Will the tariffs imposed by the U.S. Department of Commerce (DOC) on Chinese solar modules actually help SolarWorld and other U.S. manufacturers beat the competition and survive the module manufacturing downturn?
Given product pricing data and other industry realities, at least one research analyst says that no, the tariffs – which range from 31.14% to 249.96% – will not save U.S. solar module manufacturing.
Module sourcing decisions and product sales success still primarily come down to the all-important dollars-per-watt figure, Fatima Toor, lead analyst for solar components and market research firm Lux Research Inc., tells Solar Industry. She does not believe the DOC's tariffs on Chinese solar modules will motivate most developers and installers to select U.S.-manufactured products.
‘Whoever will sell at the lowest cost-per-watt, with reliable and good-quality modules, will be the choice supplier,’ Toor predicts. ‘Even with around 31 percent tariffs on tier-one Chinese modules, Chinese module prices will still be competitive with modules from SolarWorld and other U.S. module manufacturers, which have an average selling price of around $1.25/W.’
Current prices for modules manufactured in China range from approximately $0.70/W for tier-three manufacturers to approximately $1.00/W for tier-one manufacturers. For modules that use cells made outside of China (and are thus not subject to tariffs), average prices range from $0.90/W to $1.10/W.
‘The fact that Western-manufactured modules are of better quality may [have been] true a few years ago,’ Toor adds. ‘But now, with the institutional knowledge that the Chinese module manufacturers have, there is no significant quality difference between U.S.- or European-manufactured modules versus Chinese-manufactured ones.’
Overall, Toor and other Lux Research analysts concluded in a recent study that the tariffs will do ‘more harm than good’ in the U.S. – increasing the price for solar power generation at a time when many governments are cutting back on incentives.
Retaliatory trade action from China – targeting polysilicon exports from the U.S. – also looms as a potential consequence.
However, Toor forecasts that due to the major global oversupply of polysilicon, stabilized prices for the material are expected to remain in the $20/kg to $25/kg range – regardless of any retaliatory tariff action. Additionally, no shortage is anticipated.Â
‘The Chinese 12th Five Year Plan mandated that Chinese polysilicon manufacturers expand their annual capacity by 50,000 metric tons each by 2015, so the oversupply of polysilicon is here to stay,’ she notes.
Rather, Toor predicts that the main effect of retaliatory tariffs from China will be ‘increased tension’ between the U.S. solar sector's already-warring segments: the SolarWorld-led Coalition for American Solar Manufacturing and the Coalition for Affordable Solar Energy (CASE), which has opposed SolarWorld's anti-dumping complaint and countervailing-duty petition from the start.
The CASE continues to call for U.S.-China dialogue and the establishment of a free-trade framework, warning that allowing the conflict to escalate would inflict severe damage on the global industry.
‘Unless cooler heads prevail, American solar companies could face even more direct and collateral damage than the 30 percent tax imposed on many of them last month,’ warned Jigar Shah, president of the CASE, in a recent statement.
SolarWorld has repeatedly refuted claims that its actions will hurt U.S. installers and praised the DOC's tariffs as a ‘step toward restoring industry competition.’
But for SolarWorld, any competitive boost from its preliminary trade victory in the U.S. could be too little, too late. Reports abound that its German parent company will soon lose hundreds of jobs at its manufacturing facilities, even it as it plans a second trade complaint against China, to be filed in Europe.
Although SolarWorld has not yet issued an official announcement on the job cuts, company spokesperson Milan Nietzsche confirmed to The Oregonian that up to 300 positions in Germany will be cut through attrition and contract termination for temporary workers.
‘I think the reason that SolarWorld is still pushing ahead is that it is hurting financially as a company and considers putting tariffs on Chinese modules as one way to its recovery,’ says Toor. ‘Unfortunately, it is at a cost disadvantage manufacturing in the West, and there is just no way around it.’
Photo: SolarWorld's U.S. headquarters in Hillsboro, Ore. Photo credit: SolarWorld