Blame-China Imports Chorus Grows as Solyndra Falls

(Corrects number of employees in penultimate paragraph of story published Sept. 23.)

The collapse of Solyndra LLC has renewed demands from U.S. lawmakers and union leaders that the Obama administration pursue unfair-trade complaints against China for out-sized subsidies to its clean-energy companies.

“The American solar industry is facing unparalleled challenges, and without the leadership of your administration this industry may disappear,” Senator Ron Wyden, an Oregon Democrat, said in a Sept. 8 letter urging President Barack Obama to file a complaint against China with the World Trade Organization.

Wyden wrote two days after Solyndra, which received $535 million in loan guarantees from the Energy Department, filed for bankruptcy protection. China provided $30 billion in credit to its biggest solar manufacturers last year, about 20 times the U.S. effort, Jonathan Silver, executive director of the Energy Department’s loan program, told a congressional panel Sept. 14.

China “frequently provides both zero-cost financing, occasionally free land and other kinds of incentives and subsidies” to its wind and solar companies, Silver said. Silver called for the U.S. “to take on this challenge” for a global market that will be “worth trillions of dollars.” He didn’t join critics such as Wyden and the United Steelworkers union who say China’s subsidies should be challenged as unfair.

Workers move pallets of solar panels at SolarWorld's factory in Hillsboro, Oregon. “We can compete with any company from any country in the world, but it becomes difficult to compete with the communist government of China,” said Ben Santarris, a SolarWorld spokesman. “The subsidies run across every aspect of a company’s life.” Photo: Fred Joe Close

Workers move pallets of solar panels at SolarWorld's factory in Hillsboro, Oregon. “We... Read More

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Workers move pallets of solar panels at SolarWorld's factory in Hillsboro, Oregon. “We can compete with any company from any country in the world, but it becomes difficult to compete with the communist government of China,” said Ben Santarris, a SolarWorld spokesman. “The subsidies run across every aspect of a company’s life.” Photo: Fred Joe

‘Trade War’

“We should not sit back and say we are afraid to start a trade war,” Thomas Conway, international vice president for the Pittsburgh-based United Steelworkers said in an interview. “We are in a trade war, and we are losing.”

The 1.2 million-member union petitioned the administration last year to investigate China’s aid to clean-energy companies.

The U.S. Trade Representative’s Office responded by filing a complaint in December with the WTO saying China violated rules of the Geneva-based trade arbiter. China’s Special Fund for Wind Power Manufacturing required recipients of aid to use Chinese- made parts and amounted to a prohibited subsidy, the U.S. said. Before the WTO acted on the complaint, China made it moot by ending that aid in June, according to the U.S.

Solyndra Chief Executive Officer Brian Harrison and Chief Financial Officer W.A. Stover today invoked their constitutional right against self-incrimination and refused to testify at a hearing of the House Energy and Commerce Committee investigation panel.

California state officials applied Sept. 2 for U.S. Trade Adjustment Assistance for 1,100 former Solyndra employees. The aid is available to workers whose jobs are lost to overseas competition. The Labor Department said it is weighing the application.

‘Failed Business Model’

Republican Senator Orrin Hatch of Utah questioned the request, saying the high cost of Solyndra’s solar devices compared with its U.S. competitors undermined the rationale that the company was done in by Chinese competition.

“If you cannot even out-compete U.S. companies, it wasn’t foreign competition that ruined your business, it was simply a failed business model,” Hatch said in a statement Sept. 20.

Solyndra built a $733 million manufacturing plant on the bet that demand for its product would increase. Last year it received a warning from its auditor questioning whether it would remain a “going concern” and withdrew plans for an initial public offering.

Production Costs

Solyndra was producing panels at a cost of $4 a watt and selling them for $3.24 a watt, according to a filing with the Securities and Exchange Commission before the public offering was canceled.

The administration hasn’t taken action on the union’s complaints about other wind-power subsidies or aid to the solar industry. The Steelworkers cited China for providing export credits, preferences in bidding and forced transfers of technology and said China discriminated against companies based in other nations.

“The environment-friendly green-technology policies introduced by the Chinese government are for the purpose of energy protection and ensuring sustainable development, which are in conformity with WTO rules,” Wang Baodong, the spokesman for the Chinese Embassy in Washington, said in October. Wang said yesterday that the debate over subsidies “is not a new issue.”

Officials from the U.S. Trade Representative’s office didn’t return e-mails or calls seeking comment on the status of the remaining complaints.

‘Challenged Aggressively’

China’s violations “should be challenged aggressively,” Scott Paul, executive director of the Alliance for American Manufacturing in Washington, with members such as U.S. Steel Corp., said in an interview. Without U.S. efforts to challenge unfair trade, it “would be an uphill battle.”

Erin DiPietro, a spokeswoman for Pittsburgh-based U.S. Steel, referred questions to the trade group.

Solyndra of Fremont, California, ceased operations on Aug. 31, the third U.S. solar manufacturer in a month to fail in the face of lower-cost Chinese panels and weak global demand. The other two, Evergreen Solar Inc. (ESLR) and SpectraWatt Inc., hadn’t received U.S. guarantees.

Not all U.S. companies complain about competition from low- wage nations such as China.

MEMC Electronic Materials Inc. of St. Peters, Missouri, exports most of its polisilicon used for solar panels to China, contributing to an 83 percent increase in U.S. solar-product exports to $5.63 billion last year. American Superconductor Corp. of Devens, Massachusetts, generated most of its revenue last year selling electrical systems to China’s wind-turbine manufacturers.

First Solar

First Solar Inc. (FSLR) of Tempe, Arizona, the world’s largest thin-film solar producer, fell 9 percent in New York trading yesterday, the most in almost two years, after saying it’s in talks to sell a 550-megawatt project in California that failed to win a U.S. loan guarantee.

Alan Bernheimer, a spokesman for the company, referred calls about competition from China to the Solar Energy Industries Association.

Clean-energy companies that failed should be “a wake-up call” that the U.S. needs to do more to aid manufacturing, Rhone Resch, president of the Washington-based solar association, said in an interview. The U.S. Trade Representative’s office should make sure China hasn’t gone too far, he said.

‘Held Accountable’

“It is very important that the petition be fully investigated, and if China is found to break the rules, they need to be held accountable,” Resch said.

Elizabeth Salerno, director of industry data and analysis for the American Wind Energy Association in Washington, which has 2,500 member companies globally, declined to speak about Chinese competition. She said the U.S. needs consistent energy policies that would attract international investment.

Operators of U.S. solar and wind factories and installations that face Chinese competition often have their own international connections.

SolarWorld USA, which is lobbying lawmakers such as Wyden to help protect its 1,000 jobs in Oregon, is owned by SolarWorld AG (SWV) of Bonn, the biggest German maker of solar modules. The company said Sept. 2 that it was cutting almost 200 jobs at its facility in Camarillo, California.

“We can compete with any company from any country in the world, but it becomes difficult to compete with the communist government of China,” Ben Santarris, a spokesman for SolarWorld USA, said in an interview. “The subsidies run across every aspect of a company’s life.”

To contact the reporter on this story: William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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