Washington is considering punitive import duties to balance the perceived injustice of Chinese industry subsidies.

A textbook cast of characters includes an election-year U.S. president seeking to punish Chinese “dumping”; domestic producers calling for “more than 100 percent” tariffs (which will conveniently wipe out competing imports); opposed consumer groups warning of price hikes; and Chinese officials’ threats of retaliation.

A textbook would add a narrative. It would describe an economics argument that tariffs are an inefficient policy (production subsidies or R&D grants are better), and a political one, that they’re nonetheless popular among leaders taking a swing at a trading rival.

The nuts and bolts of the case are that the U.S. arm of Germany’s SolarWorld (SWVG.DE), joined by a small, anonymous band of other manufacturers, asked the U.S. Commerce Department to impose duties on imported Chinese solar cells, the components of solar panels.

They claim massive subsidies have allowed Chinese manufacturers to sell at below cost, called dumping, with a deliberate aim to “gut” the U.S. industry.

Meanwhile U.S. manufacturers of wind towers, the steel posts that support turbines, have followed the solar trade move in what appears a copycat claim.

Certainly, ample evidence exists of Chinese solar support, not least on the swollen balance sheets of producers which have received soft loans.

However, both turbine towers and solar cells are also basic, commoditized technologies where you might expect a lower capital, lower cost economy like China to beat western rivals.

The U.S. Department of Commerce will decide next month whether to introduce preliminary duties on solar cells, and later on wind turbine towers.

INNOVATION RACE

But there’s more to the story.

China is already the world leader in solar manufacturing and could lead shortly in wind turbines, in volume terms.

But producers also aim to lead these sectors, winning the technology race to produce the highest value products, and not just make more stuff more cheaply.

Clean technologies including low-carbon power and resource efficiency are tipped to transform commodities and energy over the next decades and so pose a national industrial opportunity.

Beijing says it plans $1.7 trillion investment in “strategic industries,” especially clean technology, over the next five years.

On innovation, so far, western companies are still ahead.

While wind towers are relatively simple, turbines are complicated machines with thousands of parts and western producers including Vestas (VWS.CO), Gamesa (GAM.MC), Siemens (SIEGn.DE) and U.S.-based GE (GE.N) lead: their onshore models produce more power from less wind than emerging economy rivals.

Similarly they have high performance machines which can cope with brutal offshore conditions where Indian and Chinese can’t.

But that’s gradually changing. China’s Sinovel (601558.SS) recently won its first order, from a Chinese power producer, for its largest offshore turbine.

TRADE THEORY

In solar, China already dominates manufacturing (having eight out of the top 10 producers, according to HSBC), and has achieved that almost entirely through exports.

Its plans to develop a domestic solar market will cement that dominance: it has introduced demand subsidies and unofficial capacity targets which local producers inevitably will reap, more so if U.S. tariffs spark a tit-for-tat skirmish.

The country is also advancing in innovation.

America’s leading company First Solar (FSLR.O), has a clearly differentiated, “thin film” technology which is cheaper though less efficient than traditional silicon-based cells.

In Germany, companies including struggling Q-Cells (QCEG.DE) have continually made advances in silicon efficiency.

But leading Chinese producers have their own in-house research, developing and showcasing innovation. Bloomberg New Energy Finance analysts point to Yingli’s (YGE.N) “Panda programme,” and similar technology platforms at Trina (TSL.N) (Honey), Suntech (STP.N) (Pluto) and Renesola (SOL.N) (Virtus).

China’s GCL Poly (3800.HK) is rapidly growing in the higher tech, upstream business of making raw solar-grade silicon and wafers.

Back to the trade textbook.

Rather than drive advances, tariffs will protect inefficient U.S. producers and also create pure economic waste: technically, this includes the extra amount consumers pay as a result of higher prices which the government can’t capture in the tariff and local producers don’t get in bigger sales.

A better policy may be to focus resources on funding what Americans are good at: innovation.

Source: Reuters

Suntech Power Holdings Co., the world’s largest solar-panel maker, jumped 6.9 percent while Trina Solar Ltd. rose to a three-week high. Semiconductor Manufacturing International Corp., a Shanghai-based circuit-chip maker, advanced after saying first-quarter sales will increase from the previous three months and traded at the biggest discount in two weeks to stock in Hong Kong. The Bloomberg China-US 55 Index of the most-traded Chinese equities in the U.S. advanced 1.6 percent to 106.13 yesterday in New York.

