An escalating row between solar panel makers stepped up a gear on Monday ( 5 November) when China complained to the World Trade Organisation that Italy and Greece had unfairly favoured domestic suppliers.
The International Energy Agency has predicted that solar power could provide “a third of the global final energy demand after 2060”.
But despite its huge promise, solar currently provides less than 1% of energy sold globally, in part due to its variable nature and low intensity. The main reason for this has been difficulties exploiting the resource on a large scale and at a competitive price.
Solar electricity will become attractive when it falls below "grid parity," the point at which renewable energy becomes cost-competitive with conventional sources like fossil fuels. Europe is nearing this point.
Favourable regulatory regimes and rapid technological evolution in the industry helped the sector to get onto its feet quickly. But many in the industry now fear that the sudden removal of tariffs, often retroactively as seen in Spain, is damaging future growth prospects, particularly in Europe.
China, the world's largest solar panel maker, accused the European Union of breaching world trade rules only days after saying it would consider blocking imports of solar technology from Europe.
It said the crux of its complaint centred on offers by Rome and Athens of higher electricity prices to solar power producers that use mainly locally sourced components.
Concerns that the financial crisis would bring simmering protectionist disputes to the surface proved misplaced until this year. During 2012 the WTO received 25 complaints compared to eight in 2011. Analysts blame the downturn in global growth this year for sparking a series of disputes that range from the US and Mexico complaining about Argentinian import restrictions on meat and fruit to objections from Brazil over South African anti-dumping duties on Brazilian frozen meat.
The biggest disputes involve the four major trading blocs – the US, China, Japan and the EU. Solar panels have become a flashpoint after Chinese panel makers maintained production despite a sharp slowdown in demand.
Washington has come under intense pressure to raise tariffs on Chinese goods after firms objected to panels being dumped in the US market.
Congress recently sanctioned sweeping restrictions on goods it says are dumped by China under rules allowing "the application of countervailing measures to non-market economy countries".
China has responded with a series of complaints to the WTO, one of which appears to be the same complaint that the EU and Japan have brought against Canada for protecting its solar panel industry.
"The Chinese government has the right and the responsibility to fight for a fair international trade environment for China's solar industry," Chinese Ministry of Commerce spokesman Shen Danyang said in a statement.
Shen said all countries should strengthen industry cooperation and reject short-term "protectionist" measures.
By lodging its complaint, China triggers the formal process for a WTO dispute and, if talks with the EU fail to resolve the issue, after 60 days it could ask the global trade body to adjudicate.
While Germany has built a strong domestic solar industry, much of it in the former communist region around Liepzig, Italy and Greece have struggled against local corruption and a reluctance among investors to build solar farms to replicate the same manufacturing base.
However, the EU is the world's largest market for solar products and is a particular target for Chinese manufacturers.
Tensions rose earlier this year after Chinese firms dropped their prices 30% after a long period of over-supply. EU countries accused the Chinese authorities of dumping artificially low cost panels that undermined domestic businesses.
About 60% of China's exports of solar panels and components went to the EU in 2011, generating €21bn (£17bn) and accounting for 7% of all Chinese exports to the region, according to Bloomberg.
A group of 25 European companies, led by Germany's SolarWorld, filed a complaint with the European Commission in September, claiming Chinese rivals were unfairly benefiting from illegal subsidies.
- June 2013: Deadline for EU to impose preliminary tariffs on Chinese solar cells, wafers and modules
- Dec. 2013: Deadline for imposition of final duties on Chinese solar cells, modules and wafers, following the conclusion of the EU's investigation