The development of solar energy technology was a collective and iterative process that began nearly 200 years ago.1 Although concept of photoconductivity was realized in the late 1800s, the true invention of solar panels, as we know today, were produced commercially by physicists at Bell Laboratories in 1954.1,2 However, the commercial licenses for the silicon PV technologies never reached widespread market saturation due to its prohibitive costs. Fast forward to 2005, DIY solar panels and residential solar power has become increasingly prevalent in the United States; more U.
S. solar companies were created, each hoping to tap into the newly profitable market. From 2008 to 2013, the U.S. solar energy industry was forced to drop prices by 80%. The U.S. solar industry was in a financial predicament; the cost of solar energy was falling rapidly, while the number of solar installations was rising. The rising leader was, not surprisingly, China. Within a year, U.S. solar companies, such as First Solar, SunPower, and SolarCity, experienced rapid stock plunges.
Other companies such as SunEdison and Suniva had no other choice but to declare Chapter 11 bankruptcy.5 How was China able to eclipse the U.S. solar industry, which invented the first silicon solar cell and held majority of technology patents? The answer lies in Chinese companies’ cheap labor, and its’ careful manipulation of legal strategies. When China joined the World Trade Organization in 2001, it agreed to comply with WTO rules regarding fair international trade practices.6 U.S. and E.U. have since filed countless petitions against China; there were 39 WTO disputes involving 26 different matters, seven of which pertained to China’s dumping practices.
WTO’s Anti-Dumping Agreement is a domestic protective measure designed to discipline companies that export a product at a price lower than the price it normally charges on its home market.6 Governments are only allowed to act against dumping when practices satisfy three requirements: importing country is subject to material injury, extent of dumping damages is significant, and occurrence of dumping.
It is proven that the WTO rulings of anti-dumping is not as effective in changing the behavior of China, for China has become experienced and skilled in avoidance. There are five pathways of corporate legal strategy; the ubiquitous attitude of Chinese solar companies is that law is seen as a costly obstacle.7 Chinese companies such as GCL-Poly Energy Holding Ltd., operates under an avoidance strategy only to gain knowledge of the law to circumvent any burdensome regulations. The bankrupt, Georgia-based solar company, Suniva, was the first to file a complaint to the federal trade commissioners. The petition asserted that China and others were avoiding penalties set by anti-dumping regulations by moving productions to countries such as Indonesia, Malaysia, Vietnam and India, while overproducing solar components.8 Although avoidance has the least strategic impact, Chinese companies such as GCL-Poly Energy Holding Ltd., could outsource certain activities.
China’s quick rise to leadership in the solar energy industry is also credited to its political policies.9 When the shortage of polycrystalline silicon, which was the main component of solar panels, was driving prices, tenfold, to $450 kilogram in 2008, China’s response was swift.9 The government declared development of domestic polysilicon a national priority, expediting approvals for new plants.9 Local government funneled money into the projects, getting plants approved and built within 15 months.9 In fact, GCL-Poly Energy Holding Ltd, one of the world’s biggest polysilicon makers, was funded and partly owned by China’s sovereign-wealth fund.9 GCL-Poly Energy Holding Ltd, along with other Chinese companies, also have a detailed and multifaceted economic strategy that is supported by its government policies. China’s cheap-currency policy is central to leveraging its low-cost capital, benefiting exporters, and maintaining stability and growth.
Evidently, WTO cases and other trade actions lodged at China’s practices of manipulation of trade was not enough to deter future misconduct. U.S. Solar Industries are beginning to take matters into their own hands. Under the 1974 Trade Act, Section 201, Suniva petitioned for steep tariffs and minimum selling prices for imported panels from any country to protect domestic industries.5 However, according to the Solar Energy Industries Association, the U.S solar companies have been relying heavily on cheap imported panels for its growth, and duties pushed by Suniva might prove more serious injuries to domestic innovation and growth. Tariffs at anywhere near the rates sought by Suniva would threaten the cost-competitiveness of solar power in the United States, and lead to higher electric power prices and slower growth in the nation’s economy.
The disagreement between the Solar Energy Industries Association and Suniva presented a dilemma. U.S. solar companies had to either implement tariffs that could threaten 88,000 jobs or risk potential bankruptcy due to tough international competition.5 Other U.S. solar companies asserted that the U.S. International Trade Commission (ITC) should focus on maintaining America’s trade ties, keeping down costs, and driving clean-energy innovation; the grievances of a few domestic solar companies should not be put ahead of interests of consumers. However, Suniva’s petition was successful; on January 2018, President Trump announced a tariff on imported solar panels – an action that had since shelved billions in U.S. solar projects. Fortunately, the Internal Revenue Service began extending U.S. credit to solar energy providers for as long as four years.
This ruling is an unexpected gift; if developers can prove they’ve begun construction of their solar projects by the end of 2019, they can claim 30% tax credit.10 Now, U.S. companies can avoid the newly-implemented tariffs imposed on solar panels and qualify for higher tax credits.10 Today, solar products are shaping to become a commodity. Only time can tell whether U.S. is able to reclaim its title from China in the solar industry. Chinese companies, such as GCL-Poly Energy Holding Ltd, rose to the top because of their careful manipulation of trade laws, political policies and low costs. One thing is for sure – having a great product is not enough to be successful.