Oversupply in the global solar industry is showing signs of abating with demand expected to shift from Europe to Asian and U.S. markets, Renewable Energy, a Sandvika, Norway-based maker of polysilicon used for producing solar modules, said in its earnings presentation yesterday. China’s government aims to double solar installations this year and has set preferential power tariffs designed to encourage manufacturers and developers to move into cleaner energy sources.

“Chinese solar stocks rebounded after a big loss last year as we see a natural dynamic of geographical diversifications from Europe to Asia,” Hari Chandra Polavarapu, an analyst who covers the Chinese solar industry at Auriga USA LLC in New York, said in an interview yesterday. “There is optimism in rising China demand and it needs to adopt policies to greatly increase solar installations, which will favor its own manufacturers and the industry globally.”

China ETF Gains

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 1.7 percent to $40.40, the biggest jump in three weeks.

Suntech Power rose to $3.85, the highest level since September, extending its advance in the U.S. this year to 74 percent. The stock slid 72 percent in 2011 as solar module prices fell amid industry overcapacity.

Trina Solar, China’s fifth-largest solar-panel supplier based in Changzhou in the eastern Jiangsu province, surged 13 percent to $9.23, the most in four weeks. Yingli Green Energy Holding Co., a Baoding, China-based maker of solar modules, rose 7.5 percent to $4.90, the highest level since Jan. 18.

China plans to develop three gigawatts of solar capacity this year, double its existing capacity, the National Energy Administration said on its website on Jan. 11. Installations in China may reach four gigawatts this year, Zhenrong Shi, Suntech’s chief executive officer, said in a Bloomberg TV interview in Davos on Jan. 25.

Not Enough

The addition of three to four gigawatts in installations annually is not enough for China, according to Auriga’s Polavarapu. Installations may reach as much as seven gigawatts this year, and the annual level should be 10 gigawatts in the next five years should the government provide support to the industry, he said. Polavarapu recommends investors “hold” Suntech Power shares and “buy” Trina Solar and Yingli Green.

The Standard & Poor’s 500 Index added 0.2 percent to a seven-month high of 1,349.96, while the Shanghai Composite Index rose 2.4 percent to 2,347.53 yesterday, the highest level in two months.

American depositary receipts of Semiconductor Manufacturing increased 4.6 percent to $2.74. The ADRs, each representing 50 common shares in the company, traded 3.4 percent below stock in Hong Kong, which surged 4.8 percent to HK$0.44 per share yesterday, the equivalent of 5.6 U.S. cents and the biggest discount since Jan. 26.

‘Ahead of Street’

The company’s revenue for the first quarter this year will rise between 7 percent and 9 percent from the last three months of 2011, according to a filing with the Hong Kong Stock Exchange yesterday. Analysts had forecast a decline.

Fourth-quarter sales fell 5.6 percent from the previous three months to $289.6 million, Semiconductor said. That was lower than the $296.1 million average estimate of seven analysts in a Bloomberg survey. The fourth-quarter net loss was $165.6 million, widening from $88.1 million in the previous quarter.

Semiconductor’s revenue guidance was “far ahead of street, which was looking for a decline,” Steven C. Pelayo, a Hong Kong-based analyst at HSBC Securities Asia Ltd. said by e-mail. He maintained a “neutral” rating on the stock and a 12-month price target of $2.65, citing “continued concerns over finding profitability, which will come in more than a year away at least,” he said.

Melco Earnings

Melco Crown Entertainment Ltd., the Macau casino operator, will release its financial results for the fourth quarter today. Adjusted net profit rose more than fivefold from a year earlier to 15.6 cents for each ADR, according to the average forecast of seven analysts in a Bloomberg survey. Melco Crown’s ADRs, which are equal to three common shares, climbed 4.1 percent to $11.91, the biggest gain in a week. That represents a 2.3 percent premium to its shares in Hong Kong, the most in three days.

Chinese consumer prices probably rose 4 percent in January, compared with a 4.1 percent advance in December, according to the median of 33 economists’ estimates compiled by Bloomberg. The inflation data is due to be released today.

Last year, China overtook Japan for the first time to become the world’s top importer of coal and, after increasing overall consumption of the resource by 95 million tons over the same time, China is on pace to soon be burning half of the world’s coal. As coal is considered the most damaging source of carbon dioxide emissions, these new statistics have alarmed both environmentalists as well as Chinese government officials, who are already under pressure to curb pollution and environmental degradation.

That pressure may be set to intensify further if a new policy is accepted calling for energy use to be kept below 4.1 billion tons of coal equivalent per year by 2015. The suggestion was made last month by Liu Tienan, the director of the National Energy Administration, at a policy meeting in Beijing.

