May Cause Side Effects

Solar Anti-dumping's Unforeseen Consequences

The ineffective fudge that came too late for solar module manufacturers is now poised to kill off the European inverter manufacturing industry

As predicted by many, the antidumping measures on Chinese solar modules brought in by the European Union have proved rather too easily circumnavigated.  I've heard of a number of approaches to evasion since the minimum price agreement was reached, but the most recent I've heard about should have Brussels Eurocrats in a cold sweat.

A Flag of Convenience?

I guess the most obvious sign of AD avoidance is the flood of Malaysian solar panels that are now prevalent at the low end of the market.  Many, including myself, strongly suspect that there's far more Malaysian modules being sold than there is manufacturing capacity in Malaysia. The obvious conclusion is that product is being trans-shipped from China via Malaysia and arrives in Europe with  paperwork to prove it's not of Chinese origin.

Some companies try harder than others to maintain the pretence that they have a factory in Malaysia. One company that approached us has gone to the trouble of making a Malaysian website (suspiciously similar to a Chinese manufacturer's and with all the same photos). It was only when we asked to visit the Malaysian factory that we were told that it wasn't company policy to allow visits, and that it was a 'quiet time' anyway so there wasn't anything to see.

Others are less circumspect about what they're doing. Take a look at this email I received offering to illegally rebadge Chinese modules as Malaysian with "all paperwork":

 

Dear value customer,

Nice to meet you!

Yes, for said product, here we would like to provide the professional trading solution to avoid the high anti-dumping duty that imports from China.

The routine for the containers will be as:

CHINA ---> MALAYSIA(change the containers in the free zone or inland warehouse) ----> England

Document issued details:
a. Malaysia solar panels factory CO
b. Master bill of loading under Malaysia factory
c. Malaysia factory packing list
d. Malaysia factory invoice

And the cost is much favor, it will save a lot of the anti- dumping tax:
1. Ocean freight from China port to Port Klang (west): to be advised
2. All in fee in Malaysia:
a. Include all the local fee for changing containers in Malaysia;
b. Include the above Malaysia factory document fee;
3. Ocean freight from Port Klang to England: to be advised

If you are intrested in such trading solution, kindly pls feel free to contact us anytime.
We have many successful cases to England for this item and other items.

Tks a lot.

Marketing Support

Another ruse is for the Chinese supplier to charge you the full minimum price and then separately remit money back to you against an invoice for "Marketing Support" or "Consultancy". The first invoice less the marketing support is the true price for the modules, but the only paperwork customs and excise sees is the first invoice at the minimum price.

My company has been approached with this offer on numerous occasions.

While this clearly isn't in line with the spirit of the AD legislation, I'm also not sure whether it would be strictly illegal.  After all, what's wrong with a manufacturer offering to part fund marketing initiatives in an export market?  Perhaps we'll see a test case soon?  Then again, perhaps we won't. Having brought in the rules, we've seen little evidence that the Commission has the stomach for the hard graft of enforcement.

Inverter Cross-Subsidy

I only heard about this approach recently, but if it becomes widespread it has the potential to wreak havoc upon European inverter manufacturers.

The way it works is that a Chinese module manufacturer agrees a price below the price undertaking level with you.  It then invoices you at the price  undertaking level and transfers the difference as a payment to an inverter manufacturer up the road. This payment is obviously invisible to EU customs, which only sees the modules being bought at the right price. The inverter manufacturer then sells you a shipment of inverters at a knock-down price (but not too low to be suspicious), with the price subsidised by the 'overpayment' for the modules.

The Antidumping decision came too late for the many, many European manufacturers of modules already in liquidation after years of fierce competition from Chinese competitors, but at least the continent still has world leading inverter manufacturers.

But for how long under the current regime?  SMA is already laying off staff and issuing profit warnings to investors blaming a lessening demand for solar in Europe.   How ironic if the policy intended to protect European solar manufacturing ends up contributing to the destruction of its manufacturers of solar inverters and Chinese dominance of this product segment in addition to solar modules.

The commission should either crack on with enforcing their price undertaking agreement with gusto, or should put the whole thing out of its misery and let Europeans benefit from world pricing on PV modules.  The current situation helps no one.

Winners and Losers, but Mostly Winners

Changes to the MCS Photovoltaic Energy Calculation

The solarblogger has been working on a briefing document about how the new MCS PV Guide has changed the landscape for solar photovoltaic installation companies in the UK.

I've reproduced the results of the analysis below, speaks for itself really.  For more details on how it was arrived at, read the briefing here.

Here's a thought.

