With SolarWorld petitioning the Obama administration to impose tariffs on Chinese solar imports, a coalition of 25 solar companies has come out against the move, saying it could harm the U.S. industry. During today's OnPoint, Kevin Lapidus, senior vice president for legal and government affairs at Sun Edison and a representative for the Coalition for Affordable Solar Energy, explains why he believes SolarWorld's move is not in the best interest of the U.S. solar industry.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Kevin Lapidus, senior vice president for legal and government affairs at Sun Edison and a representative for CASE, the Coalition for Affordable Solar Energy. Kevin, thanks for coming on the show.
Kevin Lapidus: Thank you for having me.
Monica Trauzzi: Kevin, CASE is formed in response to the trade petition filed by Solar World against the Chinese government and you believe the action could threaten the U.S. solar industry. Why have 25 solar organizations come together against this petition?
Kevin Lapidus: Sure, so two primary points. First of all, this case is not good for U.S. jobs and it's not good for U.S. energy policy. The U.S. solar industry has 100,000 employees and it's expected to grow by 30 percent next year. This case will undermine that job growth. If projects are not economically viable, we will not build the projects, jobs will be lost. That's point one. Point two, in terms of energy policy, our goal is to do more solar projects. This case, increasing the cost, will make it very difficult to do increased projects next year.
Monica Trauzzi: OK, but Solar World's point here is that the Chinese government is essentially dumping solar panels and solar technology onto the U.S. market, which is then making it difficult for the U.S. companies to compete on a cost basis. Do you not see it that way? I mean what do you think the Chinese government is up to here?
Kevin Lapidus: Sure, so let's talk about costs. It's ironic that after years in which the criticism of solar energy was it was too expensive. Solar energy was not viable due to cost. We're finally delivering on the promise of solar energy. Our costs are coming down. This is a good thing for the industry. Jobs are growing in the U.S. because costs are reduced. For example, 57 percent of the U.S. job industry for solar energy are installation people. These are people who get up in the morning, put on a tool belt and go and build something. Those jobs will increase due to lower priced modules. That's number one. Number two, the part of the business market that Solar World represents is 2 to 3 percent of the U.S. job base. So, this is a situation where 2 to 3 percent of the jobs are being weighed against the other 97 to 98 percent. So net-net job growth will occur through the lower priced modules and not through the imposition of taxes or tariffs. I'd also note in this regard, if you look at balance of trade, the U.S. is a net exporter of solar materials. We exported, last year in 2010, on a net basis, over $1.9 billion, mostly polysilicon and construction equipment. And even to China we were a net exporter, $400 million of net exports. Jobs are in the other parts of the business, not in the 2 to 3 percent that Solar World represents.
Monica Trauzzi: So bottom line, do you believe there's any mishandling on the part of the Chinese?
Kevin Lapidus: So, let's talk about the pricing, because that's the heart of this case. There are three reasons why you can look at the price decline in the solar cells and modules. Number one, the price of polysilicon has come down dramatically. In 2008, polysilicon cost $500 per kilogram on the spot market. Today it's $30 to $35. Contracted polysilicon was $85 a kilogram in 2008, again, $30 to $35 today. Polysilicon is the main ingredient, the main cost component in cells and wafers. As polysilicon comes down, the price comes down. That's number one. Number two, solar incentives in the U.S. are designed to reduce the cost of all components. As the value of the incentives is reduced, it is basically a declining price ceiling on the cost of the components. We, Sun Edison, the developer, will pay less for the components because the revenue or the incentives is declining. And finally, number three, you have to look at thin film modules. Thin film modules are a ready substitute for polysilicon modules that are the crux of this case. And thin film is cheaper and has a declining cost curve. So, these are three reasons why the costs are coming down that are focused on the U.S. market.
Monica Trauzzi: So, President Obama himself has questioned what's happening in the Chinese market and he's acknowledged that some kind of investigation needs to happen. Do you think this matter should be investigated?
