Summary:

The trade war between the US and China isn’t going to ruin solar energy fortunes on either side. The Chinese solar companies are still going to remain the biggest losers from the tariffs, but the solar energy market isn’t going to be affected. US sanctions will bring cheaper Chinese solar panels not only to renewables-hungry Europe but also to Asian solar energy markets, both developed and emerging.

Main Article:

US and China Trade War Isn't Going to Kill Solar Energy

Ongoing US-China trade tensions will not ruin solar energy fortunes on either side as players adapt by redrawing the lines of global supply flows, Fitch Solutions has predicted.

Chinese solar companies will remain the “biggest losers” from spiralling trade wars but their long-term growth is not threatened, the consultancy said over the weekend.

Its new analysis noted pressure is building on Chinese PV solar companies, faced with shrinking demand at home and import tariffs abroad from fellow top solar markets US and India.

However, Fitch added, the sector has so far prospered despite its challenges – with H1 2019 exports on the up from 2018 figures – and found in Europe an avenue to offset declining sales to the US.

EU countries – the Netherlands, Spain and Germany in particular – are already taking on Chinese solar panels imports at “surge”-like levels and will continue to do so in the future, the firm predicted.

Thailand, Vietnam reap unintended gains from sanctions

According to Fitch, US sanctions will bring cheaper Chinese solar panels not only to renewables-hungry Europe but also to Asian solar energy markets, both developed and emerging.

Faced with solar panels glut they cannot ship to the US at the volumes possible pre-sanctions, Chinese makers will turn to offloading exports onto – and building a presence in – smaller Asian states.

Already underway, China’s roll-out of PV making plants in Thailand and Vietnam to sidestep US duties will bolster these countries’ local supply chains and drive down prices, Fitch said.

As the firm pointed out in April, the Southeast Asian route is already being used by China to access downstream buyers in India, which adopted last year 25% duties on Chinese imports.

Predictions around Thailand and Vietnam’s rising star in a world of trade tensions come as both countries record rises in solar panel installation capacity, partly fuelled by feed-in tariff programmes.

ITC race helps US weather sanction storm

Whatever its ultimate impacts on solar panels, the US-China trade row is likely to remain in place in the short term, according to Fitch.

Last Thursday’s announcement by US president Donald Trump of new tariffs for Chinese goods starting on 1 September “reinforces” expectations that tensions will stay “high”, the firm said.

Its analysis also explored how US sanctions will affect the country’s own solar companies. There will be rises in cost of solar panels but these will be partially offset by solid market fundamentals, Fitch predicted.

Tumbling technology costs, "conducive" finance, support from state authorities and corporates and a rush for investment tax credits before their phase-down will all underpin the momentum, the firm said.

As a result, US downstream solar power – which added an “historic high” of 2.7GW in Q1 2019 – will take solar panel installation capacity from around 50GW today to nearly 175GW by 2028, according to Fitch.

US solar prospects amid trade tensions and a changing solar incentive landscape will take centre stage at Solar Media's Solar & Storage Finance USA, to be held in New York on 29-30 October 2019.

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