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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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An Unexpected Windfall For U.S. Solar

U.S. solar power companies are benefiting from a slump in global PV panel prices following China’s decision to substantially reduce subsidies for the solar industry, which led to the quick build of excessive panel stocks, Reuters reports, citing a senior industry executive.

“If you are building a large power plant your pricing has certainly come back at least halfway to what it was pre-tariff if not all the way,” Tom Werner, chief executive of SunPower, told Reuters in an interview.

Early this year, when President Trump announced a 30-percent import tariff on Chinese PV modules, the local solar industry voiced serious concern that the tariffs would make their installations non-competitive and some could even go under. However, Beijing’s decision has helped to reverse the industry’s fortunes.

China surprised everyone in June by announcing that it would not issue approvals for any new solar power installations this year and would also cut the feed-in tariff subsidy that has been a major driver of the solar business in the country that accounts for as much as 50 percent of capacity.

Subsidy costs have been swelling at a fast rate and have become difficult to manage. In 2017, these hit US$15.6 billion (100 billion yuan) and the government has still not paid these in full. At the rate of new solar capacity approvals from the last few years, subsidy costs would have reached US$39 billion by 2020, according to Wood Mac estimates. Related: A Trade Too Good To Ignore

So, following the June decision of the Chinese planning commissions, global PV panel prices dropped by 12 percent, which has benefited buyers of PV panels but has served a blow to producers, and not just those in China. In fact, the price decline has made U.S. domestic production of panels “that much more challenging,” Werner told Reuters. The only way to deal with this challenge is to raise the production scale, through acquisitions or capacity growth, in order to lower costs in an import tariff-heavy environment.

By Irina Slav for Oilprice.com 

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