Such a policy would be a surprising development, as the country currently sets goals for energy and carbon intensity China currently sets energy His proposal is based on an assumption that China’s economy will grow at a steady rate of 7.5 percent per year until 2015, and is likely to be met with fierce opposition from provincial leaders, who predict combined growth will be closer to 9 percent.

If Tienan’s policy is rejected, provinces may be granted a combined coal allowance of between 4.25 billion and 5 billion tons, which would be calamitous according to environmentalists.

“If it goes up to 5 billion tons, it would be a disaster; China would effectively be promoting high-energy, high-carbon growth,” said Li Yan, Greenpeace East Asia’s climate and energy campaign manager.

Deciding whether to introduce a cap on coal could have a major impact on the growth of the renewable energy industry. China continued to make remarkable progress in this area last year, with figures published by the National Energy Administration showing a rise of 47 gigawatts in wind power generating capacity, and the completion of an additional 12.6 gigawatts of hydropower. To put that in perspective, the UK currently has a total energy capacity of 75 gigawatts.

But although in theory a limit on coal consumption should provide an energy vacuum that a rapidly developing renewables sector could expand into, making this a reality would put incredible pressure on precious resources which are already being over-exploited.

The global community has never witnessed more enthusiasm for the rapid development of renewable energy technologies than exists at present. The benefits are manifold: drastic reduction of carbon emissions; reduced environmental degradation; slowing or even reversing the effects of global warming and allowing governments to reach ambitious targets to reduce harmful emissions, to name a few.

China wishes to lead the developing world in renewable energy technology and production, but faces a problem in its over-reliance on coal.

Source: 2point6billion.com

The new factory’s annual output of solar cells will have a generation capacity of 300 megawatts, and it will start production in December 2012, the Japanese electronics giant said.

The move comes as fierce cost competition and a global solar-cell supply glut and the yen’s strength make it increasingly difficult to produce solar cells in Japan.

A person familiar with the matter said last month that Panasonic had decided to cancel a plan to convert a plasma-television panel plant in western Japan into one that makes solar panels.

The change in plan was the latest indication of how Japan’s solar-panel makers are struggling, as fast-growing Chinese makers create a global inventory glut, while the strong yen makes Japanese exports too expensive.

By producing wafers, solar cells and modules at the new factory in Malaysia, “we are further strengthening our cost competitiveness,” Panasonic said in a statement Friday.

Panasonic Chief Financial Officer Makoto Uenoyama said at a news conference last month that the foreign exchange environment remains “very tough,” and it is “extremely difficult to make new business investments in Japan now.”

When Panasonic acquired a majority stake in Sanyo Electric Co. in 2009, the latter’s strength in energy-efficient technology – particularly solar panels and rechargeable batteries – was cited as one of the reasons for the deal.

The global market landscape for solar panels has changed dramatically since then. Chinese solar-cell makers such as JA Solar Holdings Co. and Suntech Power Holdings Co., are now among the world’s biggest producers, helped by Beijing’s support for renewable-energy businesses.

But the projections, which were presented at a meeting Friday, are likely to cause controversy for not factoring in such considerations as cost-effectiveness.

In preparing the report, the council’s secretariat examined the prospects for expanding the use of solar, onshore wind and geothermal energy.

Exploiting all of the suitable locations for these three types of renewable energy would yield 389 billion kilowatt-hours a year, the equivalent of about 38% of total domestic electricity output in fiscal 2007.

Still, given the inherent variability of sunlight and wind, solar power plants and wind farms are considered not well suited to replace nuclear reactors as the workhorses for base-load power.

Solar power generation could be scaled up to about 93 billion kilowatt-hours a year, according to the estimates. That represents around 9% of fiscal 2007 output overall but is equivalent to roughly 70% of the energy produced by oil-fired power plants, a source of peak-load power. Solar could thus play a role in peak-load supply, the report states.

Onshore wind power could provide about 270 billion kilowatt-hours – as much as from nuclear or coal – while geothermal output could amount to 26 billion kilowatt-hours.

These projections assume that every effective location for the three energy sources is used. The extent to which that is possible depends on such factors as government support.

(The Nikkei Nov. 26 morning edition)

The bold strategy cuts against the grain, but if successful, it would put Trina Solar in a better position when the market resumes a robust expansion.

With economic instability in Europe — the world’s largest market of solar cells – the supply-demand balance for solar power products is softening, and China’s major photovoltaic makers are all now in the red. Rivals such as Suntech Power Holdings Co. have frozen plant and equipment investments and shifted their focus from expansion to profitability.

