The battle lines are forming over the dumping complaint initiated by SolarWorld Industries America, with cell/module manufacturers, installers/distributors, and equipment manufacturers forming coalitions and position statements, including the Coalition for American Solar Manufacturing the Coalition for Affordable Solar Energy and SEMI’s PV Group.
Antidumping cases are a complex processes involving the International Trade Administration (ITA, part of the Department of Commerce) and the International Trade Commission (ITC, an independent government body). The ITA defines the imports in question and determines whether US sales at less than “fair value” (also called “dumping”) have occurred, and if so by how much. The ITC determines whether the dumped imports in that class have been a cause of material injury to the corresponding US industry.
In parallel with the dumping investigation, there is a process to determine if imports have been subsidized by foreign governments. Either or both of these investigations could result in the imposition of tariffs on the imported products, called antidumping and countervailing duties, respectively. This process involves a significant amount of data collection and analysis, and is designed to be insulated from public pressure and political forces, but as it unfolds over the next year, there will likely be an ongoing stream of public statements, lobbying, and political commentary.
The level of tariff would be based on the results of the investigation, and is intended to be the difference between fair value and the prices each importer has charged over the period of investigation. The impact of any import tariff would clearly be an increase in the price of PV modules. One way of looking at how any such increase would affect installed system costs is to look north, to Ontario, where the provincial energy incentive policy has basically created an insulated market for manufactured solar goods. This is accomplished by local content requirements (LCRs), which must be met if projects receive the province’s feed-in tariff. These LCRs cause PV module prices to be approximately 40% higher than average prices available in the US, and installed system costs are 25-50% higher than equivalent US projects.
The effect of these price increases on demand is somewhat harder to quantify. One of the primary reasons for the uptick in solar demand seen in the past few years has clearly been the rapidly falling costs of solar PV systems. While some segments in the US are required to purchase solar PV technology regardless of the price (due to state-based renewable portfolio standards), it can certainly be said that, without increases in incentives to lessen the impact of price increases, returns on PV systems would decline drastically, thus slowing overall uptake of PV technology.
Our latest analysis shows that IRRs for solar projects in major US markets (such as California and New Jersey) are often triple those seen in Ontario. Part of this is due to the variety of incentive mechanisms in place; however, the fact that Ontario projects are 50% more expensive also eats away at IRRs. This episode is a further reminder that, even with pure economics moving in favor of PV systems, policy shifts can cause major concerns for the industry.