Kevin Lapidus: We welcome an investigation. We welcome people understanding the facts about this case, all right? That is the key for the coalition. So I've talked about the jobs that will be lost. This is an industry that's doing well on its own and will add 30,000 jobs next year before this case was brought that's now under threat. We are increasing the renewable installations in the U.S., so we're delivering on energy policy that is favored by this administration. So we do think it's important to understand the facts and the consequences of this case and we do welcome government intervention to help resolve this dispute. There could be a negotiated solution, so we do encourage the administration to understand the jobs and the environmental policy ramifications and to potentially assist in a resolution.
Monica Trauzzi: Are you concerned that the investigation could be mishandled or swayed by persuasive lobbying happening on the other side?
Kevin Lapidus: It is a complicated case and there are arguments being made on both sides. I will just focus on our goal, which is to educate the American population, politicians as well as others in the industry, about what the risks are if the tariffs are imposed. And those risks are very clear and they'll be immediate, because it's possible, in this case, you could see the imposition of tariffs as early as Q1 next year. What that means is decisions are being made today about installing projects and there are supposed to be up to $11 to $12 billion of energy infrastructure projects in the solar space installed next year that are under threat due to these tariffs. So, this is a real issue, it's an immediate issue. It will affect jobs, infrastructure investment that's sorely needed in this country, as well as our energy policy and these are American jobs we're defending.
Monica Trauzzi: So, if it's so clear that this is a bad move for the solar industry, then what is Solar World's motivation for moving forward with this?
Kevin Lapidus: Listen, I'm not going to malign a company. You know, they've staked out a position that's in the best interest of their 2 to 3 percent of the 100,000 U.S. solar jobs, OK? I'm here to represent the other 97 to 98 percent of those 100,000 jobs. I'm here to represent the 30,000 jobs we can add next year. I'm here to represent energy policy and I think when you weigh these issues, 2 to 3 percent versus the other 97 to 98 percent, it's clear what's in the best interest of America on this issue.
Monica Trauzzi: In CASE's press materials you specifically highlight the fact that Solar World has German operations. Do you believe that they're not acting in the best interest of the United States because they're sort of more of an international company?
Kevin Lapidus: Listen, again, I'm not going to malign anybody. They've done what they think is in the best interest of their company and their portion of the job market. I'm here to talk about, you know, the up to 40 companies already in CASE and growing, the fact that CASE represents almost 9 percent of the U.S. workforce and growing and our message is for the vast majority of the U.S. solar industry. That's how we'd like people to understand this issue.
Monica Trauzzi: Do you believe your viewpoint has been fairly represented to the ITC in their hearings?
Kevin Lapidus: Yeah, so I think the legal process has just gotten started and it will continue and there's really two phases. There's an initial decision that will likely come somewhere between January and March for part of this case, the countervailing duties, and then the dumping between March and May. And then there's a final decision that will occur sometime in Q3, that's October or November in this case. So, I think the legal process is fair. We will present our information. The goal here is to make sure the media commentary, quite honestly, and the political understanding really goes to the facts, because I don't think that's been fairly portrayed. I think that's where there's room for improvement. When people understand that we are defending American jobs, that we are defending American infrastructure investment in renewable energy policy, I think it will change the media and the political discussion on this case and I think that's where we can have an impact.
Monica Trauzzi: So, in the background of all this, you have the solar and wind industries lobbying right now for an extension of tax credits. Do you see this case having an impact in any way on the future of those tax incentives?
Kevin Lapidus: It's certainly possible that a lot of these issues come together and I describe it as the atmospherics of solar. And this is what we have to talk about, that solar is doing well. The solar industry in the U.S. is doing well. We're delivering on our promise. The case coming now is certainly ironic. I talked about the lower cost structure. We're delivering on our social compact, which is we need incentives today to bridge to grid parity tomorrow. And we're moving toward grid parity. We are delivering on the promise of solar and I think it would be helpful if more people understood the success of the industry and, therefore, it would encourage the continuation of incentives that are delivering jobs and investments today.
Monica Trauzzi: And we've interviewed the chief counsel of Solar World in this case and they obviously have a very different view and I encourage the viewers to take a look at that interview as well, compare it to this one. I thank you for coming on the show.
Kevin Lapidus: Thank you for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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