By Maria Gallucci - The first time that U.S. trade officials slapped import tariffs on China-made solar panels in 2012, Chinese manufacturers barely flinched: Last year, companies boosted their shipments of panels and expanded their share of the U.S. market while keeping prices competitive. But the latest round of U.S. import duties announced this week could actually slow down the incursion of Chinese panel makers, say analysts.
The U.S. Commerce Department on Tuesday imposed duties of up to 35 percent after ruling that Chinese government subsidies were used unfairly to make the solar panels and related components. A similar ruling on additional anti-dumping tariffs is expected in July.
The 2012 ruling imposed tariffs of up to 36 percent on imported panels made from Chinese solar cells—the final major devices that are built into completed panels. But many Chinese companies managed to skirt the tariffs by procuring cells from Taiwan and assembling the final modules in China. That prompted a new case aiming to close the Taiwan loophole by targeting not only Chinese solar cells or wafers, but final panel production done in China as well.
Solar analysts said that, if finalized, the new tariffs could substantially increase the price of solar panels from Chinese suppliers and dampen demand from U.S. project developers and installers, though it’s too early to predict by how much, they said.
That would reverse the recent trend of rising Chinese shipments and low-cost supplies.
Chinese suppliers shipped 44 percent more solar panels to the United States last year than they did in 2012, said Shyam Mehta, a lead solar analyst at GTM Research in Boston, which tracks the industry. Chinese panels accounted for 49 percent of all panels deployed in the U.S. last year, up from 40 percent in 2012. Most Chinese companies “recorded big shipment gains … and increased their market shares” in 2013, he added.
The top Chinese supplier last year was Yingli Green Energy, which has U.S. offices in San Francisco and New York. Yingli supplied 660 megawatts’ worth of solar panels last year—about one-fifth of all shipments from China, according to GTM Research. Trina Solar, whose U.S. office is in San Jose, California, came in second with 440 megawatts of U.S. shipments in 2013.
Michael Barker, a senior analyst at NPD Solarbuzz, an industry research group, said that among the world’s top solar manufacturers, Chinese panels have a competitive price advantage of between 3 to 10 percent compared to similar products from U.S. and other suppliers. Huge economies of scale help Chinese manufacturers drive down costs, he said, but companies also strategically price their products low to gain market share.
If the latest round of penalties are made permanent, however, “It’s almost certain that we’ll see increases in the price of Chinese panels shipped to the U.S.,” Mehta said. In an April report, GTM estimated that Chinese panel prices could rise from 65 cents per watt today to as much as 80 cents a watt by the end of 2014, in large part because of the U.S.-China trade fight.
The benefits will likely be mixed for the U.S. solar industry. Rising Chinese panel prices will help diminish the competitive advantage over American solar products. But Barker noted that supplies of solar cells and components are limited outside of China and Taiwan, and other countries might not be immediately able to satisfy demand, forcing up solar costs until new production can catch up. “It would impact the market, because it would change the supply dynamic,” he said.
Mehta said that the U.S. rooftop solar market would be “inconvenienced” but relatively unaffected, since residential developers can absorb small price increases. Large-scale projects, on the other hand, are far more cost sensitive. “The hardware costs for these systems have to be very low to make the economics pencil out,” he said. “At the utility scale, a fair number of [proposed] projects could effectively be killed as a result of this.”