November 22, 2024

China Bends to U.S. Complaint on Solar Panels but Also Plans Retaliation

HONG KONG — Chinese solar panel manufacturers are preparing to shift steps in their production processes to South Korea, Taiwan and the United States in response to the filing of a trade case against them in Washington, and are working on a way to retaliate against U.S. exports to China, Chinese solar industry executives and officials said Monday.

Preparations to redesign supply chains and retaliate come after the U.S. Department of Commerce opened an anti-dumping and anti-subsidy case against Chinese solar panel manufacturers on Nov. 9, at the request of SolarWorld Industries America and six other U.S. solar companies. The Commerce Department said it was considering anti-dumping tariffs of 50 percent to 250 percent on Chinese solar panels, plus a request by SolarWorld for anti-subsidy tariffs of more than 100 percent.

After hastily hiring trade lawyers, Chinese solar panel manufacturers are increasingly gloomy about their chances of winning the case, said Ocean Yuan, the president of Grape Solar, a big importer of solar panels based in Eugene, Oregon. Many trade lawyers in Washington have reached the same conclusion because the Commerce Department handles anti-dumping complaints against China under special rules that heavily favor U.S. manufacturers. China accepted the rules as part of its joining the World Trade Organization in 2001.

Mr. Yuan said that Grape Solar was already in negotiations with several Chinese manufacturers, whom he declined to identify, to do final assembly of solar modules in Oregon as the last step in new supply chains that would start in China then run through South Korea and Taiwan to avoid the likely tariffs.

The Chinese solar panel industry is also seeking legal advice on filing its own anti-dumping and anti-subsidy trade case against the United States with China’s Commerce Ministry, Chinese solar industry executives in Beijing said Monday. The most likely target would be U.S. exports of polysilicon, the main material used to manufacture conventional solar panels, said Wang Shijiang, a manager at the China Photovoltaic Industry Alliance based in Beijing.

The manufacture of polysilicon requires enormous amounts of electricity — so much electricity that it typically takes the first year of operation of the panel to generate as much power as was required to make the polysilicon in it. The United States is one of the world’s largest producers of polysilicon, in states like Tennessee and Washington, because it has access to a lot of inexpensive hydroelectric power.

China’s own polysilicon industry is controversial because it relies heavily on electricity generated by coal-fired power plants, and because weak environmental controls at Chinese polysilicon factories have resulted in toxic spills that have fouled streams and rivers.

Polysilicon production guzzles electricity because it requires superheating large volumes of material in electric arc furnaces, including the melting of quartzite rock at 2,000 degrees Celsius (3,630 Fahrenheit) at the start of the process.

The United States exported $873 million worth of polysilicon to China last year while importing only $4 million worth of the material, according to GTM Research, a renewable energy consulting firm based in Boston.

At the simplest level, there are four main steps in making a solar panel, also known as a solar module. Making the polysilicon is the first step. The second step is carving or extruding the polysilicon to make very thin wafers before polishing the wafers until they are extremely smooth.

The third step involves chemically treating the wafer and adding electrical contacts to turn it into a solar cell. The last step involves connecting 60 or 72 solar cells together, covering them with glass, enclosing them in an aluminum frame and adding an electrical junction box.

Mr. Yuan said that Chinese manufacturers wanted to keep wafer production in China, but were making plans to ship wafers to Taiwan or South Korea for conversion into solar cells.

Turning wafers into cells is the costliest, most high-tech and most highly automated step in producing solar panels, representing about a third of the total cost.

An executive at a Chinese solar manufacturer said his company had already begun making elaborate preparations to move solar cell production out of China for panels destined for the U.S. market.

Chinese manufacturers have studied moving solar cell factories directly to the United States but have largely rejected it in favor of other countries because it takes so long to comply with the many American regulations for opening new factories that use a lot of chemicals, said the executive, who spoke on condition that neither he nor his employer be identified.

Frank Haugwitz, a solar industry consultant based in Beijing, said Taiwan had a very large solar cell manufacturing sector with capacity equal to more than five times the U.S. market, and a significant chunk of that capacity was not being used.

But Taiwan has very little capacity to turn solar cells into solar modules; the finished modules are heavy and expensive to ship because of the weight of the glass and aluminum frames.

China exports finished modules because its low wages offset the extra shipping costs. But wages in Taiwan are considerably higher than those in China.

Solar cells fabricated in Taiwan or South Korea from Chinese wafers will be shipped to the United States for final assembly, Mr. Yuan of Grape Solar said.

Article source: http://www.nytimes.com/2011/11/22/business/global/china-bends-to-us-complaint-on-solar-panels-but-also-plans-retaliation.html?partner=rss&emc=rss

Energy Secretary Chu Defends Solyndra Loan

Companies fail when “the bottom of the market falls out,” Dr. Chu testified before a subcommittee of the House Energy and Commerce Committee. That, he said, is what happened to the solar panel business, for two reasons that he maintained could not be foreseen.

