The world's biggest maker of solar panels wants to make sure investors think "soccer," not "subsidies," when they see the name "Yingli Solar." That's why billions of TV viewers are seeing Yingli's logo, along with those of other corporate sponsors, on stadium walls during the World Cup in Brazil.
But for Yingli and other Chinese solar companies, the real game is being played out in Washington and Brussels, and the result could either lift the industry out of the doldrums or kick off a vicious trade war.
For years, China has faced accusations that it massively rigs the solar market by subsidizing domestic photovoltaic (PV) companies and granting them big loans, and then allowing them to sell their products in America and Europe at dumping prices.
Earlier this month, the U.S. Department of Commerce agreed, and slapped preliminary tariffs on Chinese solar panel makers ranging from 18.56 percent to 35.21 percent, pending a review later this year.
The "anti-dumping" camp has plenty of evidence to back up its case. Led by the U.S. government, the European Union -- where Chinese companies control 80 percent of the market -- and companies like SolarWorld, it scored against China in 2012 when the U.S. accepted SolarWorld's claim that Chinese companies were dumping solar cells – the building blocks of the familiar flat black rooftop panels – on the U.S. market. Washington hit Chinese solar companies with anti-dumping tariffs up to a whopping 250 percent.
China doesn't play fair even after signing binding agreements, some critics say. The European solar industry group EU ProSun renewed the attack two weeks ago, saying Chinese solar companies had offered to undercut the minimum prices agreed to by the EU and China no fewer than 1,500 times after rancorous discussions last year. A Chinese trade group called the allegation "groundless and not verified."
SolarWorld, based in Germany and Oregon, was the sole petitioner in both U.S. cases against the Chinese PV manufacturers. The company's head of communications, Ben Santarris, frames the dispute as a clash of civilizations. "Our friction with China industry is not exactly a matter of industrial competition, at least not as we in the free world understand it," he said. "It's more like a geopolitical struggle in which Western producers are hobbled because, unlike China, their governments are playing by well-established rules enabling free trade."
"The full scale of financial subsidies the Chinese government has provided domestic solar manufacturers is stunning," William Pentland wrote recently in Forbes. The China Development Bank and commercial lenders have loaned billions of dollars to Yingli and LDK Solar, another major manufacturer that defaulted on a bond in February, he says.
But does that really amount to subsidies? As two Massachusetts Institute of Technology professors wrote in the MIT Future of Solar Energy study: "Whether such loans should be characterized as market-based financing or state subsidization is an endlessly debated and essentially un-resolvable issue, given the intermingling of state and private ownership in the Chinese market."
And not only in China, argue the study's authors, chemist John Deutch and political scientist Edward Steinfeld. They show how solar companies in the United States have benefited from state and federal subsidies like direct support for research and development, tax incentives, and solar-friendly regulations.
"There is no credible data that permits one to establish whether the sum of all public subsidies for PV in the United States, both state and federal, [is] larger than the sum of all Chinese subsidies for the domestic and exporting PV industry, but it is possible," they conclude.
And the U.S. solar industry is far from united behind SolarWorld. After this month's Commerce Dept. ruling, the Solar Energy Industries Association said, "These damaging tariffs will increase costs for U.S. solar consumers and, in turn, slow the adoption of solar within the United States. ... It's time to end this needless litigation with a negotiated solution that addresses SolarWorld's trade allegations while ensuring the continued growth of the U.S. solar market."
The argument may be academic because China is going to keep on pushing solar for very good reasons, trader Michael Sankowski argues. First, because solar, as a relatively simple technology, offers the quickest way to grow up a price competitor with coal, which China desperately needs as it tackles catastrophic air pollution. Also, solar arrays are much cheaper and quicker to build than coal (or oil or gas) plants, making them a less risky proposition.
Such optimistic scenarios got some backing from a prediction by Chinese PV manufacturer Wuxi Suntech Power that solar plants will be capable of generating electricity for the same or lower cost than coal-fired plants by 2017.
Coal will generate most of China's energy needs for years to come, but solar has nowhere to go but up.
Written by Ky Krauthamer at Oilprice.com.
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