Finlay Colville, Vice-President, NPD Solarbuzz tells pv magazine about anti-dumping duties and European PV manufacturers.
As the clock ticks down on the preliminary judgement by the European Commission on any anti-dumping (AD) or countervailing duties (CVD) on Chinese imports to the 27 EU member states, the discussion is perhaps incorrectly focussing on the impact of module price increases. Rather, the long-term question is really what will happen to PV manufacturing in Europe, the malaise of which prompted the filing in the first place.
When looking at the impact of pricing, the PV industry today is very different to the industry of a few years ago that was largely to blame for the struggles that confronted cell and module suppliers in Europe. Module pricing is not the driver it was a few years ago, with balance-of-systems costs now the dominant factor in installed system pricing. Furthermore, the route to market has changed, with the role of the wholesalers and distributors in Europe no longer controlling module flow from Asia to Europe.
Direct sales of modules to end-market activities (or direct participation in downstream project financing) now makes module supply pricing less of a commoditized arms-length dealing and more of a case-by-case judgement call on volume supply economics. Or put another way, making the big deals work to generate sufficient investment returns. A few pennies here or there on a factory-gate module price of $0.6/W is unlikely to have any effect on European demand or changing who the leading suppliers are to the market.
Filtering out Tier 2 and Tier 3 Asian suppliers in preference of the Tier 1 Asian suppliers may ultimately be the only short-term effect seen in module supplier trends to the European PV market. Indeed, many of the small module makers in Europe are starting to benefit from seeing less competition from the lower Tier Chinese suppliers (as opposed to winning share from the leading Tier 1 Chinese suppliers).
But while the difference of a few MW of business for some of the small module manufacturers in southern Europe may not change the global picture, it’s a really big deal right now to a struggling module supplier in Europe trying to justify keeping a 10-15 MW module line running.
However, the background for the AD/CVD case in Europe is purely manufacturing based. Not even related to market-share levels, but simply the fact that many European manufacturers are struggling to sustain operations. In fact, for many of these manufacturers, the issue is not simply a European one. It is a global issue.
For example, consider the case of PV demand being driven from outside Europe (China, Japan, India, Middle-East, Africa, Latin America, Australia, Southeast Asia…). Nothing the European Commission can do on AD/CVD on Chinese imports coming into Europe is going to help European PV manufacturers export product to these PV end-markets. In fact, the fear is that retaliatory actions from these regions could have a far greater impact on European suppliers than anything enacted locally to their benefit.
Domestic manufacturing is of course a highly politically-sensitive issue, and from a corporate standpoint the issue is one of securing jobs, not necessarily shareholder returns. When any analysis is done on European PV manufacturing, the losers are the workers in the factories: many hundreds of jobs that have been lost in the past few years. Worse still, many of these jobs were originally created in ‘zones’ that had been assigned as economically-deprived areas and had been strongly supported by governments and regional trade associations/bodies as a means of stimulating local economies.
The backdrop of the European AD/CVD case therefore is thousands of lost jobs and dozens of shuttered production plants that had once been championed as the beacon of a new green economy. So, what will the impact of the AD/CVD case be on these mothballed manufacturing plants and what prospect is there for European PV plant workers many of whom have been made unemployed?
The answer lies in a crystal ball right now, so one can only speculate for the time being. But let’s consider a scenario now which is a real possibility and an outcome that could end up being one of the few win-win situations for European factory workers and Asian PV suppliers alike.
Before we outline this scenario, it is important to differentiate indigenous manufacturing from inward-investment based manufacturing. In terms of employees having secure work and getting fabs running again, do any of the employees really care if their company is owned by a European-based conglomerate or an Asian-based entity? Do the local authorities care either, so long as workers are taken off the unemployment registers and local economies restored?
While the short-term issues for many Chinese suppliers will be based upon case-by-case direct-sale due- diligence, the threat of domestic protectionism is unlikely to go away regardless of any AD/CVD charges. Therefore, contingency strategies in place by dominant Tier 1 Chinese suppliers are likely to have both short-term and long-term components.
Long-term plans will probably be based upon having some form of manufacturing in Europe, the nature of which cannot be fully assessed until the preliminary EC ruling. However, being the saviours of domestic manufacturing is a significantly better political bargaining tool compared to being tagged as the reason for rising unemployment figures in the first instance.
In fact, some examples are already evident here in Hanwha’s acquisition of Q-Cells c-Si activities, China Sunergy’s capacity transfer to Turkey and the Hanergy/Solibro deal. There is no shortage of PV fabs in Europe equipped with automated made-in-Europe PV equipment, there is a skilled workforce in place, and Europe has an extensive network of PV R&D/academia activity unrivalled elsewhere in the world.
The reality is that local regions in Europe will happily welcome any foreign inward-investment to get manufacturing jobs revived. Many will also provide incentives and subsidies (again) simply to create this opportunity. Therefore, it could be argued that the local landscape in Europe would be perfect for inward investment for some form of PV manufacturing, in particular from well-financed or supported Asian companies focused on long-term global PV participation, within which Europe is essential.
Putting aside the nationality of ownership and shareholder returns, could this scenario be an ideal win-win situation for PV in Europe? Or perhaps another question to ask is: who stands to lose?