The ITC agreed in a 6-0 vote that Chinese solar producers have benefited from illegal subsidies from the Chinese government and sold products at below fair market value. The ITC’s findings corroborate with the decision by the U.S. Commerce Department in October. The two agencies have to agree on the allegations before the tariffs set by the commerce department last month officially take effect.

Whether slapping tariffs on imported Chinese solar cells will achieve the ultimate goal of the trade dispute – to even the playing field and foster healthy competition – remains to be seen. So far, the dire predictions about the impact of tariffs from both sides of the disputes haven’t taken hold even though the U.S. government began collecting tariffs –as a result of a preliminary decision by the commerce department – earlier this year. The government collected the tariffs retroactively.  Those tariffs will be returned, though, because the ITC didn’t agree with that decision by the commerce department.

Though the tariffs are in place going forward, Chinese companies already have found ways to minimize their impact. They can sidestep the tariffs by using solar cells made in countries other than China and assemble those cells into panels in their factories in China. This approach raises the production cost but not as much as what paying the tariffs would entail. Major Chinese solar manufacturers include Suntech Power, Trina Solar, Yingli Green Energy and JA Solar.

The ITC decision drew to a close a contentious fight brought by a group of U.S. solar cell and panel makers led by SolarWorld, who filed the complaint in October 2011 as the global solar industry saw a rapid decline of solar panel prices because supply far exceeded demand. That glut, which began in early 2011, has contributed to the bankruptcies of dozens of solar cell and panel makers worldwide and stirred up strong resentment against Chinese solar manufacturers, who rose to dominate the world market in the past six years. Silicon solar panels are made up of rows of solar cells, and Chinese companies that make solar panels typically also produce their own solar cells.

Both Solyndra and Abound Solar cited the Chinese companies’ ability to lower prices quickly as a reason for their demise. Solyndra, which is still going through the bankruptcy proceedings, filed an anti-trust lawsuit against Chinese solar manufacturers last month and is seeking $1.5 billion in compensation.

The glut of solar panels has remained, the prices of solar panels are still falling, and the number of manufacturers that are leaving the business is still increasing. GTM Research has predicted that 180 solar panel makers worldwide will disappear by 2015.

The intense competition has triggered similar trade complaints against Chinese manufactures in Europe. The Chinese government, in turn, recently filed a complaint with the World Trade Organization over government subsidies received by European solar panel makers.

On the other hand, the falling prices for solar panels have been a boon for companies that buy and install solar panels. A group that formed to oppose the U.S. trade complaint includes not only Chinese solar manufactures but also project developers and residential solar service providers. Most of the solar power projects that are bidding for power sales agreement contracts with utilities propose to use solar panels instead of other types of solar technologies.

The intense competition, bankruptcy filings and the difficulties of making profits also have generated concerns about the quality of solar panels being made these days. At a conference last week, a Wells Fargo executive said he had been noticing a fair number of substandard solar panels because manufacturers were “cutting corners.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• After Solyndra: analyzing the solar industry
• Green IT Q3: Solar stumbles while car sharing zooms ahead
• Cleantech and investment in 2013

The commerce department’s decision capped a year-long investigation to look at whether Chinese silicon solar cell makers have received financial and other help from the Chinese government that gave them an unfair advantage over rivals, and whether they have been selling products at prices that are less than their production costs or less than what they sell in their home market. The complaint, filed last October, came from a group of solar cell and panel makers led by SolarWorld. The tariffs are meant to counter the effects of the unfair government subsidies and pricing practices.

Solar cells from Suntech Power, the world’s largest solar cell and panel maker, will be hit with a 31.73 percent anti-dumping duty, which is a slight increase from the preliminary tariff of 31.14 percent that the commerce department issued in May. Trina Solar’s cells will face 18.32 percent opposed to 31.22 percent. Other solar cell makers that asked the commerce to hand out specific tariffs will get 25.96 percent instead of 31.18 percent. The rest of the Chinese manufacturers will face 249.96 percent, the same as the preliminary tariff. But the amount that these companies or their importers will fork over will be lowered by 10.54 percentage points in order to avoid double-counting an export subsidy, the commerce department said.

