Archive for the ‘Market Protectionism’ Category

The US PV industry as a whole is grappling with the solar import tariff petition by Solarworld which presents an interesting set of American made, American protectionist, and

Which Modules are BAA compliant for Government Procurement?

wider global trade issues. A great recap with citations of this complex situation which may result in substantial tariffs on solar PV modules that contain crystalline solar cells made in China can be found here.

Within the US federal agency PV market there is another set of complex American content regulations called the Buy American Act (BAA). (Not to be confused with the now expired and poorly written ARRA Buy American clause which governed rapid release of stimulus funds) The BAA requires that products purchased by the federal government must contain 50% or more US content, with finally assembly done in the US.  It sounds simple, but is highly complex to execute, with numerous contradictory requirements and a number “if this, but not this, then this” situations.

Solar PV modules that are sold to federal agencies fall under the BAA.  Fortunately, when it comes to crystalline PV modules, determining which modules are BAA compliant is slightly less complex.  The following is meant to clarify the basic situation but does not dive down into the many permutations and “what if” scenarios.

Example BAA Compliant Module BOM for Federal Agency Installations

To gauge whether a solar PV module is a fully BAA compliant product, the bill of materials (BOM)   needs to be examined. As the example industry average BOM to the left demonstrates, if the solar cell is not made in the US with final assembly in the US, the module cannot be BAA compliant. This is because the solar cell makes up at least 65+% of the completed module, depending on module design and provider.

While it’s fairly clear from this example which solar PV modules should be BAA compliant, the situation is confused by wording sometimes found in solicitations from US government agencies, such as: “ Products and materials employed to fulfill this project must be Buy American Act compliant but applied in a manner consistent with United States obligations under international trade agreements.” These trade agreements include World Trade Organization Government Procurement Agreement (WTOGPA), General Agreement on Tariffs and Trade (GATT) and other international trade agreements all of whose products are treated equally with American made goods provided certain requirements are met.  A good overview of the laws can found here which includes a list of countries with whom the US has signed agreements. Notably for the PV industry, China is not included.

As there is currently no guidance for which modules comply in which circumstances, it may be helpful to think of the situation in tiers, which prioritize the intent of the BAA act:

Tier 1 BAA Compliant PV Modules: Solar cells are made in the US with US final assembly

Tier 2 Trade Treaty Compliant PV Modules: Solar cells made in treaty country with final assembly in US

Tier 3 Trade Treaty Compliant PV Modules: Solar cells made in treaty country with final assembly in treaty country

This is admittedly a simplified explanation but puts the majority of module companies in easy to understand buckets.

Unfortunately there is no official BAA module list vetted independently under direction from a qualified agency. The US Department of Energy has provided a vetted list of lighting products which meet BAA and performance claims, so that government procurement and industry have a clear guideline on which lighting products are acceptable for a given procurement.  An agency such as DOE or DoD  energy should create a similar vetted list for PV modules, given the expansive planned use of PV in the next 10 years.

This topic is becoming increasingly important as PV systems are deployed in public private partnerships such as PPA, ESPC, UESC and other models where the government buys the energy from the system but not the system itself. This type of procurement puts the onus on the project awardees to self-certify BAA compliant modules with no guidance, oversight or penalties from the procuring agency.

And with many non- trade compliant PV module companies boldly claiming BAA compliance with modules made completely outside the US but with simple junction box installation in the US, now would be the time to put a vetted BAA qualified list in place before the problem escalates both programmatically and publicly.

I took some time off from posting here as a result of a number of events.

Two dear friends passed away in late June, it was good time to step away and reflect on what is important.

In July, I ended my PV industry consulting practice and have taken a position with Suniva, Inc., an innovative American manufacturer of high performance mono-crystalline solar cells and modules. As Senior Director, Federal Business Development, I lead the company’s efforts in assisting civilian and DoD agencies who are diligently working to meet aggressive renewable energy and energy efficiency mandates. With our project developer and EPC partners, we are providing knowledge, experience and products for high resiliency, highly reliable onsite solar energy generation to meet these challenging timelines.

