Hedge Funds Should Not Be Able to Utilize US Trade Laws to Harm the Solar Industry Posted on Sep 01, 2017

The solar industry is on edge as two hedge funds behind the foreign-owned, bankrupt companies, Suniva and SolarWorld, try to play the administration to recover their bad investments. In this article, we will provide a summary and history of this trade case, the arguments being used to fight it and a template for you to use to write your own op-eds for community and state newspapers and blogs. The first decision in this case is occurring on September 22, 2017 so timing is critical. We hope that you will not only read this whole article, but also follow through on personalizing and sending out the template, as appropriate.

Summary and History of the Suniva & SolarWorld Trade Case

On April 26, 2017, Suniva submitted a petition with the International Trade Commission (“ITC”) seeking import relief under Section 202 of the Trade Act of 1974 (the “Act”) based on allegations that crystalline silicon photovoltaic (“CSPV”) cells (whether or not partially or fully assembled into other products) were being imported to the U.S. in such increased quantities as to be a substantial cause of serious injury, or the threat thereof to the entire U.S. industry producing products like or directly competitive with such imported products. On May 17, 2017, the ITC determined Suniva’s 202 petition properly filed. Consequently, the ITC instituted an investigation pursuant to Section 202 of the Act to determine whether Suniva’s allegations are true. The ITC concluded that this investigation is “extraordinarily complicated” because of the complexity of the issues, including the existence of antidumping and/or countervailing duty orders on certain imports covered by this investigation and the global supply chains for the imported products under investigation.

The broad scope of products covered by the ITC’s investigation means that the outcome of this case could affect almost the whole solar industry. The ITC’s investigation covers CSPV cells, whether or not partially or fully assembled into other products, such as, modules, laminates, panels, and building-integrated materials. Included in the scope of the investigation are photovoltaic cells that contain crystalline silicon in addition to other photovoltaic materials.

The ITC scheduled separate hearings for the injury and remedy phases of its investigation. The injury hearing was held on August 15, 2017. The ITC will issue its decision on whether the domestic solar manufacturing industry has suffered serious injury and increased imports were a substantial cause of that injury on September 22, 2017. In the event that the ITC makes an affirmative injury determination or is equally divided on the question of injury in this investigation, a hearing on the question of remedy will be held on October 3, 2017.

Thereafter, the ITC will submit to the President the report required by November 13, 2017. The import relief requested by Suniva and SolarWorld may be imposed by the President on U.S. imports of CSPV cells (whether or not partially or fully assembled into other products) as a result of the investigation if the ITC makes an affirmative injury determination and recommends that the President impose relief. The President may impose relief in the form of increased duties and/or other restrictions on imports of CSPV cells (whether or not partially or fully assembled into other products) that are the subject of an affirmative injury determination.

If Suniva and SolarWorld are successful in this trade case, not only will it not bring back their companies, jobs, manufacturing capabilities or the domestic solar manufacturing industry, but also only the hedge funds behind the case will be compensated. Even the small shareholders at Suniva and SolarWorld will be unlikely to receive any benefit from a positive outcome. While this trade case creates no benefit to the industry or anyone but a few hedge funds and individual creditors, it also has the potential to cause unprecedented harm to the industry, resulting in the loss of thousands of U.S. solar jobs and companies. 

Arguments Being Used To Fight The Trade Case

The legal arguments being used against Suniva’s and SolarWorld’s claims are sound and summarized, as follows:

1. Suniva’s and SolarWorld’s business problems were caused by bad business decisions, not by an increase in foreign imports of CSPV products.

• Both companies’ failed focus on technological innovation, on qualifying their products with major retail purchasers, such as Sunrun and Vivant, and a litany of complaints from dissatisfied customers over late shipments, damaged products, and general product unrealiability caused their failures, not increased imports.
• The rapid growth of technological innovation in solar is so well known that solar incentives are structured based on the assumption that few incentives will be required as the technologies improve. This downward pressure on CSPV prices ratcheted up the competition, not imports.
• The only CSPV product segment in which imports increased was the utility segment, and both companies were unable to manufacture and supply those types of products. The retail CSPV segment (residential and commercial markets) in which the companies operated was mostly serviced by the domestic industry, yet petitioners failed to capture sufficient market for their businesses to succeed.
• Corporate failures like the companies’ due to bad business decisions, failure to innovate and adeptly scale are common for a high-tech industry full of startups.

2. The CSPV product market under investigation cannot be considered without also considering all of the upstream and downstream jobs and companies and the type of economic competition in which it operates.