The commerce department significantly upped the anti-subsidy tariffs, however. Its preliminary tariffs, handed down in March this year, were less than 5 percent for all Chinese solar cell makers. But its final decision has increased that from 2.9 percent to 14.78 percent for Suntech, 4.73 percent to 15.97 percent for Trina, and 3.59 percent to 15.24 percent for all the rest.

Overall, the final decision gave Suntech a slightly higher combined rate, and the same for companies that didn’t ask for specific tariffs. Trina and those who asked for individual tariffs, such as Yingli Green Energy, now face lower combined rates.

Suntech, which already is reeling from a financial fraud in Italy, saw its founder stepped down as CEO in August. Earlier this week, Suntech announced plans to reduce production and other steps to reduce its costs.

Both the anti-dumping and anti-subsidy tariffs apply only to silicon solar cells made in China. Silicon solar cells are the dominant form of solar cell and panel production and and Chinese manufacturers have squeezed out rivals in Europe, Japan and the United States in recent years. The tariffs would be paid by whoever are the “importers of record,” and that could be the manufacturers themselves or their customers.

SolarWorld was hoping that the commerce department would impose tariffs on Chinese solar panels as well, but the commerce department didn’t budge. Adding solar panels would’ve inflicted a greater pain on the Chinese companies, many of which sidestepped the preliminary tariffs by using solar cells from countries such as Taiwan and assembling the cells into panels in China.

SolarWorld, which is based in Germany and runs a factory in Oregon, said previously that tariffs are necessary to help American manufactures stay competitive and in business. The other side, which includes not only Chinese manufacturers but also project developers and equipment retailers that have benefited from cheaper solar panels, warned of rising installation costs and severe job losses. As we pointed out last week, neither prediction has come true so far since the preliminary tariffs went into effect.

In fact, solar panel prices have continued to fall because of other global economic market forces at work. The biggest factor: supply and demand remains out of whack for the global solar market. The glut began to show its impact and push down solar panel prices in early 2011, and its presence still lingers. Chinese manufacturers have continued to suffer big financial losses, along with their rivals in Europe, Japan and the U.S. After building up a big solar manufacturing base and export business, the Chinese government now is reportedly working on rescuing some of the biggest solar manufacturers and forcing a consolidation.

But lower panel prices have benefited project developers and installers. The U.S. market for solar panel installations is forecast to grow 71 percent in 2012 from the previous year.

The commerce’s decision isn’t the end of the trade case though. The U.S. International Trade Commission is investigating the same complaint, and it’s set to decide whether Chinese manufacturers’ actions have hurt American manufacturers. The final decision on the tariffs by the commerce department will be in effect only if the trade commission finds that American manufacturers have suffered harm. The commission, which did find harm in a preliminary decision last December, is set to issue its final decision on Nov. 7.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• After Solyndra: analyzing the solar industry
• Cleantech third-quarter 2012
• Green IT Q3: Solar stumbles while car sharing zooms ahead

The year-long trade case has divided U.S. solar companies — from manufactures to installers and project developers — over whether imposing tariffs on Chinese manufacturers will reverse a sorry streak of factory closures and bankruptcies. The case is now before the U.S. International Trade Commission, which held a final hearing on the case yesterday and plans to issue a decision by Nov. 7. The U.S. Department of Commerce is due to issue its final decision next Wednesday.

Both the commission and the commerce department have issued preliminary rulings that found fault with Chinese companies. The commerce department imposed preliminary tariffs of less than 5 percent for the subsidy claim and roughly 31 percent for major Chinese players and nearly 250 percent for the rest for the anti-dumping claim. The commission’s job is to determine whether Chinese manufacturers’ actions have hurt American manufacturers. The final decision on the tariffs by the commerce department will be in effect only if the trade commission finds that American manufacturers have suffered harm.

The trade complaint alleges that the Chinese companies, which have risen to dominate the global solar manufacturing market over the past five years or so, have received unfair subsidies from the Chinese government and that has enabled them to sell their products at below fair market values.

