Solar module prices have rapidly decreased during the last five years due to several factors, including the economic recession and resulting lower demand for solar energy, an increased supply of polysilicon, expansion of manufacturing capacity, and, during the last year, increased competition from low-cost Chinese manufacturers.
The emergence of Chinese photovoltaic cell manufacturers that can produce solar cells at a lower cost than American companies has forced some American solar panel manufacturers to reduce prices, decrease margins, close some manufacturing facilities, or even declare bankruptcy–as was the case for Solyndra.
In reaction to this situation, seven U.S. manufacturers of crystalline silicon solar cells, led by SolarWorld, formed the Coalition for American Solar Manufacturing, with the aim to hold China accountable to U.S. and international trade laws by filing antidumping and countervailing duty trade remedy petitions.
As a result, on May 24, the Commerce Department slapped stiff tariffs on imports of Chinese solar panels, imposing tariffs of 31 percent to 250 percent on Chinese solar-product imports. However, import duties on Chinese solar panels can have negative effects on the solar industry in the United States.
Since the enactment of the Energy Policy Act of 2005, the U.S. government has invested in providing tax incentives and loan guarantees with the aim to promote solar energy system installations and reduce its installation and generation cost.
Government incentives and renewable energy standards have been important drivers for solar energy deployment and cost reduction.
However, lower solar module prices from Chinese manufacturers have also helped reduce the price of solar energy, making solar more affordable for U.S. customers and more competitive with other forms of electricity generation. Average selling module prices have decreased 28.1 percent in 2011 (with respect to 2010) in the United States.
The Commerce Department's decision, coupled with the recent expiration of the Section 1603 cash grant (in lieu of the Investment Tax Credit, is projected to increase solar electricity prices in the United States, affect demand for solar panels (which may exacerbate the current oversupply of polysilicon in the industry), hurt U.S. jobs, diminish the competitiveness of solar energy relative to conventional and non-solar renewable sources of energy, and may also lead China to take retaliatory measures against U.S. solar panels manufacturers.
These projections are supported by the Coalition for Affordable Solar Energy led by Sun Edison, which predicts that a 50 percent tariff would eliminate 14,000 jobs in the United States.
The solar market has grown more than 100 percent during 2011. It is difficult at this point to forecast the precise effects the new tariffs will have on solar panel demand and prices, but Frost & Sullivan expects a deceleration in the industry’s growth in 2012.
--Georgina Benedetti, Frost & Sullivan senior industry analyst