Why the Chinese solar-dumping decision is right for Australia

08/04/2015 12:00 - 504 Views

The Australian solar panel retail sector looks like it will manage to escape the fate of the US and Europe and can now put the threat of punitive tariffs, which would hike-up the cost of solar panels, behind them.

Yesterday the Anti-Dumping Commission stated that they believed some Chinese manufacturers were selling solar panels into Australia at prices low enough to be defined as dumping. However the level of injury caused to the one single Australian manufacturer – Tindo Solar – as a result of this dumping was “negligible”. Consequently, they propose to terminate the investigation and don't recommend the imposition of any anti-dumping tariffs on imported solar panels.

The conclusion of the Anti-Dumping Commission is good news for both Australian consumers and efforts to lower Australia’s carbon emissions. It is also the sane and sensible conclusion given Australia is unlikely to ever develop the kind of manufacturing economies of scale essential to low costs which the Chinese are achieving.

Before explaining further it’s helpful to have some background on where Australia sources its solar panels from, as shown in the chart below. Two points to keep in mind:

1) Chinese manufacturer’s share is illustrated in blue – it’s now at about 90%.

2) Australian manufacturers share illustrated in red. Can’t see the red? Neither can I.

Figure 1: Market share by producer country of Australian solar PV panel market

Source: Australian Anti-Dumping Commission

So why should Australian consumers be pleased?

As detailed a few weeks ago in a column on why anti-dumping tariffs should be avoided, Australia is the king of cheap solar. The chart below, based on research by leading global solar industry analysts GTM, illustrates the prices by region for solar PV modules produced by the quality, branded Chinese manufacturers (known as ‘Tier 1’ producers) such as Trina, Yingli, Jinko, Renesola and Canadian Solar to name a few.

Figure 2: Regional Price Variation, China Tier 1 Module for Quarter 4, 2014 (US dollars per watt)

Source: GTM Research report Global PV Pricing Outlook 2015

As you can see the United States pays the highest prices per watt for their solar panels. The reason is simple – they impose severely punitive anti-dumping trade tariffs on Chinese producers.

You’ll also notice that the EU’s price range is that they have no range – it’s just a single dot point. That’s because the Europeans decided on setting a minimum price (known as the MIP) for Chinese solar panels in co-operation with China in lieu of imposing anti-dumping tariffs. The Japanese pay high prices too, although I’m told this is a function of a cultural form of trade barrier.

Australia is missing from the chart but it turns out, according to the Anti-Dumping Commission, we get our solar panels for slightly less than even the Chinese. The table below lists a number of major importers of Chinese panels into Australia and what they term the ‘dumping margin’. This is effectively the extent to which their prices for the Australian market lie below the prices they charge in the Chinese market.

Figure 3: Dumping margin for major importers of Chinese produced solar PV panels

Exporter/manufacturer	Preliminary product dumping margin
Trina Solar	4.00%
ET Solar	3.00%
Wuxi Suntech	8.70%
Renesola	2.10%
Residual Exporters	3.90%

Source: Australian Anti-Dumping Commission

As you can see, there’s a rather a big difference between what Australians pay for solar panels and what the US and Europe pay as a consequence of anti-dumping measures they impose on Chinese solar modules. For an averaged sized system of 4 kilowatts we pay about $900 less than the US, which equates to something like a 10-20% saving on the overall cost of the system.

Why is this a sane and sensible decision?

But the Chinese are dumping, aren’t they – isn’t this unfair even if it does help out Australian consumers?

As the first chart showed, Australian production of solar panels is negligible. Given this, one has to ask what does Australia have to gain by forcing the Chinese to charge us higher prices for their solar panels?

While I wish it wasn’t true, the reality is that Australia is unlikely to ever be a major manufacturer of solar panels. Producing solar PV is a game of scale and the Chinese have taken scale to an incredible level. There are single plants in China capable of producing more solar PV capacity than the entire Australian market installs. Consequently their economies of scale and underlying production costs are noticeably lower than any other producers.

The Anti-Dumping Commission investigation found that even if Chinese importers’ prices were adjusted upwards to correct for dumping margins, they’d still be substantially undercutting anything the one single Australian solar module manufacturer – Tindo Solar – could achieve. After taking into account the additional cost of adding a string inverter to the Chinese DC panels (Tindo’s panels are sold with a micro-inverter incorporated into the panel – which is called an AC panel) they found they would manage to undercut Tindo’s prices by around 40%, compared to dumping margins of 2.1% to 8.7%.

The commission’s report concludes:

Noting the size of the price undercutting and dumping margins found, the Commission is not satisfied that, in the absence of dumping, Tindo would be able to reduce its selling prices of AC PV modules to the extent required to ensure Tindo’s prices are competitive with DC PV modules exported from China, even after allowing for the premium that would be expected for an AC model over a DC model.

Tindo Solar is not alone. Far larger and well-established solar panel manufacturers operating in Japan, the US and Europe have found themselves struggling to match the cost structure the Chinese have achieved. No doubt Chinese producers have been beneficiaries of government support. But putting up trade barriers would be an exercise in futility.

Source: businessspectator.com.au