How China could end up paying the bill for Solyndra’s bankruptcy

October 12, 2012
Obsession
Energy Shocks
October 12, 2012
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“So, Mr. President, you just put your $535 million on this rack here…”(AP Photo/Alex Brandon)

Most analysts agree that Solyndra failed, like a dozen other US solar makers in the past year, because cheap Chinese solar panels drove down prices. That’s just the market at work, right? Survival of the fittest—unless someone was cheating. Well, cheating is now what the US government alleges, and is why Solyndra is blaming its Chinese rivals (and the Chinese government) for its downfall and suing them for compensation.

On Oct. 10, the Commerce Department issued new tariffs against Chinese solar companies, ruling that they had illegally dumped subsidized goods at below-fair value into US markets. Two days later, Solyndra filed suit against several of those same companies, using the government’s findings to demand its own reparations. Here’s a copy of the suit.

“The United States’ governmental determinations are of little comfort to Solyndra, whose only hope of redress is through this action,” the company’s complaint reads. “Solyndra seeks compensation for the loss of the $1.5 billion value of its business and more which Defendants destroyed.”

Determining whether government subsidies and price strategies are fair or unfair is a subjective process. The accused Chinese solar-cell makers—Yingli, Suntech, and Trina—argue strenuously that their practices are competitive, and that the tariffs are protectionism and election-year China-bashing.

For America to accuse the Chinese firms of over-reliance on subsidies is pretty ironic, given Solyndra’s own reliance on government help. When it went under, it left the US government on the hook for a $535 million loan guarantee, which had been made in the hope of bolstering an innovative company in an emerging industry. And the new tariffs are designed to boost Solyndra’s surviving American competitors by making Chinese photovoltaics more expensive (though a loophole may well allow the Chinese to bypass the tariffs by getting third-country firms to assemble the cells for them).

Solyndra’s suit aims to use the new tariffs to force the Chinese firms to pay back penalties, as if the tariffs had already been in effect when it was still in business. If it succeeds, they (and the Chinese government) will end up footing at least some of the bill for Solyndra’s failures; some of that money might even wind up in the US Treasury.

But the end result could just be more bad press for America’s green-energy industry. It doesn’t need Solyndra in the news again; the company’s name has become a political football in America, a rallying cry for Republican climate-skeptics who would happily see the industry vanish altogether. And in any case, the solar-cell makers’ real challenge comes not from China,  but from the new shale discoveries that have been pushing down the price of natural gas, making non-green energy a cheaper alternative to solar than ever.

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