EU solar industry needs detox, not duties

FRANKFURT/BRUSSELS Thu Apr 12, 2012 11:31am BST

Related Topics

Quotes

   

FRANKFURT/BRUSSELS (Reuters) - Duties to fend off competition from cheaper Chinese solar panels risk feeding the European sector's addiction to artificial subsidies, destroying more jobs than they save and stoking tension with one of the EU's biggest trading partners.

Policy decisions by EU governments, among them Germany's deep cuts in solar power incentives, show politicians have little appetite in the current climate to support an industry if it cannot stand alone.

Simultaneously, momentum for an EU trade complaint against Chinese solar panels is building, industry officials and sources within the EU told Reuters, following a U.S. decision backing import tariffs last month.

U.S. anti-dumping duties are expected to be announced in May, after initial tariffs were lower than expected.

However punishing, they still will not bring costs to a level where government incentives are not needed and the technology competes with conventional energy.

"Even if they have a slam dunk victory, it could turn out to be pyrrhic," John Kuzmik, a partner at energy law firm Baker Botts Hong Kong and Beijing offices, said.

The clearest risk is losing more jobs than duties could salvage.

"If the prices of the product go up, you are going to find the numbers installed (solar panels in the EU) going down sharply," said Glyn Ford, a consultant and former EU parliamentarian. He has just returned from China, where he took part in talks with government officials and EU representatives.

"You might save 50,000 jobs in manufacture, but you lose lots more in installation."

Germany boasts the world's top solar market measured by installations of panels.

In it, almost one in four jobs is connected to installation while only one in seven is related to making equipment, Germany solar industry BSW said.

Many more jobs are generated by production of materials for solar panels, notably polysilicon, which Europe and the United States export to China.

RETALIATION RISK

There is also a risk of retaliation from China, the EU's second biggest trade partner after the United States.

It has already been riled by joint action between the United States, Europe and Japan against China's restrictions on exports of rare earth minerals, critical to clean energy technology, including solar.

EU ties with China, as well as other governments, have been strained further by a law forcing airlines to offset carbon emissions if they use EU airports, which has led Beijing to threaten to suspend orders for European aircraft.

Those opposed to duties that could antagonise China further say they would run counter to many EU policies.

Not only are European governments looking to China to help bail them out, the Commission has set great store by green growth to lower emissions and to emerge from recession. For that it needs it to be affordable.

Over the last decade, the European solar industry has created more than 300,000 jobs, the Alliance for Affordable Solar Energy said, nearly half of them in Germany.

That growth has been spurred by government policy and feed-in tariffs to pay solar-panel purchasers for the power they sell back to the grid.

NECESSARY DROP-OUTS?

But cuts in tariffs have led to bankruptcies and insolvency filings, notably German solar company Q-Cells QCEG.DE, once the world's largest solar cell maker.

Some say bankruptcies are a necessary phase in a maturing industry and efficiency, including the economies of scale at which China excels, need to be sought out.

"I'm for free and open trade. If there's something wrong, that needs to be investigated. But we have to be really careful not to politicise this," said Eric Peeters, vice president for Europe of U.S. solar components firm Dow Corning .

Others are less guarded.

"If politicians think that the photovoltaic industry is to be sustained, protective duties are a legitimate means," Helmut Vorndran, co founder and chief executive of private equity firm Ventizz , said.

Germany solar company SolarWorld SWVG.DE launched the trade complaint in the United States. Its CEO Frank Asbeck last month said the group was mustering support for an EU complaint.

For years, western solar firms have accused Chinese peers of receiving lavish credit lines to offer modules cheaply in Europe while protecting their own market.

Representatives of the Chinese solar industry disagree.

Yingli Green Energy Co Ltd (YGE.N), although based in China, is listed in New York and subject to shareholder scrutiny.

"When it comes to our access to financing, our conditions are no different from any or our European competitors and we are getting financial loans from banks at commercial market rates, which are by no means lower than in Europe," Darren Thompson, managing director of Yingli Energy Europe, said.

The real competition, he said, was not from China, but from other forms of energy.

For as long as Chinese firms are the most competitive, their solar panels could be the best hope of warding that off.

"Wagging a finger at China is the wrong approach," said Gregory Spanoudakis, president at Canadian Solar Inc. (CSIQ.O) "Everybody can learn from what they did."

(Additional reporting by Luke Baker and Sebastian Moffett in Brussels; editing by Jason Neely)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.