Doomsday prediction

When a group of manufactures, led by SolarWorld, filed the complaint against Chinese silicon solar cell makers last October, predictions about the positive or dire impact of the case began to fly. SolarWorld, which is based in Germany and runs a factory in Oregon, said tariffs are necessary to help American manufactures stay competitive and in business. The other side, which includes not only Chinese manufacturers but also project developers and equipment retailers that have benefited from cheaper solar panels, warned of rising installation costs and severe job losses.

So far, the gloomy picture of rising solar panel prices and project costs hasn’t materialized. As we pointed out back in May, when the commerce department issued the tariffs for the anti-dumping claim, other market forces and clever strategies to side-step the tariffs (or the willingness by manufactures to absorb tariffs without raising prices) meant consumers weren’t likely going to feel the pinch. The U.S. market for solar panel installations is forecast to grow 71 percent in 2012 from the previous year. Leases have become a popular way for homeowners to go solar. Solar panel prices have continued to fall since those preliminary tariffs went into effect.

Meanwhile, the preliminary tariffs haven’t provided much breathing room, if at all, for many American solar manufacturers. Many venture-backed startups have gone bankrupt or they are getting snapped up on the cheap. MiaSole, which makes ultra-thin solar panels using copper, indium, gallium, and selenium, is being sold to China-based Hanergy for $30 million (a fraction of the amount of venture capital it raised). First Solar and SunPower are still struggling and working on strategies that will make them less susceptible to the price swings in the wholesale market for solar panels. GE put on hold its dream of becoming a major solar panel maker by not completing a factory in Colorado.

Solar bumper crop

So what’s going on here? Essentially supply and demand remains out of whack for the global solar market. The glut began to show its impact and push down solar panel prices in early 2011, and its presence still lingers. Chinese manufacturers have continued to suffer big financial losses, along with their rivals in Europe, Japan and the U.S.  Of course, the Chinese companies may experience a tougher time in the U.S. market if the commerce department ends up levying much heavier tariffs.

Suntech’s new tech

Despite the bumper crop, producers of silicon, which is used for making most of the solar panels on the market today, plan to bring more factories online, according to NPD Solarbuzz. The global production silicon production capacity will likely grow 22 percent in 2012 and another 18 percent in 2013. Prices for silicon could drop by 52 percent this year, Solarbuzz said.

While the U.S. is wrapping up the case against Chinese companies, solar trade disputes have cropped up elsewhere. Trade complaints against China have now been filed by SolarWorld against Chinese manufacturers in Europe. The Chinese government, which is reportedly working on rescuing some of the biggest solar manufacturers, is looking at imposing tariffs on silicon from the U.S.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Flash analysis: lessons from Solyndra’s fall
• After Solyndra: analyzing the solar industry
• A 2011 Green IT Forecast

I was reminded of this tension when a SolarWorld executive asked me jokingly (or not) why the lanyard for my badge featured Suntech Power’s logo, and if I could be fair in my coverage if I was willing to wear that? As I looked around the conference, I saw a number of people sporting plain lanyards with no logos — I guess I should bring my own lanyard from now on.

Notwithstanding the controversy surrounding the trade dispute, the trade show offered an interesting look at prototype solar panels, robotic technology, marketing strategies and politics. Some solar companies highlighted how efficiently their solar cells and panels can convert sunlight into electricity. This marketing reflects the pressure manufacturers are under to boost those efficiency figures quickly because doing so cuts costs.

And given that where stuff is made carries a political overtone these days, it was not surprising to see companies such as Stion splashing the image of the American flag as the backdrop of its booth. On the other hand, Shinsung Solar Energy was proud to use “powered by Korea” as part of its slogan.

Here are some highlights from the trade show:

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• After Solyndra: analyzing the solar industry
• Green IT Overview, Q2 2010
• Green IT Q1: Cleantech Breaking Out — and Bracing for Hard Times

As you can see, the list is dominated by Chinese companies, though U.S. firm First Solar is now the largest. Lux Research also says that Japanese solar thin-film maker Solar Frontier is within the top 25, and the researchers “expect to see a major rise in market share from Japanese and Korean suppliers.”

And the results:

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• After Solyndra: analyzing the solar industry
• Cleantech third-quarter 2012
• Green IT Q4: solar, subsidies and the outlook for EVs

“We are in a position to be on the offense,” said Tom Werner, SunPower’s CEO, during a conference call with analysts to discuss the company’s earnings.