If the EU Trade War with China adds 50% to the cost of PV modules (BBC News reports the average is 47%), and if the modules are around 40% of the total installed cost of a domestic system, then the cost increase to domestic customers will be about 20%.

The increase in the MCS energy estimate maintains the return on investment for customers....well, so long as they live in Kent.

The EU Chinese PV Anti-dumping Investigation

What you Need to Know

News this week that imports of Chinese solar PV into Europe is subject to registration has brought the investigation into Chinese alleged anti-competitive practices back into the spotlight. How might it affect the solar industry in Europe?

What is Dumping?

Dumping sounds bad, doesn’t it?  Like a bloke in a battered truck is going to pull up outside your house and lob a couple of used tyres, a tatty old pram and a carrier bag full of dog poo into your front garden.

Plenty more where this came from

In international trade, dumping is defined as charging a lower price in an export market than is charged in the home country of the producer.  It is seen as an anti-competitive strategy aimed at driving competitors in the export market out of business in an attempt to create a monopoly.

Governments are allowed under international trade rules to protect their domestic producers against such predatory pricing.  To do so they must prove that the pricing is below “normal value” and that the practice is causing damage to the domestic industry in the importing country.

The Chinese Problem

China poses a special problem for proving that the products are being sold below normal value.  Neither the USA nor the EU considers China to be a market economy.  The price for a product in China is therefore not accepted as a fair market value.

The investigators may chose to determine the normal value of the product by looking at the price in a third country.

 

What Happened to Chinese Solar PV in the US?

In November 2012 the International Trade Commission (ITC) of the USA upheld the ruling of the Department of Commerce that Chinese exporters of solar photovoltaic cells and panels were both receiving subsidy from the Chinese government and dumping their products into the US at below normal value.  The subsidy was assessed to be around 15% and the dumping margin around 25%.  The ITC concluded that this had damaged the business of US-based solar manufacturers.

The USA  moved to apply import duties of around 32% onto solar PV from China.

The news was not all bad for Chinese exporters though, because a loophole was left open – solar panels made in China from solar cells manufactured in other countries are exempt from the duty.  Many Chinese panel manufacturers have simply moved cell production outside of China.

 

What’s Happening in the EU?

 

The process in the EU is similar to the US, but with one difference.  In addition to finding that products have been dumped into EU markets at below normal value, and that EU industry has been harmed, the Commission also assesses whether the imposition of duties would be against the wider interests of the EU.

The investigation was launched in September 2012, and will report preliminary findings by June 2013 and conclusions by December 2013.  A provisional level of duty can be applied to imports in the period between June and December. 

In the meantime, from March, all imports of Chinese PV must be registered.  This allows the EU to apply duty retrospectively to solar PV imports between this date and the date of the preliminary findings.  This so-called "retro-active duty" is only allowed only if there is a further substantial rise in imports –  a rush to import before the imposition of any duties.

So what’s the Most Likely Outcome?

 

It seems likely that when faced with the same evidence as was presented in the USA, the European Commission will reach the same conclusion, that Chinese PV manufacturers have been receiving state subsidies such as preferential lending terms, tax exemption, and cheap materials, power and land.  This support has allowed them to dump solar panels into Europe at below cost.

 

The second test would be whether the Chinese exports had damaged the European industry.  Prosun, the group bringing the action against Chinese exporters lists 34 European solar PV manufacturers that have become insolvent since 2010, 25 of which closed in 2012.  My guess is that there will be no question that Chinese competition has damaged European manufacturers.

 

The final test is whether the imposition of import duties would be against the interest of the European Union, and this is where it gets interesting.  There’s no question that lower prices for PV modules is of benefit to customers, and is also allowing member states to meet their renewable energy targets at lower cost - at least in the short term.  Solar trade bodies and installation companies fear that more expensive solar PV panels will result in a loss of demand for their services and are dead set against anti dumping tariffs.  They have organized around a group called the Alliance for Affordable Solar Energy.

Their argument is persuasive – so what if the Chinese want to subsidize European solar installations – why not let them?  A clue to the thinking at the European Commission is on a fact sheet that has been published on the case:

“Potentially unfair trade in solar panels does not help the environment: a market that faces dumped imports will drive local producers out of business and could discourage EU producers from developing cutting edge technologies in the renewable energy sector. As well as the very significant loss of jobs, dumping and other unfair trade practices can ultimately lead to less competition and eventually price increases. We do not know yet if that is the case here, but that's what the investigation is designed to find out.”

I’m not a betting man, but if you forced me to come off the fence, I’d probably guess that the price of solar PV in the European Union is set to rise.  What do you think?