Technology Transfer: Chinese Solar After the Paris Agreement

March 16, 2016 | 00:00
Technology Transfer: Chinese Solar After the Paris Agreement
Technology Transfer: Chinese Solar After the Paris Agreement
The Paris Agreement was debated and adopted by consensus during the 21st Conference of the Parties (COP21) of the United Nations Framework Convention on Climate Change (UNFCCC) in Paris in late 2015. Although not perfect, one of the positive outcomes is a strengthening of cooperation on clean energy technology to aid nations to transition toward low-emission climate protecting economies. A shadow remains over this accord however with the wrangling in Europe, and to some extent the USA, regarding the importation of Chinese solar PV arrays and cells. This issue came to prominence during 2011-2012 when an EU trade case investigated the ‘dumping’ of cheap Chinese solar panels in the European market to undercut European manufacturers. The result was an agreement between Europe and China in 2013 of a minimum import price for Chinese solar panels of €0.56 per watt, which was designed to run for two years and provide a level playing field in Europe for solar panel producers. Some Chinese manufacturers (Canadian Solar, ET Solar and Renesola) violated the terms of the agreement in 2014 and had an anti dumping tariff of 47.6% imposed, effectively pricing them out of the EU market. Most Chinese companies have respected the Minimum Import Tariff (MIT) and in some instances it has been beneficial to them as well as they increase profits. However the whole point of the MIT was to maintain the level of solar take up across Europe and protect EU solar manufacturers. The question must be asked – has this been a success?

Solar in Europe and the backdrop


In the period 2011 to 2015 what has happened to solar PV installation across Europe? Well the simple answer is that according to a recent report from Solar Power Europe the level has fallen from 22.6Gw in 2011 to 7Gw. This may of course also be due to prevailing economic conditions in the European renewable energy market, which has seen an economic slow-down, a reduction in subsidies and feed in tariffs for solar energy and a resultant slow down in the level of private investment. According to Sir John Baker CBE, speaking at a UK energy forum at Instinctif in London on 8th March, significant barriers remain with a reluctance of investment from both private and public sources. This of course is in direct contradiction of the Paris Agreement, which now demands massive investment into renewable energy in the achievement of a low carbon economy. So how does the MIT for Chinese solar panels fit into this scenario? Has the MIT served its purpose and now need to be scrapped to allow an influx of cheap Chinese solar cells and modules across Europe to fill the gap in demand and build zero carbon generating capacity? Currently The EU Commission is in the process of gathering evidence to review if the MIT has been effective and needs to be maintained. The expiry review process could take 15 months and during that time the MIT will remain in place and run contrary to the Paris Agreement. The majority of solar market interested parties believe this will slow down investment into solar energy across Europe and ultimately damage the market and cost jobs, particularly in the downstream sectors.

What the regulators say


There are two main points of view in this case with solar trade associations across Europe, the Renewable Energy Association and Solar Power Europe all calling for the MIT to be dropped to establish a free trade market and stimulate the installation of solar power across Europe. On the other hand there are a number of solar companies that have gathered under the banner of the European solar power initiative ProSun who argue that protecting the European solar panel market from cheap Chinese imports is the only way to go to maintain profitability for European companies. Milan Nitzschke, President of EU ProSun and VP of Europe’s major solar panel manufacturer Solar World, told EER that “dumping cheap goods in a market economy is the greatest threat for competition, jobs and innovation. As long as Chinese manufacturers fail to comply with basic international trade and competition rules, the EU must maintain the measures in full force and effect.” James Watson, CEO of Solar Power Europe, expressed a contrary opinion saying that “there has been a deceleration in the market for solar PV in Europe due to the MIT and tariffs and this is not what we need at the moment. We need to demonstrate a stable and predictable economic and political framework to encourage investment”.

The two arguments


The Solar Photovoltaics Jobs & Value Added in Europe report, published by Solar Power Europe in November 2015, shows that over 100,000 jobs have been lost across the solar sector in Europe during the period from 2011 to 2014. The report also highlights the potential of a post-MIT period where free trade will allow the creation of 50,000 jobs by 2020. The majority of this employment is expected to be in the downstream sector, but according to James Watson there is great potential in the area of balance of systems (inverters and switchgear), which will be in demand if the solar market in Europe can recover. Lauren Cook, the solar policy analyst of the UK’s Renewable Energy Association, is concerned that European production capacity of solar panels is low with a number of manufacturers being lost and that with the price of solar panels falling by 70% across the rest of the world Europe is missing an opportunity to bring solar power to the forefront of renewable energy. Cook said “grid parity for solar is within our reach without protectionist interference … solar PV is much faster to plan and install than other technologies and we need to remove the tariffs and act now to give Europe a low carbon future”. Seb Berry, Head of Public Affairs for Solar Century, said “There is no question that the Commission’s retention of the MIT during the expiry review has damaged the wider European solar sector … Artificially driving up the price of solar in the EU market also contradicts the EU’s wider climate change and renewable goals”. There is a drive towards removing the MIT supported by “99% of the UK solar industry and the UK Government” according to Berry but the other side of the argument presented very eloquently by Milan Nitzschke is also valid.

Nitzschke believes that EU ProSun members are able to compete on level terms with any solar manufacturer in the world but not when Chinese solar panel producers are supported by the state capitalism of the People’s Republic of China. “EU solar manufacturers went bankrupt and the industry was damaged by the massive subsidisation and dumping of Chinese solar panels in the EU” said Nitzschke. He also has evidence that some 30% of Chinese solar panel imports into Europe were able to bypass the MIT and anti-dumping rules by being routed via countries such as Taiwan and Malaysia that weren’t subject to the tariff. “Minimum import prices should continue to support the few EU solar producers left and build a real market economy that will promote quality solar equipment, investment in new technology, new jobs and ultimately grid parity for solar”. Nitzschke is an economist of some standing and believes that the Chinese government are supporting loss making solar companies with massive loans that will never be paid back and are, in common parlance, ‘throwing good money after bad’. “These are zombie companies that are making a loss but know they will still get state money to get them out of trouble” said Nitzschke.

The outlook and decisions


Renewable energy using solar power is at a crossroads in Europe. EU has undertaken an admirable promise via the Paris Agreement to build zero carbon generating capacity and promote technology transfer. The problem is, as always, investment capital is required and with solar panel prices at their lowest ever it should make sense to buy equipment on the world market and install massive solar capacity. Milan Nitzschke is just trying to protect European jobs and the EU solar industry who will develop innovative technology over the long term. James Watson, along with many others, is taking more of a market forces view where ultimately the price will dictate investment into solar energy. The EU Commission conducting the expiry review is literally between Scylla and Charybdis as they want to encourage investment into solar power across the EU but also have a political obligation to protect European industry, trade and jobs. James Watson believes that the MIT will be relaxed but possibly in stages, cells first and modules later. “Ultimately if the price of solar is too high there is a ‘double whammy’ where demand is reduced and the ability to bid for projects in the post-FIT (feed in tariff) contracts for difference era will be stifled.” Europe needs to promote investment into new solar capacity across the continent but industries and jobs must be protected. This is the tightrope the EU Commission must walk. Surely the long-term answer for EU solar manufacturers is investing in the next generation of more efficient solar panels via the solid base of European academic expertise.



Image: Made in China. By: Martin Abegglen, CC-BY licence.
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