U.S. and China on Brink of Trade War Over Solar Power Industry

The Commerce Department in Washington on Wednesday opened an investigation sought by American manufacturers who accuse the Chinese of “dumping” solar panels into the United States at prices, aided by government subsidies, lower than the cost of making and distributing them.

Anticipating that move, the government-controlled Chinese solar industry has been unusually vitriolic this week. A trade group accused the White House of turning the commercial complaint into “a political farce, which is very likely a publicity show initiated by the Obama administration for the coming election.”

Meanwhile, a new American trade group was formed this week, representing buyers and installers of solar-energy systems. It argues that any new Commerce Department restrictions on Chinese solar panels would slow the adoption of clean energy technology in the United States and could cost thousands of American jobs. Some environmentalists also oppose policies that might slow the adoption of solar energy.

Solar power is a politically charged issue in Washington, in part because of the bankruptcy this summer of a solar panel maker, Solyndra, after it had received more than $500 million in federal loan guarantees.

The use of solar energy in the United States is growing fast, but Chinese solar panel manufacturers have been growing even faster, raising their American market share to more than half now, from almost none five years ago.

By bringing together complex issues like manufacturing policy, job creation and climate change, the solar panel dispute is emerging as the most politically charged trade case in many years, potentially rivaling Detroit’s legal case against Japanese automakers under a related trade statute in 1980.

The solar panel case “is one of those once-in-a-generation cases,” said Alan W. Wolff, a deputy United States trade representative in the Carter administration who is now the chairman of the international trade practice in the Washington office of the Dewey LeBoeuf law firm.

Although solar energy now contributes only about one-tenth of 1 percent of American electricity, the amount of new solar wattage installed in the United States has been growing more than 70 percent a year since 2008, according to GTM Research, a renewable energy market analysis firm in Boston.

Seven American manufacturers filed a legal petition on Oct. 19 seeking the Commerce Department investigation and asking that tariffs of more than 100 percent be imposed on solar panels from China. The filing accused the Chinese industry of using billions of dollars in government subsidies to help gain sales in the American market and dumping panels at very low prices.

Under American trade laws, Wednesday was the deadline for the department to either begin a formal inquiry — unless it judged the case to be groundless — or find that few companies manufacturing panels in the United States actually supported it.

Whatever action the American government might take, it could prove too late to save the American solar panel industry. China, whose government has been a big promoter of green-energy companies, already accounts for three-fifths of the world’s solar panel production, giving it enormous economies of scale.

And it exports 95 percent of its production, much of it to the United States, rather than using it within China. That has helped push wholesale solar panel prices down sharply — to $1 to $1.20 a watt of capacity today, from $1.80 in January, from $3.30 in 2008.

Although plunging prices could speed up the adoption of solar power, the American industry contends the Chinese are simply not playing fair. Besides Solyndra, two other American solar companies that together represented one-sixth of American manufacturing capacity in the sector went bankrupt in August, while four other American solar companies have laid off workers and cut output since spring of last year.

President Obama said in an interview on Nov. 2 with a television reporter from Oregon, the hub of the American solar panel manufacturing industry, that there were “questionable competitive practices coming out of China” in clean energy.

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