A big part of that offense will rely on major financial support from Total, which bought 66 percent of SunPower’s common shares over the past year and pledged to provide a line of credit, a 4-year R&D fund of $24 million, and other help to push SunPower’s project development business.

Werner called 2012 a “transitional year” for the solar industry. In 2011, a glut of solar panels caused prices to fall around 50 percent and contributed to a trade complaint against Chinese silicon solar cell and panel makers. The U.S. government is reviewing the complaint and considering whether to impose what could be hefty tariffs on Chinese imports.

The projects

The company’s solar project business in North America looks good, said Werner. The construction start of the 250 MW California Valley Solar Ranch project, which nabbed a $1.24 billion federal loan guarantee, will boost SunPower’s financial numbers.

Werner highlighted three contracts totaling 711 MW that the company signed to sell power to Southern California Edison, though SunPower isn’t scheduled to start delivering electricity until 2014. A more immediate deal involves shipping 54 MW of solar panels and related equipment for power plants to NRG Solar in 2011 and 2012.

No analysts on the call asked about the trade secret theft lawsuit that SunPower filed against SolarCity earlier this week, probably because SunPower executives weren’t likely to say much about it. But one analyst did ask SunPower to describe its program that offers leases to homeowners and how it compares with SolarCity’s. Leases allow homeowners to pay for the power produced by the solar panels monthly rather than the price of the solar energy equipment and installation. It’s becoming a popular way for consumers to avoid the expensive upfront cost of installing solar equipment and enjoy the promise of a smaller utility bill.

Werner and two other SunPower executives told the analysts that the lease program is a good fit because it rewards high energy production, and SunPower’s solar panels happen to be able to convert more sunlight into electricity than its rivals’. They added that SunPower has a big network of installers in which to market the leases, and its connection to Total means it can provide more competitive financing rates.

The numbers

SunPower reported $563.4 million in fourth quarter revenue, down nearly 40 percent from $937.1 million in the same quarter in 2010. It posted a net loss of $83.1 million, or $0.84 per share, compared with a net income of $152.3 million, or $1.44 per share from the year-ago quarter.

For 2011, SunPower generated $2.31 billion in revenue, up 4 percent from $2.22 billion in 2010. It recorded a net loss of $603.9 million, or $6.18 per share, whereas it posted $178.7 million, or $1.75 per share, in net income in 2010.

The company is expecting some improvements in sales for 2012. Revenues for the first quarter will likely reach $420 million to $495 million (its first-quarter in 2011 was $451.4 million). But it expects to post more losses: $0.20 to $0.05 per share.  For 2012, the company anticipates generating $2.6 billion to $3 billion in revenues.

Photo courtesy of SunPower

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• After Solyndra: analyzing the solar industry
• Green IT Q4: solar, subsidies and the outlook for EVs
• Flash analysis: the Fisker debacle and its implications on investing, innovation, and government incentives

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Green IT’s Q4 Winners: Wind Power, Solar Power, Smart Energy
• Green IT Overview, Q2 2010
• Green IT Q1: Cleantech Breaking Out — and Bracing for Hard Times

In the ruling issued last Friday, the commerce department said it’s found enough evidence to show that Chinese manufacturers might have benefited from illegal subsidies back home and that they might have shipped a much larger-than-usual amount of products into the U.S. in recent months to head off any decision by the government on the trade complaint.

The ruling is important because it paves the way for the commerce department to make another decision that could impose duties retroactively by 90 days. That means if the commerce department sides with SolarWorld and its coalition of manufacturers, then Chinese solar cell and panel makers (or their importers) will have to pay the so-called “countervailing duties” starting with their shipments made back in early December. The commerce department said Monday it plans to announce the official ruling for that on March 5.

Countervailing duties are meant to offset unfair subsidies in order to even the playing field. China is the biggest exporter of solar cells and panels into the U.S. Chinese companies have expanded production by gigawatts in recent years to take advantage of a growing demand for solar energy around the world. At the same time, the massive production also contributed to a glut of solar panels that led to a drop of around 50-percent in prices over the past year. The price collapse has cause big financial losses not just for Chinese companies but also manufactures from other countries as well, and it’s led to big layoffs, factory closures and bankruptcies.

