Has Europe buckled under Chinese Pressure?

The Chinese have captured the global solar panel manufacturing industry by investing billions of dollars in building almost 40-50 GW of capacity even when the global demand is about 30 GW. Their low cost manufacturing has bankrupted erstwhile solar panel leaders such as Q-Cells, which have been bought for pennies to the dollar by Chinese giants as Hanergy. Major US solar panel makers such as Evergreen Solar, United Solar Ovonics have also gone under as they are unable to match the super low costs of Chinese solar panels. The US government imposed moderate CVD and AD duties on Chinese imports of solar panels last year. Europe also started an investigation into solar panel imports into Europe.

Will Europe loose the battle with China

However, Chinese pressure has made Europe buckle as major countries such as Germany were not willing to offend China which is one of the biggest export markets for German companies. After imposing a preliminary duty of 11.8%, both sides started negotiating. The Chinese took a very hard-line position. They have showed the stick by imposing 50% plus duties on imports of polysilicon from the USA. They did not impose big duties on poly imports from European poly factories of Wacker. The two sides have now finally signed an agreement in which China will be allowed to export 7 GW of solar panels at a minimum price of 56 eurocents/watt. This is a victory for China as European demand will be around 10-12 GW this year. The European companies will find it difficult to match the minimum price set, which means that the Chinese companies will be able to meet their full quota.

I think Europe has taken a prudent position, as most of the European solar manufacturing is shut down anyway. If they had not given China an opening, it would have unnecessarily started a mini-green trade war between these 2 trade blocs. Chinese solar panels would have been substituted by Korean/Taiwanese/Indian solar panels. This would not have helped the European cause anyway. The European solar industry also benefits from cheap Chinese solar panels which helps in lowering the overall installation cost of solar systems. I don’t think that the German and Italian solar booms would have been possible without the massive influx of super cheap solar panels from China. Solar panel prices have gone down from $4/watt in 2009 to around 60c/watt currently and this has been mainly due to massive investment by the Chinese companies which has substantially lowered the costs.