Milan Nitzschke is president of EU ProSun, an alliance of European solar firms whose complaint to the EU sparked an ongoing anti-dumping probe against China. EU ProSun says it represents the majority of solar manufacturing companies in Europe, and favours fair, free trade but argues that its members cannot compete with "the state capitalism of the People’s Republic of China".
"As Thomas Edison once said, 'I’d put my money on the Sun and Solar Energy, what a source of Power! I hope we don’t have to wait until oil and coal run out, before we tackle that.' Unfortunately it took over 100 years to develop the technology but solar energy has experienced massive growth in the EU.
Indeed, 75% of the global photovoltaic expansion in 2011 was installed in Europe, which is also where 75% of the globally installed PV capacity is located. McKinsey forecast that global annual installations of solar energy could increase 50-fold by 2020 compared with 2005, which happened to be the same year that China established a foothold in the EU market.
Since then, Chinese companies have captured over 80% of the EU market for solar products from virtually zero. EU manufacturers have the world’s best solar technologies but are beaten in their home market due to illegal subsidies and destructive dumping of Chinese solar products below their cost of production. Such practices have led to over 20 major European solar manufacturers going out of business already in 2012 alone. If China destroys the EU solar industry where labour accounts for less than 10% of production costs, then virtually all European manufacturing sectors and jobs are under threat.
We strongly believe in Europe’s solar future. Therefore, this summer we requested that the European Commission investigate illegal subsidies and destructive dumping by Chinese solar manufacturers. If the EU acts quickly, we have a chance to maintain a sustainable solar manufacturing base in Europe for the benefit of jobs, growth, innovation and the planet.
The aim of these duties is not to prevent fair competition by Chinese manufacturers, but merely to negate harmful dumping and subsidies sponsored by the Chinese government. Once Chinese manufacturers have to sell their products at a fair price, European manufacturers will be happy to compete with Chinese products just as they compete with producers from other countries such as Korea and Japan, whose own solar industries are also threatened by Chinese dumping.
China has no natural cost advantage over the EU given labour accounts for around 10% of production costs, and it must import raw materials and equipment to produce their solar cells and modules. However, Chinese companies are selling solar products in Europe far below their cost of production, with a dumping margin of 60 % to 80%. This means that Chinese solar companies are making enormous losses, but are not bankrupt because they are bankrolled by the state.
European industry does not want to increase prices but rather stop the current ruinous race to the bottom. Any measures to level the EU playing field will in any event not halt the long-term downward trend in module prices. A recent study by AT Kearney showed that solar system prices could decline by 50% across the EU by 2020. Over the last 20 years the price of solar modules decreased by over 20% every time the volume of solar modules doubled. As the price of solar installation continues to decline sustainably, demand and local installation jobs will increase accordingly.
With technological advances, the costs of producing solar panels has come down substantially, but prices in the last three years have come down much faster due to the dumping of subsidised Chinese production. Costs and prices should continue to decline steadily as this technology continues to develop. Hence, demand for solar systems and local installation jobs will not decrease if anti-dumping measures are imposed on unfairly traded imports from China. Trade measures would only restore fair competition with China, and prevent a monopoly over solar manufacturing that would be bad for European consumers, jobs, installers and industry.
Chinese government subsidies are only available to Chinese companies. Massive subsidies and state intervention have stimulated overcapacity more than 20 times total Chinese consumption and close to double total global demand. Hence, more than 90% of Chinese production has had to be exported. Irrational overproduction on this scale cannot generate profits. Chinese subsidies shield manufacturers from insolvency, and are pumped into solar companies even if they are unprofitable. Most Chinese solar companies would have gone bankrupt a long time ago if not for endless government subsidies.
The US government recently determined that 12 categories of Chinese subsidies for its solar manufacturers were illegal, and that Chinese exporters have dumped solar cells in the USA at margins between 30% and 250%. The US Department of Energy estimates that the Chinese government has provided its solar manufacturers with more than €25 billion of subsidies including low interest loans, free land, and subsidised energy.
EU ProSun has identified many forms of significant government subsidies to Chinese solar manufacturers. For instance, Chinese banks implement government policy by giving preferential terms to solar manufacturers, and, if a borrower cannot pay back its loans, they may be written off, extended indefinitely or paid off by other government-controlled entities. This makes it easier, cheaper, and a lot less risky for Chinese solar companies to obtain financing.
In accordance with China’s five-year plan through 2015, credit lines have been granted by the state banks at very favourable lending conditions and subsidised by funds at all levels of government. One bank alone - China Development Bank Corp. - has extended €33 billion in credit lines to 12 Chinese solar companies since 2010, according to Bloomberg. Additional regional and local subsidies have been granted, such as the repayment of interest, electricity costs, and transaction costs for land, as well as credit guarantees.
Unless the EU takes urgent action, there will no longer be any manufacturing or R&D solar jobs left in Europe, in the face of such aggression from China."