Archive for the ‘Market Protectionism’ Category
A survey by Public Opinion Strategies, a national Republican political and public affairs research firm with its roots in political campaigns, yet again not only illustrates how broad based support is for clean & renewable energy but also the issue by issue disconnects. A good piece here on the survey and the survey itself found here.
Everything you need to know about attracting mainstream capital to clean energy solutions.
A great read by Jigar Shah, founder of SunEdison, innovator of the solar power purchase agreement model and former CEO of the Carbon War Room. With real world examples in many energy related industries, Jigar outlines how entrepreneurs and investors can unlock the enormous potential that climate change represents. And how this can be done utilizing existing, commercial off-the-shelf technologies combined with new and innovative business models.
According to the International Energy Agency, $10 trillion can be invested profitably—today—in the world’s existing technologies, making Jigar’s plan of 100,000 companies each generating $100 million in sales a reality in catalyzing a new economy in the process.
A quote from the book that sums a large issue facing the solar industry, ““The utilities are playing this wrong, saying you’re with us or against us. It’s not the solar industry that’s the problem — it’s their refusal to recognize the benefits of new technologies.” I remember Jigar telling me years ago that the utilities where in trouble as distributed generation plants like solar are going to put an enormous pressure on them in the very near future. I was skeptical that the utility monopoly would be in trouble anytime soon.
Fast forward today and the writing is on the wall. With the exception of few forward thinking utilities, the majority are fighting back instead of embracing distributed generation and morphing their models to this new technological and business model. But this makes sense as the electric utilities have made large capital infrastructure and business investments with long amortization horizons and would of course fight for their profitability. Government regulators and the utility industry need to work on a coordinated and long road map fashion to transition to the rapidly evolving distributed generation model.Utility business model innovation can’t happen in a vacuum or without government guidance as its always been highly regulated contrary to the free market fundamentalist’s claims.
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
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.
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.Share this:
A new report from IMS market intelligence group shows just how large that dominance has become. Chinese crystalline
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.Share this:
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 3rd 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.Share this:
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.
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.Share this:
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.Share this:
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.Share this: