Solar Panels at Crossroads

Dec 05 - Record, The; Bergen County, N.J.

The flood of low-priced Chinese solar panels into the U.S. is roiling New Jersey's robust solar energy industry.

The state's largest panel manufacturer, whose business has suffered in the face of cheaper competition, has joined the chorus of panel makers across the country in demanding that tariffs be placed on Chinese imports.

North Jersey project developers and installers, while sympathetic to the manufacturers' plight, say the cheaper Chinese panels have made solar systems more affordable -- up to 25 percent cheaper.

At the heart of the debate is the question of how best to create jobs in a sector that has been touted by President Obama and many others as a potential sunrise industry for the future.

"I'm conflicted," said Kurt Holmes, owner of Englewood-based Renewable Energy Associates, which develops and sells solar energy projects.

"As a citizen, I would like to see manufacturing done here at home," he said, reflecting the view of several installers. "However, I've got to pay the lowest price. The fact that Chinese manufacturers are driving down the price is good for the industry."

Manufacturers say protection from Chinese imports would help create jobs in the U.S. and stop them from going overseas. But some installers and project developers say Chinese imports help bring down project costs, spurring the creation of new businesses and sales, construction and installation jobs.

Tom Ferraro, owner of Solar & More, a Pompton Plains solar installation company, said he supports the manufacturers, but low panel prices help boost his year-old business, which employs four people including himself. He opened a showroom in April and plans to open two more next spring.

"Obviously, when you are selling something that's thousands of dollars, the lower the price the easier it is to sell," he said. "I get these stores open and I'm going to need to hire service people, office and support staff."

On Friday, the U.S. International Trade Commission voted unanimously in a preliminary ruling on the petition by manufacturers calling for anti-dumping and countervailing duties. The commission will now proceed with a full investigation.

The manufacturers accuse Chinese manufacturers of "dumping" solar panels in the U.S., selling them for less than the production and shipping costs with the help of Chinese government subsidies. The complaint asks the U.S. to impose tariffs on imported Chinese panels, which could significantly raise the price.

The dispute comes at a volatile time for the solar industry, which has been shaken in recent months by the bankruptcies of Fremont, Calif.-based Solyndra, a large solar panel manufacturer that received $500 million in federal subsidies, and two other large panel makers, as low-priced Chinese imports flooded the market.

Solar-panel prices have fallen dramatically in the past year in large part due to a worldwide excess in panel manufacturing capacity, some of it the result of a collapse in European demand. New Jersey installers say panel prices have fallen 30 percent in the past year.

N.J. makers hurting

Conversely, the state's industry has been squeezed since May by a nearly 70 percent drop in the price of Solar Renewable Energy Certificates (SRECs), which represent the clean-energy benefits of electricity generated from solar energy systems.

The certificates can be sold to utility companies to help them meet their state-imposed solar-energy production targets, earning solar system owners thousands of dollars in revenue annually. So the price drop, which is largely driven by a surge in completed projects in the state, means a sizable loss in revenue for solar project owners.

Yet the Chinese question is among the biggest headaches for manufacturers.

Canceled orders

MX Solar USA of Somerset, the largest panel manufacturer in New Jersey, is "very much aligned" with the position of the manufacturers that filed the trade complaint, said Carlo Santoro, the company's director of business development

The Somerset company, the U.S. subsidiary of a large Italian panel manufacturer, opened its $15 million plant in December with the help of a state loan and grant totaling $3.3 million.

The company opted to put its U.S. home in New Jersey because of the support from state officials and the size of New Jersey's solar market, Santoro said.

But the flood of Chinese imports has hurt business, reducing the 120-worker, three-shift operation to one shift of 60 workers at times, he said.

"We have been substantially hindered and damaged by the dumping of these products on the market," he said.

"We have had many canceled orders because people have said, 'Hey, can you give us this [low] price' because they were getting prices which were lower than we could possibly offer."

Sonali Solar, a Closter-based company that manufactures solar panels in India, also backs the complaint, said Danial Rushton, the company's marketing manager.

He said India's low labor costs, and the tax breaks awarded the company's plant in a "special economic zone" in the Indian state of Gujarat, mean Sonali can just about compete with Chinese manufacturers on a level playing field.

However, "we do not want to compete with manufacturers who are illegally pricing below the cost that it takes to manufacture," Rushton said. "We can't compete with that."

Yet some installers have no time for arguments that would keep panel prices from falling.

"It's going to ultimately negatively impact customers," said Alan Epstein, president of KDC Solar, a Bedminster installer, who responded to SolarWorld's action by joining the Coalition of Affordable Solar Energy, which opposes the complaint.

Price isn't everything

Epstein and other project installers said a panel's price is key to a project's success because it is the single largest cost -- 25 to 30 percent of the total. Using Chinese panels could cut about 10 percent from the $33,000 price tag on a typical, 6 kilowatt residential project, Ferraro, of Solar & More, said.

Despite those potential savings, you won't find any Chinese panels at Meadowlands Nissan in Hasbrouck Heights, where co-owners Barry Goldman and his son, Howard, are spending about $1 million to install 890 solar panels on the roof of the 30,000-square-foot dealership.

The 210-kilowatt project will generate about half the dealership's electricity, and the Goldmans expect it to repay the investment in five or six years.

Uncertain quality

Project contractor Gregory Redington, president of Westfield- based Redco Engineering and Construction Corp., said he and the Goldmans picked SolarWorld panels for the project even though the price of about $1.55 per watt was at least 15 percent higher than similar Chinese panels.

"One reason was we buy American," he said. Quality and reliability were also key factors in the decision, he added, because that system, like most solar projects, is expected to last for decades.

Jim Van Ness, chief operating officer for Alliance Cooperative Energy, a Lyndhurst installer, said some customers don't want to take a chance on a Chinese company with little track record.

"Are they going to be around to honor their warranties?" he wondered. "I haven't installed many Chinese panels. Generally, the lowest priced panels don't provide much value to my customers because of the risk involved."

David Jenkins, general manager of the solar division at East Rutherford-based Allied Building Products Corp., a distributor, said he regularly gets e-mails from Chinese panel manufacturers trying to interest his company in their products.

Jenkins predicted there would be a "flight to quality" as consumers understand the benefits of higher priced panels.

"If lower prices chase all of the higher quality manufacturers out of business, there won't be strong warranties and higher performing products," he said.

E-mail: morley@northjersey.com

Sidebar:

Update

Background: Seven U.S. solar panel makers have accused Chinese competitors of "dumping" cheap panels, made with the help of government subsidies, on the U.S. market.The news: The U.S. International Trade Commission on Friday ruled that there was enough evidence that the industry had been harmed to continue the investigation. The Department of Commerce is conducting its own probe into whether Chinese manufacturers are dumping subsidized panels in the U.S., and will give a preliminary ruling in March.What's next: Both agencies will issue a final determination next the summer. If they back the allegations made by U.S. manufacturers, the U.S. would order tariffs levied on Chinese imports.

Originally published by E-mail: morley@northjersey.com.