The Chinese solar panels suddenly became too cheap for Europe

A photovoltaic powerplant in Portugal, covering fertile land.

On 6 September 2012 the European Commission introduced an anti-dumping investigation on imports of solar panels and components originating from China. Understandably the present market conditions, including selling prices of solar panels in the European Union, have been there for many years. More than ten. That is, from the moment that a number of EU member states decided to pay very generous subsidies, to solar energy production.Why then the European Commission decided now, to launch this investigation? The answer is very obvious; because now the EU doesn’t need any more the imports of chip and high quality – thus very competitive – Chinese solar panels. But how did this happen? To answer this question one should follow the facts. Let’s do it.

Solar energy

For many years the construction of solar panel parks has taken unbelievably wide dimensions all over the EU, based on extravagant subsidies for solar electric energy production. Today in the Greek countryside the spectacle of small and large solar panel parks is a standard view. The same is true not only in the southern EU member states but also in Germany, where the government is still paying large subsidies to solar energy.

The solar park business flourishes for many years. Whatever business is based on subsidies however creates unacceptable distortions. In the solar energy business one grave loss is fertile land. It has also turned large numbers of farmers again into idlers, expecting to live on state subsidies, as it was the case during the golden years of the Common Agricultural Policy.

What went wrong is easily to understand. During the 1990s Politicians all over Europe had a rough time been accused by environmentalists that they plan to base the energy future of the EU on fossil fuels. At that time the CO2 emissions issue also became a big theme and the production of energy was the prime target of all those discussions.

Subsidising the sun

In view of that the European Union decided to allow member states to pay very high subsidies for the production of electricity, from renewable energy sources like the sun and the wind. North Europeans took it to the wind, while southerners and Germany choose the sun.

All along the years 2000s the installation of solar parks became a flourishing business and the European solar panel production was not enough to supply the exploding needs of the European markets.

Imports from China were the obvious solution, given their competitive selling prices and the good quality. So the Chinese products were called to cover the gap of the exploding demand for solar panels in the EU. China is the world’s largest producer. Approximately 65% of all solar panels are produced in China. The EU is China’s main export market, accounting for around 80% of all Chinese export sales.

Time of consolidation

The arrangement worked perfectly for many years. The announcement of every new solar park meant a lot of votes for politicians. The new burden on state budgets was hidden from taxpayers and subsidies were financed by government borrowing. Also the environmental argument was strong enough to silence every objection comparing real social costs and returns, or criticising the large subsidies.

Unfortunately all good things do not last much. The EU countries which had been paying extravagant subsidies to electricity production from solar energy, started having problems of fiscal deficits and had to rethink this haemorrhage. Even from late 2011 and early 2012 the Greek and the German governments started discussing deep cuts of those subsidies. As it usually happens a bad decision causes a chain of wrong ones.

The so abrupt cuts of the subsidies on electricity from solar energy, is expected to completely undermine the sector and create even more distortions. Farmers who turned their good quality fields in electricity factories, will discover that their investment is nor profitable without big government hand-outs. Investments and jobs in the solar panel production sector in Europe may collapse because of this sadden change of policy.

Make the Chinese pay

Then it seems that the European Commission had this idea to create impediments and if possibly block altogether the EU imports of Chinese solar panels. In this way, what will be left of the business of solar park construction will turn to the more expensive home production of panels. The very fact that the EU Commission accepted NOW “valid” complaints that the Chinese solar panels are sold at dumbing prices cannot stand the slightest criticism just because of its timing. Why now and not four or three years ago? Obviously this is quite an unjustified Commission decision. Now what next? According to the Commission this is what happens next.

What happens next?

“The Commission will send out questionnaires to various interested parties (e.g. exporting producers, Union producers, importers and associations), asking for information relating inter alia to the exports, production, sales and imports of solar panels and their key components. Once the interested parties have responded to the questionnaires, the data will be verified by the Commission, often by means of on-spot verification of company data.

On the basis of the information collected, the Commission will establish if there has been dumping and whether the injury allegedly suffered has been caused by the dumped imports. This examination will also include looking at possible other factors that could also have contributed to the injury suffered.

The Commission will then within 9 months of the initiation of the investigation (in this case, June 2013) issue its provisional findings. There are three possible scenarios: (a) impose provisional anti-dumping duties (normally for a six months period) (b) continue the investigation without imposing provisional duties or (c) terminate the investigation”.

The European Sting will monitor this story closely and will inform its readers on every detail.