But Trina Solar has chosen to invest 200 million dollars to boost capacity for solar panels and solar panel modules at its main plant in China, focusing on products made using value-added solar cells with high power-generating efficiency. It hopes greater economy of scale will reduce manufacturing costs.

These products directly compete with the solar products of rival Japanese makers, so Trina Solar’s actions are bound to affect their strategies. Trina Solar conducts most of its business in China and Europe but is now hurrying to expand into other markets, including Japan.

(The Nikkei Business Daily Nov. 29 edition)

Sekisui House Ltd. will start selling Green First Hybrid houses equipped with an energy management system that can operate in emergencies. The system monitors solar cells, storage batteries and fuel cells using external and in-house servers. Even when residents are not home, they can check the status of these energy sources in real time by connecting to the external server from personal computers and smartphones. The in-house server will be standing by in case of emergency.

Next fiscal year, the company plans to start developing a subdivision that will include several dozen of the Green First Hybrid houses.

Daiwa House Industry Co. will from January start buying carbon credits from buyers of its Sma x Eco Original homes that use both solar cells and storage batteries. The firm will first target about 350 buyers and will pay 1,000 yen per ton of credits, which are earned by the homeowners for reducing emissions of carbon dioxide.

(The Nikkei Nov. 30 morning edition)

ENN Solar is an example of a Chinese solar company which has boosted its North American business by finding the right partner. The company is headquartered in Langfang, China and specializes in the manufacture of large (up to 5.7 sq. meters) PV modules. ENN Solar has previously worked with North Carolina’s Duke Energy on US solar projects. More recently, the company has partnered with the National Energy Renewable Corp., LLC (NERC) to turn a New Jersey landfill into a solar power generation facility capable of producing over 100 million kilowatt-hours of electricity over its lifetime.

The New Jersey landfill solar project employs about 9,000 ENN’s PV panels and is located on the south slope of the Edgeboro Landfill in East Brunswick, New Jersey. It was developed and constructed by ENN Solar Energy in partnership with NERC. It utilizes ENN’s large thin film silicon solar modules plus the company’s construction technique that uses of different types of wasteland for renewable energy production. The installation of these modules utilized a new “floating” architecture that securely anchors the solar panels to the landfill surface with no needs to penetrate the landfill cap that would increase the leaking risk of flammable methane gas.

This 4.3 MW solar site has undergone and successfully completed extensive compliance testing in preparation for connection to the power grid, making available its clean power output to New Jersey consumers through PSE&G (Public Service Electric and Gas Company), New Jersey’s oldest and largest publicly owned utility.

NEDO, which is part of Japan’s Ministry of Economy, Trade and Industry (METI), will develop and install smart utility system controls on the island of Maui to improve the integration of photovoltaics and electric vehicles (EV). Advanced EV charging management systems will enable utility operators to better balance generation and power demand while accepting larger amounts of solar and wind power.

Installation of the smart grid technology is expected to begin in late 2012, with the project becoming operational in 2013. The demonstration project is scheduled to run from 2013 to 2015.

Hawaii’s state government creating a partnership with a sub-organization of Japan’s METI marks a continuing trend of US states acting independently from the federal government on energy policy. Not only are states driving their own renewable energy goals with their Renewable Portfolio Standards (RPS) but they are also working with international partners with little or no federal involvement.

One of the best examples is California’s relationship with the Chinese province of Jiangsu. The two governments have brokered renewable energy deals, set up joint research centers and have basically dealt with each as two countries would. Expect to see more states reach across borders and create joint renewable energy projects like NEDO’s smart grid project on Maui.

People often overlook the American Southeast when they think of North American solar energy. Over the last week, however, there have been a couple of examples of an increasingly robust solar market in the region.

Duke Energy announced it has acquired three 1 MW solar farms near Murphy in North Carolina’s southwestern corner, bringing its statewide total to seven commercial solar projects.

Phoenix Solar Incorporated and Silicon Ranch Corporation announced a strategic alliance to develop, finance and construct solar photovoltaic power plants in Tennessee and the Southeast. The companies said their first 1.4 MW project in the city of Pulaski, Tennessee will be the largest privately owned solar installation in the state. Phoenix Solar, with support from Chapel Electric, has begun construction on the Pulaski solar plant. The company will also provide long-term operation and maintenance support to monitor and optimize the plant’s ongoing energy production.

The ground-mount solar power project is the centerpiece of a plan by Silicon Ranch to develop the “Pulaski Energy Park,” which in addition to the operating power plant will also include a solar training campus consisting of administrative, classroom and service buildings. To build the “Pulaski Energy Park,” Silicon Ranch has acquired 25 acres at the Pulaski Industrial Park on Elkton Highway near the city.