The surprise decision by China to impose tariffs on coal imports from Australia has raised the prospect of tit-for-tat action that could impact on the multi-billion solar industry in Australia.
The decision to impose – at least temporarily – a tariff of up to 6% on imports into China is yet another blow on Australian thermal coal in particular, which is suffering from reduced demand and plunging prices. Few Australian thermal coal mines are making profits.
But the decision could rebound on the Australian solar market. The Australian government is currently considering an anti-dumping case against imports of China solar modules brought by Adelaide-based Tindo Solar.
Any ruling against cheap Chinese solar modules imported into Australia could have been potentially difficult, considering Australia’s push for a free trade agreement.
But it could now become a bargaining chip in the spat of import duties on coal. The politics of any anti-dumping ruling on Chinese solar modules has just shifted dramatically.
The anti-dumping case was brought by Tindo Solar, a small module assembly company in Adelaide with a high-tech plant and a dozen employees, earlier this year.
Tindo is Australia’s last remaining manufacturer of modules (using imported cells and other equipment). It argued that solar modules were being dumped in Australia below the cost of manufacture.
“Here at Tindo, we are passionate about creating new and innovative manufacturing jobs in this country and we are supportive of any initiative that embeds a fair go and a fair market place for Australian manufacturers” Tindo’s Richard Inwood, said at the time.
“We hope the investigation here will help achieve a level playing field in the market.”
But Tindo’s move has gotten no support in the remainder of the industry, which relies almost exclusively on renewable (installations of around 800MW versus Tindo’s current capacity of less than 10MW). While some acknowledged an issue with the imports of poor quality panels at the cheaper end, the major manufacturers reject any notion of dumping in the Australian market.
They fear that any ruling will have an impact across the board. Developers of large-scale solar projects – and there are many in the pipeline – say that any tariff would remove the small margins on project finance.
The industry says that import duties would raise the cost of solar PV modules, reduce sales, cause significant job losses and be only partly offset by an increase in solar module manufacturing jobs. “It is one more layer of uncertainty that none of us need,” said Douglas Smith, the head of Trina Australia at a conference in July. “Don’t underestimate the lengths that opponents (of the solar industry) will go to.”
The industry has tried to reduce the focus of the investigation into smaller 60-cell modules mostly used on rooftop installations, and not the larger 72-cell modules being imported for large-scale projects. FRV, which built the largest solar farm to date in the SCT, and is soon to begin construction on a 56MW project in Moree, also argued the same point.
“The utility scale solar market in Australia is still in its infancy and we believe the introduction of any tariff will have a considerable detrimental effect on the development of the industry,” wrote Infigen Energy in its submission.
However, the anti-dumping commissions is believed to have rejected those entreaties and its probe remains broad. The impact of a tariff on rooftop modules could be significant – or perhaps not as great as the removal of the renewable energy target – and there are fears it could be used as a political weapon by the government.
While the anti-dumping commission will largely look at economic factors, the broader political implications will be decided by Bob Baldwin, the parliamentary secretary assisting the Industry Minister, and Cabinet.
The anti-dumping ruling is expected soon, possibly within a week or two, with the government to hand down its decision a month later. Baldwin indicated in July that the government would take any such decisions “to the edge” of World Trade Organisation rules.
Asked to explain what this meant, Baldwin said recently: “In general, there is a submission for cabinet to enhance and strengthen … to take anti-dumping rules to the edge of what the World Trade Organisation allows … to make sure that our industries compete on a level playing field.”
Leveling the playing field
The issue has also been raised by independent Senator Nick Xenophon, who told RenewEconomy on Thursday: “Panels are coming in from China and are breaching, I think, WTO rules. Europe and the US have slapped tariffs on them and we haven’t. (These cheap imports) are killing Tindo and they could employ hundreds of more people and ramp up production. We could have new manufacturers coming into the market place.”
Xenophon also said it was an issue around quality. And if cheap panels were stopped, it would give the likes of Tindo to increase production and reduce unit costs.
There are also fears that the government could use the anti-dumping findings to put pressure on the solar industry, particularly if it is forced to back-track on plans to halt, or reduce, the renewable energy target. The small-scale solar market now looks relatively safe from policy changes, but the fossil fuel industry is still anxious that its rapid growth be curtailed by the removal of remaining subsidies.
Greens Senator Christine Milne in July warned that the government could use the anti-dumping rules to continue its campaign against solar. “Anything that makes solar more expensive than coal will be supported by the government. They could have come out in support of manufacturing but they had zero interest with SPC Ardmona and the car industry. It would be ironic if they suddenly took an interest in manufacturing now.”
The investigation is looking into four importers – Trina, ET Solar, Renesolar, and Suntech – but is believed to have only inspected one of these importers. However, any findings could impact the whole industry. The commission could recommend variable tariffs against modules, and they could be retrospective.
A statement of essential facts – which would give an indication of their assessment – was to have been released in early September, but has been delayed until November, and could be delayed further. A decision by government will be pushed into next year, by which time the coal tariff agreement could have been resolved, and a free trade agreement signed as well. The solar industry will be hoping so.