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China subsidized solar panels, US finds. Are tariffs the right response?

A Commerce Department investigation found that Chinese government-subsidized solar panels were dumped in the US market, harming US manufacturers. 

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Solar photovoltaic module production in the US dropped from 1,273 megawatts in 2010 to 1,219 MW in 2011 "as a result of global oversupply and the shuttering of a number of production facilities," according to a 2011 year-in-review study conducted for the Solar Energy Industries Association by GTM Research.

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At the same time, imports of Chinese solar cells and modules into the US in 2011 more than doubled, with their value soaring from $1.5 billion to $3.1 billion in the same time period, the Commerce Department found.

Amid that flood, US-based SpectraWatt, founded in 2008, closed last year. Evergreen Solar Inc. and Solyndra, the California company that received a $535 million federal loan guarantee, shut last year, too. Sanyo last month said it plans to close its solar ingot and wafer factory in Carson, Calif., laying off about 140 workers.

But there's doubt that the new tariffs will do much. Even with new US trade sanctions, Chinese solar manufacturers are shifting assembly lines to Taiwan, Malaysia, Indonesia, and the Philippines, industry analysts say.

In an apparent bid to cut off that end-around, Commerce also announced a clarification of the scope of its investigation to cover not only imports of solar cells produced in China and solar panels produced in China from Chinese-made solar cells, but also imports of solar panels produced outside of China from solar cells produced in China.

Will that stop the flood of cheap panels? Probably not, Toor says.

Instead of tariffs, she says, the US should consider subsidizing the manufacturing of polysilicon – the high-purity raw material for solar cells. That would, she says, help ensure domestic manufacturers' survival.

"It's going to be hard for US companies to produce at a cost per watt advantage unless they get cheaper polysilicon," she says. "That's where the US government needs to focus its support, not on higher tariffs."

Commerce is scheduled to conclude its investigation and release its findings in June.

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