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China overshadows European solar industry

Europe’s solar industry fears for its life and sees itself at a disadvantage in the fight against competition from China. It’s calling on Brussels to help make trade fair.

Q-Cells, Sovello and Solon - the list of German solar panel manufacturers that have declared bankruptcy over the past few months is long. Companies who were enjoying great success just a few years ago now tremble to think what the future might bring. Taking the blame for the downturn are solar products coming out of China.

"Competition is completely distorted, we’re dealing with masses of Chinese solar panels at low prices and that makes life difficult for the European producers who want to trade fairly," said Milan Nitzschke from the Solar corporate group SolarWorld.

Businesses within the solar industry have begun to take action in order to halt the wave of bankruptcies. About 20 European corporations intend to file a lawsuit with the European Commission in the hope of thwarting overseas competition.

It’s essential to do something about this problem, Nitzschke added. He is also the spokeperson for the initiative EU ProSun, which brought the litigation.

The solar industry has had different reactions to this step and experts see little sense in calling for protective tariffs.

Tons of Sun

Claudia Kemfert from the German Institute for Economic Research

Claudia Kemfert, German Institute for Economic Research

"Competition is a good thing, but it has to be fair, which is not how things are right now," said Claudia Kemfert of the German Institute for Economic Research, who viewed the lawsuit as justified.

An estimated 80-percent of solar panels in Germany come from China. Overproduction, low prices, and sinking subsidies - that’s what the German solar industry is currently fighting.

Some experts believe EU ProSun’s lawsuit as unwarranted and unjustified.

"It’s accurate that panels were sold at the cost of production, but to say that it was deliberate price dumping with the intention of hurting German manufacturers, loses sight of reality," said Eicke Weber of the Fraunhofer Institute for Solar Energy Systems.

Worldwide, solar panels are produced every year that generate 60 gigawatts of electricity, but are sold to produce only 30 gigawatts, added Weber.

"We have a global production surplus. That means, there are companies going through a liquidity crisis," said Weber. "They’re ready to sell solar panels, even if it was more expensive to produce them than what the price on the world market will yield."

The production of solar cells at a SolarWorld factory in Germany

Solar cell production at SolarWorld in Germany

Lawsuit could hurt some German companies

Polysilicon from Germany, machines manufactured in Germany and special-purpose glass delivered from Germany - solar panels produced in China are manufactured with products designed, built or manufactured in Germany.

These German manufacturers, like Wacker Chemie, see the negative consequences of trying to gain more power by opting for a lawsuit before exploring other options.

"Differences of opinion about the terms of competition can only be conducted within political dialogue," Wacker Chemie said in a press release. The German company produces Polysilicon, a required element in the production of solar cells. The statement went on to say compulsory measures would obstruct competition and could spark a trade war, whose consequence would prove to be disadvantageous for all companies active in the solar business.

The sense and nonsense of protective tariffs

Eicke Weber of the Fraunhofer Institute for Solar Energy Systems

Eicke Weber from the Fraunhofer Institute for Solar Energy Systems

Those who view China’s role in the solar industry as a threat to German businesses, like Nitzschke of EU ProSun, want tariffs imposed to raise the price of solar panels.

"If the European Union imposes measures against dumping prices, then the future’s looking good," said Nitzschke.

In the US, the Department of Commerce has already imposed a provisional duty on solar panels from China. It will make a final ruling in the autumn about whether to retain the tariff.

But Weber from the Fraunhofer Institute for Solar Energy doesn't believe Chinese companies have intentionally lowered prices to hurt German companies, but she isn’t convinced about how effective these measures would be.

"Protective tariffs are very dangerous for the world market. It would lead to very expensive solar energy in Germany," said Weber. Europe depends on exports, he added. "We’re sitting in a glass house, we must advocate for free trade instead of establishing protective tariffs."

The introduction of anti-dumping-tariffs is a double-edged sword, according to Kemfert from the German Institute for Economic Research, who believes it wouldn’t be advisable for an export-oriented country like Germany to advocate for such duties to be imposed by the commission.

"On the one hand, there are enough indicators that anti-dumping practices make sense, but the on the hand, that doesn’t mean it would result in a trade war, it may make conditions with China more difficult," she said.

In addition to dealing with prices, German businesses must update their solar panel factories to compete realistically with their Chinese counterparts. Weber thinks going to Brussels is a step in the right direction but that these businesses shouldn’t call for the introduction of tariffs.

"The German factories cannot fully compete with world market prices," said Weber. "The European solar manufacturers could seek better interest rates on loans, like the Asian producers receive, in order to make investments."

solar panels

Solar panels in action

The future of the German solar industry

Chinese company Suntech, which is represented in Germany, is protecting itself against the accusations and doesn’t think World Trade Organization rights have been violated.

"Open markets are vital for making solar energy affordable," said Suntech spokesperson Björn Emde.

"Germany’s technology leadership isn’t in danger. What is in danger is mass production and that’s where we see a parallel with computers and cell phones. There we also saw the tendency for production to migrate to cheaper countries," he said.

The earliest the EU could impose an anti-dumping tariff would be at the beginning of next year. First, it must determine if the lawsuit fulfills all the requirements needed to initiate legal proceedings.

Author: Rayna Breuer / ks
Editor: Jessie Wingard

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