When the EU first imposed tariffs on Chinese solar modules in 2013 I thought it was a rather senseless thing to do.
I did not think it would help the ailing European manufacturing industry.
I did not think it would benefit the remaining European players in the solar value chain.
I did not believe that anyone would build a new solar factory in Europe.
I did not think it would be good for the consumer, who would have to pay more for solar.
I also thought it would have a negative impact on solar installations across Europe.
And finally, I thought it would strengthen the financial positions of the Chinese producers, by enabling them to sell into European markets at a higher price than they would have been able to otherwise.
The only positive benefit I perceived was that it would be good for SolarWorld, who was responsible for bringing the case against the Chinese in the first place.
Well, all these beliefs came true.
Starting in February 2014, SolarWorld completed a financial restructuring, which saw a reduction in its financial liabilities of 57%, and the gain of a new strategic investor, while converting its remaining financial liability, circa $500 million, into two new five-year bonds.
In the meantime, European solar capacity installations fell from 16.9GW in 2012 to 9.2GW in 2013 to 8.6GW last year with a further fall expected this year. Successful companies across the solar value chain such as SMA, an inverter company, and Wacker Chemie, a silicon manufacturing company, have been negatively impacted by the tariffs. The negative impacts have been felt by European developers, wholesalers and installers alike. And even with the tariff intended to benefit the customer, they are paying more for modules than they would have been without them.
Even worse, the so called Minimum Import Price (MIP), set by the EU in the agreement for Chinese solar products, was raised earlier this year from €0.53 per watt to €0.56 per watt. Meanwhile, prices in many Asian markets are as low as €0.40 per watt and solar production costs have fallen by 15-20% over the last two years. And selling into Europe at these higher prices now means that many Chinese solar businesses are stronger than before. This can be clearly seen in the gross margins of the publicly listed Chinese companies: Yingli, Canadian Solar, Jinko, Renesolar and Trina, all of which have seen gross margins improve by 10 percentage points since the tariffs were imposed. These companies are all now profitable, unlike in 2013 prior to the tariffs established to protect the European solar industry.
And, guess what, there have been no new solar companies formed in Europe over the past two years. What’s more, the higher priced Chinese modules have not slowed the decline of European solar manufacturing. To the contrary, between 2013 and today, we have seen a significant decline in European companies, as Solarion, Solon, Q-Cells, and Avancis, have all ceased production. In addition, we have seen a high quantity of bankruptcies downstream amongst solar developers, installation companies and the balance of system manufacturers, such as inverters, who uniformly witnessed their [solar The good news is that the current Minimum Import Price (MIP) agreement will expire in December 2015. The bad news is that ProSun, an organisation backed by SolarWorld, is likely to request a review of the existing tariffs. If they are successful, the current measure may be extended for a further 15 months. That would certainly be great news for SolarWorld, and their bond and shareholders.
However, the evidence shows, this would not be good for the customer, trying to capitalize on falling solar module costs; the dwindling European solar industry, struggling under this failed tariff’s imposition as noted by the EPI’As a European solar trade association, opposition to its extension; nor for the global environment, requiring by all accounts, a higher rate of renewable capacity installation to combat climate change.