Solar Power 2012: Year in Review Part 2
The solar energy industry experience a lot of highs and lows during 2012. The biggest development has been the continued growth of solar energy in the United States. As recently reported, if you compare the third quarter of 2012 with the third quarter of 2011, you would see that there was a 44% growth in the amount of solar photovoltaics (PV) installed in the United States. By anyone’s measure that is a huge growth rate.
In our first blog post on the solar energy year in review, we discussed the huge price reduction in solar panels, dwindling incentives, and the effect of competing energy sources particularly natural gas on the adoption of solar energy in the U.S. In this blog post, we will talk about some of the troubling issues facing the solar energy industry. We will discuss the Department of Energy loan program and tariffs.
Department of Energy loan program: the year of Solyndra
This was the year when people will remember above all else the demise of Solyndra. They may not have known anything else about the solar industry, but as became clear all of the progress made in the solar industry and bipartisan report for renewable energy was overshadowed by a very bad deal for the government on one loan made to Solyndra. According to The Hill’s Energy & Environment blog, Solyndra, which received a $535 million loan guarantee from the DOE, has “become a symbol for GOP attacks on President Obama’s green energy and spending policies,” and Republicans use the company’s failure as “a reason to remove government support for technologies that are not yet cost-competitive in the marketplace.”
The Republican dominated U.S. House of Representatives passed a “No More Solyndras” bill, earlier this year, which would eventually eliminate the energy loans. However, it’s unlikely that this bill will pass the U.S. Senate or be signed by President Obama.
There were many problems with the loan to Solyndra, but one of the lasting problems is that every other loan made through the Department of Energy to any solar company, regardless of its merits, will be compared with Solyndra. Some of these loans are essential to support research and development in a highly competitive global marketplace.
Take the loan to a company called SoloPower. The doors of SoloPower’s first plant opened September 27th in Portland, Oregon. This was a key step in allowing the company to utilize a $197 million Department of Energy loan under the controversial plan that supported the now-bankrupt Solyndra. According to a Reuters article, these federal loans will add to the “$56.5 million SoloPower has collected in loans, tax credits and incentives from the state of Oregon and…Portland.” Additionally, the company raised over $200 million in venture funding from investors. SoloPower received attention because of the similarities they share with the infamous Solyndra.
Some industry members worry about the company because they believe SoloPower will have to lower its prices in order to compete with the cheaper Asian products. This cutthroat Asian competition contributed to Solyndra’s demise. According to Reuters, cause for concern is heightened because “even the Chinese manufacturers, whose products are the cheapest in the world, are losing money and struggling with ballooning inventories.”
While Chief Executive Tim Harris has faith in SoloPower, many critics are skeptical of the “thin film” solar technologies the company is using because they are less efficient than PVs. Additionally, many of the company’s claims about the benefits of their products have yet to be demonstrated. Though there are serious obstacles ahead, SoloPower insists they will not meet the same fate as Solyndra. Regardless of the efficiency of their panels and the odds SoloPower has to overcome, before the opening of their first plant, Harris claimed the company already had so many orders that they could not fill them all. Unfortunately, the company recently had to lay off a significant number of employees, further fueling concerns about the fate of this company.
Tariffs on solar panels from China: do you know how to make the Chinese mad?
The final hearing before the International Trade Commission (ITC) for the United States’ trade case against Chinese solar manufacturers was in October. According to the New York Times, earlier in the year, the Commerce Department found that “Chinese companies, which dominate the global panel business, were benefitting from unfair government subsidies and were selling their products below the cost of production on the American market.”
These findings caused the Commerce Department to impose “anti-subsidy tariffs of 2.9 percent to 4.73 percent (in March), and in May, it added anti-dumping duties of at least 31 percent.” These were only preliminary rulings, with the Commerce Department’s International Trade Commission making its final decision on November 8. For tariffs to be implemented, the ITC had to decide that Chinese manufacturing practices harmed or threatened the American industry.
American solar industry executives testified before the trade commission to demonstrate their beliefs that Chinese pricing practices are negatively impacting the domestic solar industry. Executives spoke about how Chinese competition has forced them to shut down plants, reduce production and lay off employees. They also claimed that their businesses have suffered because Chinese manufacturers have been able to sell at a loss because of backing by state-owned banks.
However, not everyone who testified supported the tariffs. The dispute divided the domestic solar industry, with installers, developers and several manufacturers against the tariffs on Chinese imports. Opponents expressed their opinion that SolarWorld “brought its problems on itself, and had proved unable to compete in a world where the low price of natural gas and declining subsidies were putting pressure on solar manufacturers to cut their prices sharply in order to survive,” according to Bloomberg Businessweek. Other opponents of the tariffs were worried because the trade dispute has harmed their businesses due to a “preliminary finding of ‘critical circumstances’ that allows the tariffs to be applied retroactively to goods entering the country 90 days before the ruling.”
In its final ruling, the ITC decided unanimously that Chinese manufacturing practices had indeed harmed the American industry, that they participated in illegal dumping and, the companies had received illegal government subsidies. According to New America Media, “the ITC issued a report that said undervalued imports of Chinese panels have caused US competitors to lose market share and prevented the domestic industry from covering production costs.” As a result, the majority of Chinese solar panel manufacturers will now have to pay tariffs of about 24 to 36 percent.
The cycles for the solar industry continue to be exceptionally compressed, growth, incentives, tariffs, bad loans. The stakes are high for the future of energy not only in the United States, but all over the globe. Overall, it’s been quite a year for the solar industry, leading many to wonder what 2013 holds in store. But the issues that dominated the headlines for the solar industry will continue to affect the development of the industry.