“This company and several others got caught in a very, very bad tsunami,” he said. New plants to manufacture solar panels started up in China and elsewhere, while the market for the panels was softening because of economic troubles in Europe. Prices dropped 70 percent in two and a half years, he said.

But Republicans pursued the theme that the problem was incompetence and political influence. Clifford Stearns of Florida, chairman of the oversight and investigations subcommittee, which held the hearing, said, “it is readily apparent that senior officials in the administration put politics before the stewardship of taxpayer dollars.”

Dr. Chu said he had come into office in January 2008 trying to speed up a loan guarantee process that had been established by a 2005 law, but which had not at that point resulted in any actual loans. His goal, he said, was to create jobs in a faltering economy.

Dr. Chu also stressed that private investors had put more than half a billion dollars into Solyndra, which had a new design for lightweight solar modules.

“When it comes to the clean energy race, America faces a simple choice: compete or accept defeat,” he said. “I believe we can and must compete.”

His prepared testimony also made an indirect dig at some members of Congress. “We appreciate the support the loan programs have received from many members of Congress — including nearly 500 letters to the department — who have urged us to accelerate our efforts and to fund worthy projects in their states,” the statement said.

Mr. Stearns, though, complained that the policy was an effort to keep President Obama on a “green jobs pedestal.”

“Two of the first three deals approved under Secretary Chu’s acceleration policy have now blown up and filed for bankruptcy,” he said, referring as well to a Massachusetts energy storage company, Beacon Power. “No one has admitted any fault whatsoever, and the president and our Democrat colleagues just shrug and say, “Hey, sometimes things don’t work out.’ ”

Dr. Chu was the only witness.

The hearing has two focuses: the business judgment of the Energy Department and the White House, and the possibility of political influence. The chairman of the Energy and Commerce Committee, Fred Upton, Republican of Michigan, asked in an opening statement, “What did Secretary Chu know about the situation at Solyndra, and when did he know it, and how did he act on this information, if at all?”

The form of the question mirrors what was asked 35 years ago about President Richard Nixon’s involvement in the Watergate break-in.

“We have heard from President Obama, and even from you, Secretary Chu, that nobody had a crystal ball and no one could have predicted Solyndra’s demise,” he said. “But the truth is, the D.O.E. staff did predict this — one of the models reviewed by D.O.E. staff specifically showed that Solyndra would run out of cash in September 2011.”

And the company’s auditors said six months after the initial loan agreement was completed that Solyndra would have problems, he pointed out.

For the most part, Democrats are not defending the government’s judgment in making the loan.

But Representative John D. Dingell, also of Michigan, questioned in his opening statement the Republicans’ other contention, that the loan was rushed through because one of the investors, George Kaiser, an Oklahoma oil and gas billionaire, was a “bundler” for the Obama campaign.

“I have yet to be presented with a single piece of evidence that President Obama, Vice President Biden or any of their staffs used political pressure on D.O.E. to circumvent the normal vetting process, an assumption/presumption that my Republican colleagues continue to propagate for media attention,” he said.

Representative Joe Barton, Republican of Texas, said that political influence by Mr. Kaiser was inevitable.

“It’s the elephant in the room,” he said. “Everybody and their dog at D.O.E. knew who he was.”

Republican questioners were alternately respectful of Dr. Chu, who won a Nobel Prize in physics, and condescending.

Joe Barton of Texas praised Dr. Chu’s integrity but asked about a decision that Dr. Chu approved, to allow Solyndra to restructure its loan and take in new money, putting the government second in line for reimbursement in case of liquidation. He said the 2005 law that established the loan program that said that in case of liquidation, the government “shall be”  first in line.

“Do you understand what the word ‘shall’ means?” he asked.

Mr. Stearns asked Dr. Chu whether the White House’s appointment of an outside expert to review the loan guarantee program reflected badly on the secretary. “Doesn’t this mean, simply, it does to me, that the president has lost confidence in you, your acumen, your financial acumen?” he asked.

Dr. Chu replied, “we welcome outside eyes.”

Mr. Stearns said, “you don’t take it as a personal affront on your integrity?”

“No,” said Dr. Chu.

Speaking to reporters at the end of about five hours of statements and testimony, all parties sounded feisty. Dr. Chu said: “We really have nothing to hide; we really have nothing to be ashamed about.”

He added that the government would have to help incubate new manufacturing industries, because this played to “the U.S. technological sweet spot,” which is the development of new technologies.

Mr. Stearns was later asked if he thought Dr. Chu should be fired. “My personal opinion is I think possibly he should be reassigned,” he said.

Mr. Barton was more charitable, but darker. “I think Secretary Chu is trying to be a team player,” he said. “I think probably he is taking the heat for some decisions out of his control.”

Article source: http://feeds.nytimes.com/click.phdo?i=cd1fa4f6ea3f671090b6e25f5f0e45a8