The complaint, filed by SolarWorld and six other manufacturers (who wouldn’t reveal their identities publicly), contends that Chinese solar companies have received unfair government subsidies that allow them to sell products at far lower prices than their rivals from other countries. The U.S. International Trade Commission is looking at the same allegations, and both the commission and the commerce department have to agree in their final decisions before any duties become permanent.

The complaint has deeply divided the solar industry. On one hand the petition calls for creating a fair marketplace by following U.S. and international laws. On the other hand, the rulings outcome could lead to an increase in solar panel prices and that goes against the industry’s goal of reducing solar energy costs so that it’s more expensive than power from coal or natural gas power plants (and it could reduce profits for developers, too). Some U.S. manufacturers also worry that the complaint will invite retaliation from the Chinese government, which already has vowed to investigate whether the U.S. government has unfairly subsidized its silicon producers. The U.S. sells a lot of silicon and solar factory equipment to China.

The commerce department hasn’t indicated how much Chinese manufactures might have to pay for the countervailing duties. It’s still investigating the claim that Chinese silicon solar cell and panel makers have received Chinese government subsidies that has made it difficult for their rivals in the U.S. to compete fairly. The commerce department will have to calculate the amount of unfair subsidies before deciding how much countervailing duties it will impose on Chinese imports, said Tim Brightbill, the lead attorney for the SolarWorld-led group.

Anti-dumping

The complaint isn’t just asking for countervailing duties to be imposed on imported silicon solar cells and panels from China. There is a second part to the complaint that accuses Chinese companies of flooding the market with cells and panels at prices that are less than the production cost or less than what they sell at home, Brightbill said.

The anti-dumping complaint could lead to additional duties being imposed on Chinese solar cell and panel. The commerce department is looking at whether Chinese companies are selling their products at anywhere from 50 percent to 250 percent below the fair market value. What that below-market value is will help determine the amount of anti-dumping duties. For example, a $100 shipment of solar panels with a 250 percent anti-dumping duty will require the manufacturers or importers to pay $250 to the U.S. Customs. The commerce department is scheduled to decide on the anti-dumping claim on March 27, SolarWorld said.

If Chinese companies have to pay countervailing and anti-dumping duties, they will have a hard time finding customers in the U.S. Major Chinese solar companies, such as Suntech Power, Trina Solar and Yingli Green Energy, all have publicly refuted the allegations. Trina, in particular, said last week that it shipped more solar panels to the U.S. in the fourth quarter because there was a rush by developers to get projects underway before a key federal incentive expires on Dec. 31.

Resentment against Chinese manufacturers has been brewing for a few years now as they gained in size and influence with financial help from the Chinese government. SolarWorld, which is based in Germany but runs a factory in Oregon, has been vocal about fending off what it sees as anti-competitive practices by its Chinese rivals long before it filed the trade complaint with the U.S. government last October.

A group of project developers aligned with major Chinese solar companies last November to oppose the trade complaint. That group issued a report on Monday to highlight the number of jobs that it said will not be created if the U.S. government imposes heavy duties on Chinese products. The report, prepared by the Brattle Group, said a 100 percent duty on Chinese imports could cut the number of new jobs by up to 50,000 over the next three years.

Photo courtesy of Maxintosh via Flickr, Suntech Power.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• After Solyndra: analyzing the solar industry
• The race for cost-effective and efficient solar power
• Green IT Q4: solar, subsidies and the outlook for EVs

One of the reasons for these global solar struggles is thanks to Chinese solar manufacturers, which flooded the market with low-priced solar cells and created an oversupply. Global solar makers are having to sell solar below cost to just survive. While that’s bad for these companies, it’s good for the solar consumer, and also will lead to healthy consolidation in the overall solar market. There are also lingering effects of the recession on these solar firms.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• After Solyndra: analyzing the solar industry
• The race for cost-effective and efficient solar power
• Green IT Q3: Solar stumbles while car sharing zooms ahead

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Green IT Q4: solar, subsidies and the outlook for EVs
• The subsidy game for fossil fuels
• After Solyndra: analyzing the solar industry