Suniva’s very capable management team is focused on high efficiency mono-crystalline cells but without the corresponding high price which has been typical for this cell type. Using novel intellectual property developed in the U.S., the company excels at innovation both at the cell and module level and on the manufacturing floor, resulting in lower cost to compete on a global basis.

I will be back to posting weekly again going forward. I will also be posting to my twitter feed, @ peacesolar, with specific news and content for my government and business partners in the near future.

As I wrote previously here, here and here, Asian, and particularly Chinese, companies have rapidly dominated the PV solar energy industry in a mere 8 years.

A new report from IMS market intelligence group shows just how large that dominance has become.  Chinese crystalline

Going, going . . . .

module companies dominate the global market with 55% market share. Chinese wafer and cell manufactures also dominate their segment with over 80% market share.

China manufacturing dominance is not about cheap labor. Crystalline PV module and components production is a highly automated process. It’s a story of strong government support with a long-term focus, low cost capital, low cost real estate, and other government supports. With assistance of European and U.S automated production machine companies, Asian based PV product is high quality. We can file all the WTO actions we want, and there may be validity to the WTO violations claims, but the real issue is that the U.S. has not supported clean energy in any meaningful, sustained manner.  And by the time a WTO action has been arbitrated, their competitive advantage will be even greater.

The current budget debate on Capitol Hill doesn’t inspire confidence that this situation will change for the better.  While President Obama has vision of clean energy growth, the “slash and burn the budget with no regard to loss of jobs” extremists in the House of Representatives will make it difficult to change this devolving clean energy job situation. At a time when jobs are the number one political and economic issue, we have and continue to let the greatest new economic opportunity of our lifetime go overseas.

This is not idle speculation. The U.S. is on track to lose 2 million clean energy related jobs by the end of 2011. A successful demonstration of how to employ people in clean energy can be seen in California, where over 200,000 jobs have been created in the last 10 years as a result of strong state government support of implementation of clean energy projects.

China Makes Solar News at Climate Talks

Right after I posted the preceding blog about the difficulties in forecasting the global PV industry, China announced a large solar deployment plan at the COP 16 climate talks in Cancun, Mexico. While not on the scale of Germany over the last five years, this latest announcement from China will clearly have a positive impact on the supply demand situation if in fact Beijing follows though and is not just hand waving.

The December 3^rd announcement outlines China’s plan to install a minimum of 1,000 megawatts (MW) of solar energy capacity per year starting in 2013.  For comparison, one average coal burning plant has about 500MW capacity.

The announcement went on to describe 13 industry zones and that Beijing will pay up to half the price of equipment for solar PV projects. In addition, a subsidy of 4 to 6 yuan (60 to 90 U.S. cents) per watt of generating capacity will be rewarded to project owners.

As I noted in my 10/15/10 blog piece, this will almost certainly increase WTO violation allegations from the U.S. government and others.  But it will be a very long time before a WTO court can rule on these assertions.  Meanwhile, our U.S. government continues to dither on long-term PV manufacturing and project support while we concede further clean tech competitiveness and leadership.

An update to my blog post of September 23: the Obama administration has lodged a protest with the World Trade Organization. Prompted by the United Steel Workers Union petitioning of the White House, the accusation is that China is providing its domestic clean energy manufacturers with large benefits that violate international trade agreements.

China Based Solar Cell Production

It was recently reported that China now has over 40% of the solar PV energy manufacturing capacity globally. This was accomplished in less than 7 years. A product of systemic WTO violations by China? Hard to know.

While the outcome of this filing will take years, it is significant in that it’s the first US clean energy-related trade dispute which may receive too much attention. My hope is that the U.S. government will not lay all the blame on our lack of competitiveness on this less than clear trade dispute. The U.S. lost its clean energy-manufacturing base over the last 10 years by lack of long term, WTO legal stimulation and support measures. By some studies, the U.S. has lost over 2 million jobs as a result. It’s early in the global solar market development game and the first to market players are establishing themselves. Most of them are in Asia and Europe who have been reaping the employment benefits. Hopefully our government leaders will not focus entirely on the WTO proceedings which will be a distraction from the real need: substantive long term focus on stimulating and supporting US industries.

WTO Action or U.S. Action or Both?

The United Steelworkers union has filed a petition with the U.S. government alleging that China has ignored WTO rules.  According to a recent article in the New York Times, the U.S. solar industry could gain from this action.

