What To Expect From The Upcoming Solar Panel 'Dumping' Investigation

 |  Includes: FSLR, GE, JASO, JKS, LDK, SOL, STP, TSL, YGE
by: Rodolfo Avalos

In early February, the International Trade Commission (ITC) tasked by the U.S. Department of Commerce will announce the results of its investigation into alleged solar panel "dumping" by Chinese solar manufacturers into the U.S. market. The outcome of such investigation could have devastating consequences for an industry that now more than ever is starting to reflect some success in the on-going and ever-advancing goal of grid parity.

Day after day, I come across a new article stating that either the demand for solar energy in some place of the world continues to surge at an extravagant pace, or that solar is becoming cheaper by the day. Bloomberg recently reported that "India is producing power from solar cells cheaply than by burning diesel for the first time", spurring the interest of important India businessmen such as Sunil Mittal.

The free-fall that solar prices experienced in the last 6 months has accelerated the transformation of the solar industry from a "promising technology" into a "clean energy reality". The innovations that are taking place in the industry have allowed not only to significantly reduce the manufacturing costs of solar panels, but also to increase their efficiency conversion rates from the low teens (12-15%) to the high teens (17-19%).

Solar antagonists would argue that the industry can only survive due to heavy subsidies and Feed-In-Tariffs (FIT) provided by governments, and that the technology is not economically viable. The truth of the matter is that subsidies are actually extremely important and do play a significant role at the beginning and during the development of any industry. However, this role diminishes over time as the industry matures and the heavy R&D and capacity investments begin to show improved results that pave the way for more sustainable markets, without the need of any further subsidies. The evidence shows that we are getting there in solar, and we are getting there real fast.

We can look at this situation by using an analogy of a parent-child relationship. At the beginning, the parent must provide care, food & shelter as the child cannot survive on his own. During the child's development, when he shows the most promising potential, a parent incurs the most significant expenses in order to sponsor the child's education, so that when he reaches maturity, he becomes a self-sufficient individual. How is this different than governments providing subsidies to an industry that showed potential at first, but then has been showing significant progress along the way to the point where grid-parity is almost here?

Additionally, solar bears would argue that solar cannot provide energy 24x7. Solar was never intended to provide energy on a 24x7 basis, but instead it was intended to be a renewable energy source that would complement fossil fuels or other renewable energy sources. Case in point is General Electric (NYSE:GE), the big conglomerate that recently decided to get into the solar arena by producing their own thin-film solar panels using the Cadmium Telluride (CdTe) technology, similar to that of First Solar (NASDAQ:FSLR).

General Electric is not a pure-solar developer, they have been in the wind energy field for quite some time. But with the 51% drop in panel prices last year, General Electric recognizes the power, potential, and advantages of the solar technology, and it is in their best interest to embrace it. The company is trying to convince developers that have bought its wind turbines to double down on clean energy by purchasing its solar panels as well.

Not only is GE currently pushing for solar due to uncertainty over the Production Tax Credit extension in the U.S. (which provides 2.2 cents a kilowatt-hour for electricity generated from wind, and they want to be able to weather a possible domestic downturn as wind incentives expire), but also because GE recognizes that solar is a perfect complement to wind energy. Sun at day, wind at night. It cannot be a more complementary couple than that.

All of these arguments boil down to a crucial point: the ITC and Department of Commerce must fully understand the realities of the solar industry and the implications of their decision as to not undercut the progress of the technology towards grid-parity. They must also understand that it's not about punishing the Chinese solar manufacturers for receiving government subsidies that helped them increase efficiencies and reduce manufacturing costs to a point where solar is now a clean energy reality.

Their decision must be one that provides a more level-playing field for its participants and goes along with what President Obama said Tuesday in his State of the Union Address in regards to clean energy:

Some technologies don't pan out. Some companies fail, but I will not walk away from the promise of clean energy. I will not cede the win for solar or battery industry to China or Germany because we refuse to make the same commitment here. We subsidized oil companies for a century. That's long enough. It's time to end the tax credit giveaways to an industry that rarely's been more profitable and double-down on a clean energy industry that's never been more promising. Pass clean energy tax credits. Create these jobs.

We can also spur energy innovations with new incentives. The differences in this Chamber might be too deep right now to pass a comprehensive plan to fight climate change, but there's no reason why Congress shouldn't at least set a clean energy standard that creates a market for innovation. So far, you haven't acted. Well, tonight I will. I'm directing my administration to allow the development of clean energy on enough public land to power 3 million homes, and I'm proud to announce that the Department of Defense, working with us, the world's largest consumer of energy, will make one of the largest commitments to clean energy in history, with the Navy purchasing enough capacity to power a quarter of a million homes a year.

Of course the easiest way to save money is to waste less energy, so here's a proposal, help manufacturers eliminate energy waste in their factories and give businesses incentives to upgrade their buildings. Their energy bills will be a hundred billion dollars lower over the next decade, and America will have less pollution, more manufacturing, and more jobs for construction workers who need them.

We can only hope that the Department of Commerce and ITC paid close attention to this part of Obama's speech, and that their decision not only boosts even further the world's adoption of the solar industry for the benefit of all its participants (including the Chinese solars LDK Solar (NYSE:LDK), Suntech Power (NYSE:STP), Yingli Green Energy (NYSE:YGE), Trina Solar (NYSE:TSL) , ReneSola (NYSE:SOL), JinkoSolar (NYSE:JKS), and JA Solar (NASDAQ:JASO)) but also paves the way for the U.S. Government to provide substantially more subsidies to American solar manufacturers in order to, once and for all, embrace the sun.

Whether American companies can compete in costs with their Chinese counterparts remains to be seen, but using excessive protectionist measures is certainly not the answer during this period of industry consolidation and shakeout.

Disclosure: I am long LDK, JKS, TAN.