I've been getting up to speed on the trade proceeding initiated by SolarWorld that seeks to impose punitive duties on US companies that import Chinese solar modules. What I've learned is chilling. The nightmare that is likely to unfold will have severe and immediate consequences to the US solar industry. Unless the industry takes action now, the result will be massive loss of jobs, decimation of the US solar project pipeline, and the failure of numerous US solar businesses.
To see why the impact will be so severe, it's important to understand two things: how the trade proceeding works and how US utility scale solar projects get developed.
A Quick Summary of the Trade Process
The trade process will move forward via a series of hearings culminating in a final decision on whether to impose duties at the end of September 2012. However, the intermediate hearings present big risks because of how the process works and when liabilities for duties attach to importers.
The first hearing is next week to gather initial testimony. The first decision about whether there is sufficient evidence to move forward with an investigation will occur December 5. If they decide to move forward (which is very likely because the level of proof required at this stage is very low) the next decision comes in spring 2012. This is when a preliminary decision is due on the amount of duties to be imposed on US importers.
The preliminary decision date is critical because from this date forward importers must post cash or bond to cover the duty on all subsequent imports. What's worse, duties can be imposed retroactively going back 90 days to cover imports from December 2011 on. In other words, the risk of duties being imposed will impact decision making almost immediately even though the final decision isn't due until September of next year.
Another very important point to clarify, import duties are imposed on importers, not exporters. In other words, it is the US solar businesses that are importing modules from China that will be hit with the duties--not the exporters. Furthermore, if an exporter were to reimburse or compensate an importer in any way, the duty is automatically doubled to ensure punitive impact on those involved.
An Industry at Risk: A $40B Pipeline and Tens of Thousands of Jobs
The US solar market has been growing leaps and bounds in recent years. In large part, that’s because utilities have been eager to sign large contracts with developers for new solar generating plants. Most of those plants are going into construction or about to go into construction. An import duty will render most of those projects worthless by doubling the cost of the equipment going into building them. The result will be a wave of delayed and terminated projects, which will spill over into tens of thousands of lost jobs and an equally bleak landscape of bankrupt developers.
To get a sense for the magnitude of this impact all you have to do is look at the volume of projects that are in the late stages of development. Using publicly available data, Greentech Media estimates the US utility solar pipeline at 21 gigawatts (worth roughly $80B when completed). About 9.7GW (roughly $40B) already have contracts in place with utilities and are either in construction or about to go into construction. This pipeline represents nothing less than the future of US solar growth, investment and jobs.
Source: Greentech Media
I can't say exactly what portion of these projects are relying on Chinese made solar panels, but I think it's a safe assumption that it's easily more than half. That's because, like it or not, the vast majority of panel manufacturing capacity is now in China. What this means is that something on the order of $20B-$30B of contracted utilty solar projects and all they represent are at risk.
For the US economy, this couldn't come at a worse time. The US solar industry is one of the few bright spots when it comes to jobs. The industry now employs over 100,000 Americans (mostly in engineering and building projects) and is forecast to add upwards of 10,000 new jobs next year.
The shameful irony in all of this is that SolarWorld (a German company with a manufacturing facility in Oregon) has wrapped itself in the US flag while initiating a process that could bring the US industry to its knees. The couple of hundred US manufacturing jobs they claim to be "saving" are insignificant compared to the thousands of US companies and jobs their actions will destroy.
The rest of the industry needs to wake up fast to this reality and do whatever it takes to stop the trade proceeding as soon as possible. As someone who's worked for the past 10 years to make US solar a reality, the consequence of failure is almost too terrible to contemplate.
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