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2014 Media Kit
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Is a solar trade war about to flare?

By: | at 07:00 PM | Channel(s): International Trade  

Germany’s fifth-biggest solar power park emerges as a smudge on the horizon long before you reach it on the outskirts of the small, sleepy village of Eberswalde, an hour’s drive north of Berlin. “In the far distance, you can see it,” Peter Kobbe says, pointing through heavy December snowfall as he steers his Citroen van along an icy road.

Kobbe, 64, works at Finow airport, where a local investment firm built the 58 million euro ($77 million) solar park in 2009. Finow itself was built by the Nazis before World War Two and later became one of the Soviet Union’s main Cold War hubs. Now the small aircraft that still use the airport share it with about 90,000 solar modules—which together generate enough to power 6,400 households a year.

“This is where they (the Soviets) used to store their nuclear weapons,” says Kobbe, who runs a small museum documenting the airport’s history, guiding his van over the snow-covered landing strip.

Now there’s a different foreign presence in Finow. When the first solar modules arrived for installation they came not from a local manufacturer—German solar company Conergy runs a factory just 45 minutes away in Frankfurt an der Oder, for instance—but from China’s Suntech Power Holdings , now the world’s largest maker of photovoltaic (PV) solar modules. “We were quite surprised when the trucks brought Chinese modules, and not German ones,” Kobbe says. “But they were probably cheaper.” Solarhybrid , which spearheaded construction of the park, says reductions in Germany’s renewable subsidies meant it had to use Suntech modules to stay competitive.

Germany has long been the global solar industry’s engine. Europe’s biggest economy consumed more than half the solar panels produced around the world in 2010. Solar accounts for just two percent of Germany’s power production, but the country added a record 8,000 megawatts (MW) of solar modules last year—equal to the capacity of eight nuclear reactors—far outpacing Italy, Japan and the United States.

So why are China’s solar companies benefiting at the expense of renewable energy manufacturers in Europe and the United States? Virtually non-existent a decade ago, Chinese solar companies now control two thirds of solar cell production in the $39 billion global PV market. Critics say this is mostly because the generous subsidies they receive at home give them an advantage over other countries’ manufacturers and restrictions keep foreign companies from competing for China’s domestic projects. European and U.S. subsidies are designed to boost solar usage no matter who builds the hardware. Chinese subsidies, western firms complain, help Chinese solar manufacturers alone.

Resentment in western capitals is building. Beijing is currently considering plans to spend up to $1.5 trillion over five years to back strategic industries, including alternative energy, a source with ties to the leadership and direct knowledge of the proposal told Reuters in December.

The Obama administration, prompted by a complaint by the United Steelworkers union in September, is now considering taking a case against China to the World Trade Organisation (WTO) regarding Beijing’s support of its solar companies. Last month, the U.S. government complained to the WTO that China illegally helped its wind power manufacturers. The issue of trade will be under discussion when Chinese President Hu Jintao visits Washington. Could a green trade war be brewing?

“I think we’re always afraid of a trade war so we don’t act. The Chinese are never afraid of a trade war so they do act. And that’s why they’re beating us in too many cases on clean energy and other industrial concerns,” said U.S. Senator Sherrod Brown, a Democrat whose home state of Ohio is a hub of solar panel production for companies such as First Solar Inc , which still ranks as the world’s top solar maker by market value and is one of the largest producers.

“For 10 years we’ve always stepped back because we’re afraid, we don’t want to upset anybody. Every other country practices trade accordi