Solar Power Enjoys Bright Day as EU, China Reach Compromise on Panel Tariffs

Solar hot water in Weihai, Shandong province. Photo: Popolon for Wikimedia Commons

Solar hot water in Weihai, Shandong province. Photo: Popolon for Wikimedia Commons

In a major development for the young solar power sector, the EU- China dispute over imported Chinese solar panels seems to have been amicably resolved over the past weekend. With the new agreement, a threatened massive tariff hike on Chinese panels may be averted.

European Trade Commissioner Karel De Gucht announced on July 29 that he had sealed a compromise with China, effective to the end of 2015, under which Chinese solar manufacturers agreed to a minimum price and a volume limit on imports to the EU. Chinese firms that comply with the new regulations will be exempted from EU tariffs.

The EU had previously threatened to place tariffs on Chinese solar panels in response to China’s practice of “dumping” panels on European markets—that is, flooding the market with cheaply made solar panels at low prices. It was feared that a trade war over solar panels might drive prices up and cripple growth in one of the most vital clean energy sectors.

The European Trade Commission treats import dumping as a serious offense. By ETC policy, if a foreign producer’s dumping of products causes harm to European competitors, that producer may face punitive measures, including EU-wide tariffs.

These measures usually last five years, considerably longer than the timeframe laid out in De Gucht’s plan.

The EU must now decide by December 5 whether or not to formally turn De Gucht’s deal into a set of “definitive” laws. Proponents say that the 28-member Union must act decisively to keep its underwhelming solar panel industry alive.

De Gucht was publicly ambivalent over the merits of protectionism.

“We allow a certain intervention in the market trusting … that this will lead to a stabilization of the market,” he said in Brussels. “If the European solar industry wants to continue selling solar panels, they will have to be competitive with the rest of the world.”

The dispute over imported solar panels recently became a major hot button issue between the EU and Beijing— a sign of how rapidly the solar industry’s clout has grown in only a few years.

On June 4, De Gucht had announced that the EU would immediately implement an 11.6% tax on Chinese solar panels, and that the tax would nearly quintuple to 47% by August and stay there for six months, unless a compromise could be reached.

In retaliation, the Chinese threatened to place tariffs on European polysilicon—a crucial component of solar panels—and wine. The threatened wine tariff caused particular concern in France, where the wine industry is becoming ever more closely tied to China, in both investment and consumption.

China now says it hopes to reach a deal on European polysilicon and wine by next February.

The deal made moderate waves in the financial world. Shanghai-listed manufacturers Hareon Solar and Shanghai Chaori both saw their shares rise on Monday, outperforming a Shanghai Composite Index that fell by 1.7%.

“It’s good that they finally found a solution,” said Sun Haiyan of Trina Solar Ltd. He added that the deal was a cue for Chinese solar firms to expand in other markets, mainly the United States and Japan, and also to expand solar power domestically.

Analysts expect Middle Eastern markets and South Africa to join China, Japan, and the US as leading consumers of Chinese solar panels.

China could be especially receptive to a domestic solar boom. Its historical reliance on coal for power has led to infamously bad pollution in cities like Beijing, where many wear surgical masks for their daily activities rather than breathe in the soot.

China is also the world’s largest gross emitter of greenhouse gasses. This means that without major Chinese action, a serious, concerted global effort to curb carbon dioxide emissions is unlikely.

China is already acting to make more of its grid clean, in large part due to its poor urban air quality. A new subsidy program has been put in place to encourage small-scale solar projects.

However, despite its remarkable growth, the solar industry is still heavily dependent on government support. More research is needed before large economies like China, the EU, and the US carry out a major switch to solar.

“Solar power has good development prospects, but its cost must come down further,” said Bai Jianhua, an engineer and researcher whose work is overseen by State Grid Corp, China’s leading utility company.

In recent years, China has put its nascent solar sector on an economic steroid regimen with heavy subsidies and generous loans from state banks, leading to a massive glut of cheap solar panels. The surge of Chinese panels put a number of European companies out of business.

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  1. […] a major development for the young solar power sector, the EU- China dispute over imported Chinese solar panels seems to have been amicably resolved over the past weekend. With the new agreement, a threatened massive tariff hike on Chinese panels […]

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