Complaint Against Chinese Solar-panel Makers

As U.S. trade officials prepare their preliminary decision on a dumping complaint against Chinese solar-panel makers, U.S. panel users are preparing for new tariffs on Chinese imports by lining up new sources of the panels, sometimes at a significant cost.

The U.S. unit of Germany-based SolarWorld SWV.XE +5.38% and six other U.S. companies have accused Chinese suppliers of solar panels and solar cells made from crystalline silicon of receiving unfair government subsidies and selling their products in the U.S. at prices below the cost of production. The companies have asked the government to impose antidumping tariffs and countervailing duties on the Chinese products of as much as 100%.

The U.S. Commerce Department, which has been investigating the case, is scheduled to issue a preliminary decision Tuesday on the merits of SolarWorld's case. The International Trade Commission is also pursuing an investigation.

Final decisions on tariffs and duties on Chinese panels aren't likely before summer. But some solar-power developers have already changed their supply contracts from panels made in China to those made in Taiwan, South Korea and other countries. Other developers are waiting to see how the case concludes.

The U.S. solar market has grown quickly over the past few years, owing to government subsidies and falling prices. But the uncertainty of how much Chinese panels will cost if duties are imposed adds to the unknowns in an industry already battered by the expiration of key government subsidies and a natural-gas boom that has driven down conventional electricity prices.

Recurrent Energy, a unit of Sharp Corp. 6753.TO -0.78% that builds large-scale solar farms for utilities, had to 'scramble to resupply most of [its] projects' with solar panels not made in China, said Arno Harris, the unit's chief executive, adding that, 'everybody had to do it.'

Mr. Harris said that sourcing panels from other countries drove up the price his company paid by more than 10%, from 90 cents to 95 cents a watt per panel to between $1 and $1.05 a watt. 'That came straight out of our bottom line,' Mr. Harris said.

A 50% slide in solar-panel prices last year hit manufacturers hard, driving down their profits and stock prices and forcing some companies out of business.

SolarWorld and others have blamed China's aggressive buildout of solar-panel manufacturing and Chinese companies' low prices for the pain being felt by manufacturers in the U.S. and world-wide.

'Part of the point of these trade cases is to return pricing to a nondumped, nonsubsidized level,' said Timothy Brightbill, a SolarWorld attorney. He added that U.S. solar-panel makers are still hurting, with 12 U.S. solar firms having gone out of business, declared bankruptcy or laid off large numbers of employees over the last several months.

The U.S. installed a record 1,855 megawatts of solar-power generating capacity in 2011, more than twice as much as in 2010, according to a report by the Solar Energy Industries Association and GTM Research. The demand was fueled by low prices and government incentives, particularly a federal program that expired in December that offered developers cash equal to a 30% investment tax credit in lieu of the credit.

The groups predict that U.S. solar installations will grow an additional 50% this year, to 2,800 megawatts, as developers build projects contracted during the boom.

But uncertainty about government support for clean energy and how the trade dispute will affect prices and development make it difficult to predict where the market will go next year.

Nevertheless, Chinese solar-panel makers remain focused on the U.S. solar market. China-based JinkoSolar Holding Co. Ltd., JKS -2.67% a lower-tier panel maker behind solar giants such as Suntech Power Holdings Co. Inc. STP -0.63% and Yingli Green Energy, has high hopes for expanding in the U.S., despite the trade case.

'We are being very aggressive in terms of creating brand awareness in the U.S. market,' said Isabelle Christensen, JinkoSolar's director of North American operations.

If the U.S. government levies tariffs that add 10 cents a watt per solar panel, JinkoSolar can still sell its Chinese-made panels in the U.S. and remain competitive, Ms. Christensen said. If the tariffs are much higher, the company plans to supply U.S. customers with panels made at a factory in Ontario, Canada, she said.

Ms. Christensen also said that while she hopes prices go up, she doesn't think they will. A global oversupply of manufacturing capacity and a raft of projects under development that depend on low prices make the prospect of rising prices unlikely, she said.