China: The fine line between fair competition and protectionism

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Since global economic ties are so closely meshed and dependent jobs are so numerous, a market intervention in the form of trade barriers would have fatal consequences for the European solar industry, writes Thorsten Preugschas.

Thorsten Preugschas is the chief executive of Soventix GmbH, a company that plans, builds and operates rooftop and free field solar systems worldwide.

"It is well known that solar module manufacturers in Germany and Europe are in crisis. This is also due to the fact that Asian modules and components, which are sold on the European market and which deliver a comparable performance, are offered at more competitive prices.

Critics of the anti-dumping complaint argue that it is knee-jerk protectionism to punish Chinese providers by levying import duties on Asian solar modules.

This is because artificial price increases of Asian modules also represent a distortion of competition that aims at restoring competitiveness of the more expensive European components.

Thereby, the actual, long-term goal is often ignored. Above all, the industry should focus on making solar energy competitive with conventional energy sources. This means that sooner or later solar energy has to become independent of subsidies, national regulations as well as feed-in-tariffs.

In many sun-rich countries this has already been achieved – even in Germany, a solar plant today already pays off if only 30% of the energy produced is self-consumed.

This is in part because resources of oil, gas and carbon are getting scarcer and consequently, their prices increase. Also, it is due to the fact that during the last years, investment costs for a solar plant decreased rapidly – an effect that has occurred not least thanks to the affordable Asian modules and components.  

In fact, a significant part of the solar industry is only able to operate successfully today because  they can either profit from favourable purchasing prices, or they are generating a large proportion of their turnover in Asian countries.

Machine manufacturers, chemical companies and not least also solar project engineers, wholesalers and installers belong to these beneficiaries.   

The current outcry of German module manufacturers is understandable. They are doing business in a highly competitive market segment that has produced many times more capacities in the last years than was actually demanded on the market.

Just as the entire industry – they as well are suffering from instable political framework conditions, which makes long-term planning difficult, if not even impossible. It was exactly this instability that has made investors and shareholders insecure creating a vicious circle as demand tumbled in one European country after the other.    

German producers might enjoy a moment of relief if prices were increased artificially. However, this cannot be a long-term solution. Besides the fact that the solar industry should become fully competitive as soon as possible, punitive tariffs on single Asian products bear substantial other risks.

It cannot be denied that the German economy, and in particular the solar industry, benefits from free trade with China. Key components of solar modules manufactured in Europe are often purchased in Asia, from glass to binding agents.

At the same time, machines and chemicals are exported from Europe to China. And the basis of solar energy, polysilicon, which is of course used in Asian modules as well, is in large parts imported from Europe and the US.

Since global economic ties are so closely meshed and dependent jobs are so numerous, a market intervention in form of trade barriers would have fatal consequences for the European solar industry.

As comprehensible as the fear of German module producers might be, the origin of their difficult situation cannot be found in affordable Chinese imports, but in the constantly changing solar politics, partly being a result of the financial crisis.

The consequences of import duties on the European photovoltaic market, as claimed by EU ProSun, are beyond imagination since the market being at stake does not only comprise module production but the entire value chain.

Soventix takes a stand for free trade and demands that the conflict is solved through diplomatic channels."

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