be responsible for the additional cost. Large utility scale projects that several years to move from concept to construction when accounting for signing Power Purchase Agreements, module sourcing, all the necessary permitting, and EPC contract negotiations. FSLR is also one of the largest project developers in the United States. An ultimate positive that could occur would be the location of additional manufacturing facilities in the U.S. without the delay in any projects.
Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.