The US Department of Commerce has begun its investigation of a trade complaint accusing Chinese makers of solar PV modules of dumping their goods on the US market at less than the cost of manufacturing. The complaint also claims that China’s government pays subsidies to the country’s solar PV makers, a practice that is not allowed under international trade rules for exported goods. The Commerce Department now has four months to investigate and issue a preliminary decision on the dumping claim.

Seven US solar PV makers jointly filed the claim last month, but only the US unit of Germany’s SolarWorld was identified. Top US solar makers First Solar Inc. (NASDAQ: FSLR) and SunPower Corp. (NASDAQ: SPWRA) are not among the companies that signed on. No specific Chinese makers were identified in the complaint, but leading makers like Trina Solar Ltd. (NYSE: TSL), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), and LDK Solar Inc. (NYSE: LDK) are surely among the targets.

The solar industry in the US is divided, though, over this trade case. Solar system installers, like Real Goods Solar Inc. (NASDAQ: RSOL), Sungevity, and SolarCity, have welcomed the falling module prices because the lower costs mean more people are installing solar systems on homes and businesses. New financing schemes have enticed many homeowners and businesses to install solar panels at essentially no up-front cost and then pay a monthly rental fee or a monthly power usage fee. One might argue that the easy financing that is becoming available is more responsible for the increase in solar installations than is the low cost of the panels.

The Solar Energy Industries Association, a US trade group, issued the following statement when the complaint was filed: “Global trade in solar products has been good for the United States by expanding export opportunities for domestic manufacturers, creating jobs and driving down costs to consumers.” The group recognizes that most of the jobs being created in the US solar industry are not coming from manufacturing the solar cells and modules, but from making the other pieces that go into a solar system and from installing the systems.

The solar industry estimates that more than 100,000 US jobs are attributable to making, selling, and installing solar PV systems. Of that number, more than half are installers working for about 10,000 different firms. Some 25,000 jobs are classified as manufacturing, but of that number a generous estimate of how many are actually making cells and modules would top out at about 3,000. The rest make racks and glass and inverters. SolarWorld, the largest solar PV maker in the US, employs 1,300 people at its Oregon plant.

First Solar employs about 4,500 of its total workforce of 6,100 in manufacturing, but 4,100 of those manufacturing jobs are located in Malaysia, Germany, and Vietnam. SunPower employs about 5,150 people, of which 4,100 are manufacturing employees in the Philippines. First Solar planned to employ about 4,800 US workers at a new plant it was building in Arizona, but its recent stock price declines have put that project on hold for an unspecified length of time.

The Chinese government did make loans totalling more than $25 billion to many of its solar PV makers last year to support capacity expansion. Because so much of the country’s manufacturing capacity is dedicated to export, it is at least arguable that the Chinese are violating trade rules related to subsidies. As for the dumping charge, the Chinese claim that economies of scale are driving the price declines.

Penalizing Chinese solar PV makers with higher tariffs, if they are indeed found guilty of anti-competitive practices, will raise the cost of solar modules and US installers could find themselves scrambling for work. The impact of those job losses would be greater than any losses in the solar manufacturing space. Even if the Chinese are found guilty of dumping, the likelihood of a significant tariff on solar modules is fairly remote.

Even more remote is the likelihood that US solar PV makers will benefit significantly from a win. The federal government is unlikely to invest in new manufacturing capacity (think, Solyndra), and private financing for capacity expansion stands no chance of being offered. Why would a bank finance a facility that would be uncompetitive in its market? If First Solar, still the low-cost leader, can’t see its way to adding manufacturing capacity, there’s no reason to think that a smaller company has a better chance.

SolarWorld and its partners picked a good time to file this complaint. The Obama administration has to support the case because the issue has been framed as pitting US workers and US jobs against those cheating Chinese. Going into an election year when unemployment and a weak economy are sure to play a large role in the outcome, no President and no candidate is likely to come down on the side of the Chinese solar makers in this case.

Paul Ausick

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