Temperatures plunged in San Jose after last week's US commerce department preliminary ruling took the heat out of the US trade dispute with China.
Countervailing tariffs on imports did not have the chilling effect that the US industry feared, with lower than expected ranges set between 2.9% and 4.73%. Even the US commerce department's addition of an anti-dumping levy investigation on May 17 is unlikely to bring the total tariffs up to the 20–30% predicted by some analysts.
Nevertheless, a sharp draught could be felt in the halls of the San Jose Convention Centre, host to last week's PV America West. And this time it wasn't the air-conditioning set too low.
Rhone Resch, the chief executive of the Solar Energy Industries Association, warned the third-full opening session that the real threats to the industry were closer to home: the shadow of fundamental tax reform and the integrity of the US industry itself.
Resch said that as he was clearing out his loft recently, he found a dusty copy of the Sierra Magazine from 1987, which ran an article headlined the Dark Days of Solar. It contained some very chilling echoes of the storm clouds gathering for the US solar industry today, he said.
"This article told of the industry's downfall and what could happen in 1985 and how we made mistakes as an industry and mistakes that we must learn from and never make again," he said.
Resch then read from the article:
When the Solar Industries Association met for a strategic meeting last year members had one item on their wish list: survival. Only 15 people showed up to represent an industry that once numbered 267 manufacturers, 6,000 distributors and 30,000 employees. The solar industry today is a former shadow of its former high flying self. Low oil prices, the demise of tax credits, charges of fraud and high prices and poor quality have sent the solar industry into a tailspin. Sales of solar have declined 80%-90% from their highs in 1985.
"Two takeaways from the story are that you realise there are two primary reasons for why this occurred," he said. "The first was the demise of the tax credit, due in large part for the general tax reform that was going on in Washington. But the industry was also to blame. Reports of unscrupulous business practices poisoned our chances of surviving the tax reform debates. Solar marketing firms that were using solar financing arrangements for systems were suspected of inflating the prices of solar equipment way above the fair market value and abusing the basis on which the tax credit was calculated.
"So we had a confluence of events: tax reform and companies getting greedy. Sound familiar? This cannot be allowed to happen again."
Fundamental corporate tax reform is on the Congressional horizon in Washington, with federal tax credits at the centre of debates on spending cuts, he said.
Among other policy measures, SEIA is advocating for an extension of the 1603 cash grant, a US$5bn extension of the manufacturers tax credit and clarity on what will happen to the critical Investment Tax Credit after it is due to expire in 2016.
"It would be a mistake for us to assume that the ITC is safe," he said. "We can expect that there will be a push to repeal energy tax incentives in Washington in the next year."
Senator Jim DeMint's amendment to the transportation bill this month would have scrapped support for all renewables incentives:
"[Renewable] subsidies have long distorted the market for new sources of energy by allocating funding to the technologies with the best lobbyists instead of those with the most value to consumers… When the government picks winners and losers, we get unwise and failed investments like Solyndra. We need to let the innovative spirit of the free markets decide which new technologies will most benefit American consumers."
Luckily for the industry the amendment failed. But Resch said support from 29 Senators shocked him as many of them were from states with emerging solar industries.
A senator from each of 14 states including Florida, Utah, Pennsylvania and Mississippi, where companies such as Stion and Twin Creeks Technology have chosen to build new manufacturing facilities, all backed the amendment. Both senators from Arizona, Alabama, Oklahoma, Idaho, South Carolina and Kentucky voted in favour of DeMint.
"We have a problem when Senators who represent states with strong solar industries vote against their constituents," he said.
But he warned developers and installers not to overstate their ITC claims and avoid mistakes made in the 1980s, which turned the public and politicians away from solar, he said.
"The follow up on this magazine article is that we have to make certain that we don't make the same mistakes that we did in the 1980s as an industry. We must maintain the highest level of integrity across all aspects of our industry. Don't overcharge, don't inflate the basis on which you take the ITC because you will get caught. Don't install systems that don't work. Have pride and make sure the systems you install perform.
"Systems that were installed didn't perform as advertised [in the 1980s] and ultimately the industry's credibility was undermined and it led to massive investigations and prosecutions of fraud for many companies in the solar industry."
The day before commerce's announcement, Resch outlined what a good result for the industry would look like.
"If there is a good outcome from any of these kinds of cases its one which keeps the price of solar competitive with other sources of energy, that allows the industry to continue to grow yet still encourages more domestic manufacturing.
"I don't know what that number is, if that number is right but I do think that ultimately it's important we've made such incredible stride this past year with respect to cost declines. We've seen a 50% reduction in the price of solar panels in the past year, that's the same reduction that we saw in the previous 10 years, around the world. Solar is close to that threshold of being cost effective in most markets in US.
The solar industry is quick to seize on plunging module prices and installations are breaking records, with 1,855 megawatts of PV installed, according to SEIA and GTM's US Solar Market Insight Report 2011.
But the same story cannot be told in manufacturing, which stayed mostly flat for polysilicon and modules, and shrank significantly for wafers and cells, according to the same report.
Some would also argue that the industry is much slower to pass through cheaper module prices to the consumer. SEIA's report shows that of the three segments – residential, commercial and utility – system prices for the first category increased 0.7% in the last quarter of 2011, as the national average installed rose slightly to US$6.18/W.
Commercial system prices average US$4.92/W and prices for utility-scale projects dropped to US$3.20/W.
But Resch and his advocacy teams are determined to keep the tumbleweed out of US conference halls well beyond the expiration date of the ITC in 2016.
It might not be too long before we see a world trade association for solar to mediate in future disputes as SEIA deploys soft diplomacy tactics with other industry associations around the world, he said.
"SEIA is working with the Chinese Renewable Energy Industry Association to start a multi-lateral dialogue on solar trade. We can't really affect the outcome of this case, but what we can do is prevent future cases from occurring that could severely impact the global market for solar.
"We're trying to bring the entire industry together on this very important issue. The idea is to develop consensus guidelines to avoid future trade disputes, so we're working with our fellow trade associations around the world to develop this multilateral framework that promotes free and fair trade and open markets for solar energy in all countries around the world."
One emerging winner from the US-China spat might be Taiwan, said Thomas Kimbis, SEIA's director of policy and research and general counsel.
The scope of the US International Trade Commission's investigation was the cell itself, so if the cells are made in China and made into modules anywhere in the world, the importer is responsible for the tariff – in most cases Chinese PV manufacturers.
The reverse is also true: if the cell is made in any country other than China and assembled into modules anywhere, including China, no tariff would be levied.
"In other words, Chinese modules containing cells made in Taiwan, Germany or even the US would not be subject to the duty," he said. "Since Taiwan has been greatly increasing its cell production and gaining market share in the cell manufacturing sector, it's only natural that Chinese module manufacturers looking to avoid this tariff will consider importing cells from Taiwan to assemble into modules in China."