Pricing War For Solar Panels Between US and Germany

The US and Germany could be soon engaged in a pricing war over the booming industry of renewable energy products like solar cells.

According to Reuters on Friday, German solar firms Conergy and Solarworld, as well as US solar entities, are becoming more concerned about China’s efforts to grab a larger share of the renewable market by cutting costs in order to compete on the global market.

Reuters cited a USB report that found Chinese firms have slashed prices on solar panels, which has undercut German solar cells by about 20 percent.

Germany’s Conergy, which is the nation’s second-largest provider of solar panels, is reportedly urging the European Union to investigate price structures of Chinese solar panel firms.

"It cannot be the aim of our environmental and economic policy to lose to the Far East our pioneering role with regard to the last great future technology, which was raised here with great efforts," Dieter Ammer, CEO at Conergy, told Reuters.

Popularity of solar cells has resulted in overproduction, which has caused retail costs to plummet, and now China intends to cut prices even more, which has led to much speculation among industry leaders in the US and Germany.

According to Reuters, a solar system below 10kw would cost about 3,400 euros in Germany, and more than $70,000 in the US.

Now the US faces the tough task of trying to encourage consumers not to purchase more affordable solar energy products from China.

"Solar is a very special product. I don't think it's a good idea to target this (for dumping) as the product is important for the world (to achieve) a low carbon economy," Fu Donghui, trade lawyer for Allbright Law Firm in Beijing, told Reuters.

"The world benefits if the cost goes lower."

"Accusations of dumping in the solar space raise concerns that an important sector like solar could be weakened by protectionism," said Felix Lam, analyst with CCB International.

"In the end, everyone loses if there are trade barriers."

In Germany the economic loss can already be seen. Shares of Solarworld have decreased by 63 percent in one year, and Q-cells, the world’s largest solar cell provider, has seen an 85 percent drop in shares.

Industry analysts tell Reuters that Chinese panel maker Suntech Power Holdings and First Solar in the US stand to lose the most if trade barriers are put into effect.

"China is dependent on foreign trade, but so are the United States and Germany," said HSBC analyst Christine Wang. "Chinese companies will definitely be hurt, but in the long run German firms will also suffer as China is potentially a huge market."

A spokesman for Yingli Energy Holdings told Reuters that the firm intends to grow its business in Europe as well as in the US, adding that the company already has “a presence in San Francisco and New York.”

"Processing costs have become a key factor in determining cost competitiveness, and this is where the Chinese do better," said Charles Bai, CFO of Chinese firm ReneSola Ltd.