• A very small domestic industry produces products like or directly competitive with the imported products. Therefore, any injury determination would be unfairly limited if it fails to account for the significant upstream and downstream jobs in the US solar industry that depend on CSVP products. Solar jobs dependent on CSVP products are booming. For instance, the U.S. solar industry grew twenty-fold from 0.1 percent of the total US electricity generation in 2010 and it is projected to pass 3 percent in 2020 and 5 percent in 2022.
• If solar equipment is made substantially more expensive through import relief, thousands of jobs will be lost, thousands more will never be created and consumers will simply stop buying CSPV products.
• Solar is still a very small percent of the nation’s electric supply providing only approximately 1.4 percent today. CSVP product manufacturing jobs are 1 percent of the total US jobs in the solar industry.
• The domestic CSPV manufacturing industry in which the companies operate represents less than 1 percent of the 260,000 solar jobs in the U.S. and 35,000 of the total US solar manufacturing jobs are manufacturing jobs other than CSPV.
• CSPV products do not merely compete against foreign CSPV products, whether domestic or imported, CSPV products must be priced low enough to compete with other sources of electricity on the grid.
• The need for grid parity, competitiveness with alternative sources of energy on the grid, is a far more plausible explanation for the companies’ failed businesses than cheap imports are as an explanation of the cause.

3. Increased imports are not causing the domestic industry of products like or directly competitive with the Suniva’s and SolarWorld’s products to suffer injury.

• The solar industry was always dependent on imported CSVP products, and as the industry grows so do the number of products imported. The very market at issue was created by the existence of imported solar products.
• It is only in the utility sector, which neither Suniva nor Solar World served, that an increase in imported products as compared to domestic ones occurred. Thus, both companies failed to supply products in the most rapidly growing CSVP product segment.

Template for Writing Op-Eds and Blogs

Everyone who works in solar should get involved with this trade case. You can help with the fight against the Suniva and SolarWorld trade case by reaching out to lawmakers, journalists and others who are potentially influential to tell the true story about how hedge funds and bad business decisions by two foreign-owned, bankrupt companies unable to innovate and respond to the rapidly changing solar marketplace are the reason for Suniva’s and SolarWorld’s failing businesses.

Please modify the template below, as appropriate, for writing your own op-eds in community or city newspapers or in a blog: 

Headline

By xxx xxx,

An obscure provision in federal law known as Section 202 of the International Trade Act (“Act”) may cost tens of thousands of local jobs, and decimate clean energy in this community. 

Solar is a true American success story. Last year, solar was the number one source of new electric capacity for America creating 51,000 jobs and $23 billion in investment. Solar is powering homes and farms, churches and military facilities with a clean, abundant domestic power source. And, the industry employs over 260,000 Americans, which is more than Google, Facebook and Apple combined.

My company, xxx, is a part of this success story. We employ xxx people in this community.

Our success, and that of the solar industry, is being threatened. Two moribund solar cell and panel manufacturers are hanging their hopes on Section 202 of the Act, last used in 2002, to eliminate competition. Importantly, the two companies, Suniva, a bankrupt Chinese-controlled company, and SolarWorld, whose German parent company has declared insolvency, are failing for reasons that having nothing to do with imports.

And here is the worst part—if these two companies prevail, 88,000 well-paid Americans could be jobless next year, including potentially xxx jobs at my own company, with no guarantee of Suniva or SolarWorld adding any jobs. The harm will go beyond jobs. Bloomberg New Energy Finance says, if imposed as Suniva has asked, the tariffs would double the cost of solar panels. IHS Markit says the case could slash photovoltaic demand by 60 percent by 2021. GTM Research says it could lead to the abandonment of 47 Gigawatts of future solar projects, that’s more than the total amount of solar installed in the United States to date and the equivalent of enough electricity for 10 million homes.

This is particularly disconcerting to me because…..

My company is a [manufacturer] [installer], [x service company] [supplier] that employs xxx people doing everything from xxx electrical work, to manufacturing to sales or whatever

We’ve hired hard working Americans from all walks of life who are making a serious commitment to our community.

Right now, the Section 202 petition is in the hands of the U.S. International Trade Commission. Suniva and SolarWorld made bad business decisions, chose not to participate in the largest and most rapidly expanding sector of the solar market and faced numerous complaints from customers about the quality and timeliness of their products.  They brought their failures on themselves. There is no solution involving global trade relief that would help these two companies survive without severely damaging the American solar industry. Furthermore, many of those damaged would be manufacturers. In fact, we support the growth of the nearly 38,000 solar manufacturing jobs in our country that are threatened by this case.

Solar is a high-tech product that, like other tech industries, making it part of the global economy. We need U.S. manufacturing, as it is a staple of American entrepreneurship, innovation and ingenuity, but we also need the business flexibility to utilize the global supply chain to meet a constantly growing domestic demand for solar. There is a right and wrong way to spur growth in U.S. solar manufacturing—sacrificing jobs in a burgeoning industry is the wrong way. I urge the ITC to decide against injury in the best interests of American businesses and the quarter-million solar workers and their families.

For my company and our workers, this is now a matter of economic survival, and the lost jobs will be felt throughout our community if this decision goes the wrong way.