The petition outlines numerous suspect subsidies, loans, grants, and finance instruments which implicate the Chinese government in violating specific WTO regulations.

As I wrote last week, China has been aggressive in supporting their solar industry base. However, while it remains to be seen whether there have been WTO violations, the U.S. government needs to step up now with solid long-term support for U.S. clean energy industries, whether enacting CO₂ regulation, a Renewable Electric Standard, or subsidy programs with extended time horizons.

A well thought out, long term, balanced energy plan is a sorely needed replacement for the short-term, brown fuel lobbyist-driven legislation that we seem to get every few years.  The continuously revised short term energy policy keeps the solar industry from attracting financing entities and market participants who plan over decades rather than year-to-year.  The result is an unhealthy boom-and-bust cycle in the solar and other renewable energy sectors that prevents steady jobs creation, tax base increase and economic activity throughout the supporting supply chains.

The Obama administration and the Democratic Senate and House made many campaign pronouncements about supporting clean energy and energy efficiency, but so far their record of meaningful long term legislation has been minimal. While the stimulus money was helpful, it is again a short window program.

China Based Solar Cell Production

As I wrote previously on this subject, Asian companies are investing considerable resources in their domestic solar energy manufacturing companies and now have over 50% global market share. While my concern is that the U.S. has been left behind in solar manufacturing, a few Asian countries may be violating World Trade Organization regulations. China, a recent signatory to the WTO, is under the microscope on a number of fronts (tires, steel, credit cards services) with actions pending, and solar energy manufacturing may be next in line. A good article here today from the New York Times illustrates the potential violations.

This is a difficult topic as the lines are blurry and the alleged violations hard to uncover and value, if past WTO actions are any indication. Clearly, Chinese companies are making both high quality product and big inroads on the global stage. But I believe the main competitive issue is the lack of U.S. government support to foster a strong American solar energy industry, regardless of the whether any WTO regulations were or were not violated. Stay tuned as I believe this issue may become more acute going forward.

As many experts in the solar energy industry have warned since earlier in the decade, the U.S has been at risk of losing the economic opportunity that new industries like the PV solar energy industry exemplify.  It is no longer a question of whether we will lose clean energy manufacturing, but rather how much of a net importer of these new products will the U.S. be, and how much money will we be handing over to other nations as a result?

Offshore Manufacturing Using High Throughput Lines

While China is in the spotlight on this issue, countries such as India, Taiwan, Japan, Korea, Malaysia and Germany have created environments hospitable to clean energy manufacturing, and are now the reigning powerhouses.  In a mere 6 years, the U.S. has fallen from #2 in manufacturing volume of PV modules and related products to a distant 6th position.

The typical mantra is that U.S. labor rates are too high to compete. While labor costs are a small part of the competitive advantage, the companies based in these countries have strong government leadership resulting in access to very low cost money to start and fund operations, access to low cost land and buildings for factories, highly subsidized training for skilled workers, and access to exceptionally low cost raw materials and upstream suppliers.

A Rare Sight

What is lacking in the U.S. is leadership, and a recognition that the “greatest economic opportunity of this generation” is about to slip away. A great piece of journalism on this subject by Eric Pooley in Businessweek entitled, “America Sits Out The Race” , highlights how our leadership is content to sit on the sidelines and let the U.S. clean energy industry become yet another low margin, low revenue service industry. Without leadership and decisive energy and carbon legislation, large market participants such as PSE&G, GE, Siemens and others cannot plan for the future and billions of investment capital sit on the sidelines.

In the latest example of this lack of leadership issue, on August 5th, Senate Democrats and the White House eliminated $1.5 billion of stimulus funding for renewable energy and electric transmission loan guarantees to offset part of a $26 billion state aid bill to put teachers and municipal workers back on payrolls. This on top of another $2 billion redirected from renewable energy for the Cash for Clunkers program back in Q1 of 2010. While these decisions may keep the teachers union and other constituents loyal for the mid-term elections, far more jobs and economic opportunity, as well as tax base, would have been generated by supporting renewable energy.  Numerous Department of Energy and academic institution reports have demonstrated these benefits in a variety of studies over the years.