As part of an ongoing dispute, the U.S. Department of Commerce recently moved to impose broad tariffs on solar panels from China. How will U.S. companies be impacted by the latest round of tariffs? During today's OnPoint, John Smirnow, vice president of trade and competitiveness at the Solar Energy Industries Association, discusses the solar industry's reaction to the new sanctions and talks about a possible update to 2012 dumping estimates that could result in tariff reductions.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is John Smirnow, vice president of trade and competitiveness at the Solar Energy Industries Association. John, thank you for you coming on the show.
John Smirnow: Thank you. It's a pleasure to be here.
Monica Trauzzi: Thanks. John, as part of an ongoing dispute, the Commerce Department recently moved to impose broad tariffs on solar panels coming out of China. There's disagreement among U.S. solar manufacturers on what exactly the impact will be on U.S. industry. How do you believe U.S. companies will be affected?
John Smirnow: So I guess I would start out by saying that I'm not sure there is much disagreement within the industry. Seeing how we represent over 1,000 member companies, and it's clear to us that this continued litigation is bad for the industry. In contrast, you have one company, SolarWorld, that really is driving the litigation. And, you know, they presented themselves as being the voice of manufacturing, but they represent less than one-half of 1 percent of total U.S. solar jobs. There are also, I think people need to recognize, more than 32,000 other jobs in the U.S. solar manufacturing segment. So that, you know, important distinction.
We think the continued tariffs are slowing the adoption of solar, effectively adding a tax of upwards of $500 million annually to the industry. We're doing well as an industry. 2014 was another blockbuster year. We saw solar installations grow 36 percent. There are now over 20 gigawatts of solar capacity installed in the United States, and we expect over the next two years to double that number to more than 40 gigawatts. And so, while the trade litigation is raising prices, effectively it's adding maybe 10 cents per watt, prices do continue to fall, and solar's not benefiting directly from that. So what we really need is a negotiated solution to all of this.
Monica Trauzzi: All right. So I'm unclear on the pricing situation because we have seen a rapid and steady decline in pricing of solar here in the United States, and in the interim of all of that, we've also had this ongoing trade dispute and tariffs on China. So then how are those tariffs impacting solar prices if they've continued to go down?
John Smirnow: So we would say that they've added maybe 10 cents per watt. So we would, in the absence of the trade litigation, we would expect prices to be in the low 60s. For big, large wholesale purchases, you know, pricing is, you know, 70 -- approximately 70 cents right now. And so really there -- it's that 10 cents per watt added tax. But prices continue to go down because solar is truly a global industry. The supply chain is global. The U.S. is solar manufacturing base, again, 32,000 companies. We export billions of dollars of solar products abroad, polysilicon X-boards, metallization paste, back sheets, encapsulants and also, because solar's a global supply chain, Chinese manufacturers have the ability to modify their supply chain to bring in non-tariff solutions.
In addition, the -- what we're seeing and what this recent decision shows us is that the unfair trade practices are not that severe. I mean, there are unfair trade practices based on the decision by the U.S. Department of Commerce, but the recent anti-dumping margin of, I believe for ... and a host of other companies, 1.82 percent. A related countervailing duty of 1 -- or 15.86 percent, so roughly 17 percent. That's a real number, but the Chinese manufacturers are able to absorb that, bring in a product that, under U.S. law, should be considered fairly traded, and that price is significantly lower with the built-in tariff than what SolarWorld's able to offer for sale in the U.S. market.
Monica Trauzzi: So on the 2012 numbers where the Commerce Department found that estimates may have been off and that they were actually overestimated, does that mean that we will see lower-priced solar if the Commerce Department moves to lower those tariffs?
John Smirnow: Yes. Yeah, we do believe that, if the preliminary determination of this administrative review, and really the decision on Friday, again, an administrative -- the first administrative review is a continuation in effect of the 2012 investigation where the duties were anywhere from 23 to 31 percent for most of the Chinese suppliers. What this number will do -- Friday's numbers will do, if they're affirmed, in either late April or late June, is they will set the definitive number for merchandise that was entered during roughly the one-year period after the investigation ended because everything going forward is a deposit, an estimated rate. And then you have the ability to look back and have Commerce decide whether your rate should go up or down. And so those estimated rates will be reset going forward. And so rather than having to pay at the time of entry, rather than having to pay the 23 to 31 percent, the importers will have to pay 17 percent.
Monica Trauzzi: So where does this all leave the U.S. and China on trade negotiations?
John Smirnow: So we've, over the last two years, we've been trying to drive a negotiated solution. This year, we facilitated a dialog between SolarWorld and some representatives of the Chinese manufacturers, facilitated 10 effectively meetings, not negotiating sessions because that's the role of the governments at the end of the day. So we're developing a recommendation to governments. Those efforts led to government-to-government negotiations over the course of three weeks, both in person in Beijing as well as a videoconference. The governments negotiated. They made progress based on the work that the industry had already done, but they didn't get there. They weren't able to close the deal. So then they kind of walked away. Holidays came. Now we have this new decision which has, in some ways, reset the negotiations, and everyone needs to get back together. Importantly, no one has said that they don't want a negotiated solution. Even today, Chinese companies, we want a negotiated solution. SolarWorld, negotiated solution's the best way. And so a lot of work's been done, both within the industry and between the government to move the parties' positions together.
Monica Trauzzi: And so what are seen as next steps then?
John Smirnow: So our next steps are to help craft a solution that is in the best interest of the industry and allows the parties to reach common ground. The focus now on a minimum price -- one or two minimum price, there's never going to be common ground because where SolarWorld needs to be today is a higher number than what the Chinese are able to sell for in the U.S. So there has to be something in addition to a minimum price or in place of a minimum price, and that's the ... proposal, we call it. The idea there is that the Chinese companies would pay a few cents per watt into a U.S. solar manufacturing fund that SolarWorld could then draw from and other U.S. manufacturers could draw from to expand capacity, implement R&D, as well as offset -- as they grow their businesses to make them more competitive, offset any price differential.
Monica Trauzzi: All right. We'll end it there on that note. Thank you for coming on the show. Nice to see you.
John Smirnow: Thank you very much. Really appreciate it.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
[End of Audio]