Verbatim Mac

Solvency

Solar not Competitive

Chinese Solar companies dropping into debt due to oil prices and economic downturn

ZER 5-23-2016, (Zacks Equity Research, "Will China Gloom Darken Global Alternate Energy Prospects?," No Publication, http://finance.yahoo.com/news/china-gloom-darken-global-alternate-205508366.html)//SZ

Apart from the crumbling oil price scenario, other weaknesses that can impact the renewable industry at large are discussed below. China Factor: China’s solar industry is not immune to the current downturn in the economy. The country’s economic situation has sparked apprehensions that the government could shift asset resources away from investment in renewable energy in order to fuel its stock market. One of the most prominent effects of the economic slowdown in China has been relatively weak demand for electricity. China's installed photovoltaic solar capacity was 43 gigawatts (“GW”) by the end of 2015, up about 15 GW from 2014, as per media reports. Although the country is likely to have surpassed Germany in the fourth quarter with the most solar capacity, China missed its own target for 2015. The Chinese National Energy Administration had set a goal of 17.8 GW of newly installed solar capacity for the year. This puts China well behind its own set goal. Per the United Nations Environment Program, China exhausted a record $102.9 billion in green energy investments in 2015, up 17% from 2014. A major portion was most likely targeted at the solar and wind market. However, as the economy slips into a slower growth phase, the Chinese government could pull strings on renewable subsidies. Trina Solar Ltd. (TSL), the largest Chinese manufacturer, derives about two-thirds of its revenue growth from China. So far this year, its share price dropped over 27% while Yingli Green Energy Holding Co. Ltd. (YGE) saw its shares plummet about 28%. YieldCos Go Awry: A YieldCo can be defined as a dividend growth-oriented public company formed to hold operational assets, which produce an expected cash flow based on long-term power purchase contracts. The impact of YieldCo financing on solar developers and plant operators has been huge. It is basically the adaptation of the REIT program to renewable energy, by forming an independent power producing corporation to operate primarily renewable energy assets comprising water, wind and solar. The company is publicly traded, yields a predictable cash flow, and distributes income to its shareholders. After a strong 2014 that saw a series of IPOs and surging valuations, 2015 turned out to be a difficult year for solar YieldCos. The Global YieldCo Index is down by over 25% in the last one-year period and many YieldCos that held IPOs in 2015 have witnessed share losses. 8Point3 Energy Partners (CAFD) lost 30.16% since its listing last June, while TerraForm Global Inc. (GLBL) has declined 81.14% since Aug 2015. The downturn can mainly be attributed to falling crude oil prices as well as the China slowdown. High Cost Burden: Since the recession began in 2008, the solar industry has experienced both ups and downs, but the main trend has been a sharp fall in the prices of solar panels due to a supply glut. This has forced many solar firms to go bankrupt leaving only low-cost producers, comprising mostly Chinese players. Solar stocks were beaten badly around mid-May 2015 following a brutal plunge in the highflying Chinese thin-film solar manufacturer, Hanergy Thin Film Power Group. The company lost nearly half of its market capitalization in a day’s trading in May. The rout was followed by sluggish trading by Yingli Green Energy on looming bankruptcy concerns. Shares collapsed as much as 80.76% in the last one year. Yingli Solar has been struggling to survive amid a pile of debt. Importantly, the company has failed to generate profits since 2011. In this scenario, the company may find it difficult, if not impossible, to pay down its outstanding debt. This could lead to cross-defaults, putting it at liquidation risk. The company was once the leading module manufacturer in the world between 2012 and 2013.

Pricing

1NC – Even if solar and wind are competitive, power grid replacement makes the cost of implementing panels/wind turbines higher than that of conventional fuels - Fares

DA

Domestic Industry DA

1NC Domestic Industry DA

Removing tariffs on Chinese panels destroys solar innovation

Hart and Gordon 12 (Senior Fellow; Director, China Policy at the Center for American Progress)

(Melanie Hart and Kate Gordon | Thursday, March 15, 2012, The Complexities of the U.S. Decision on Chinese Solar Panel Imports, https://www.americanprogress.org/issues/green/news/2012/03/15/11330/the-complexities-of-the-u-s-decision-on-chinese-solar-panel-imports/)

Whether the U.S. solar market continues to grow, therefore, may depend much more on demand-side policies than on access to cheap Chinese imports. Overall, then, it is not clear that import tariffs would harm solar-market growth in the United States over the long term. What is clear, however, is that long-term U.S. market exposure to illegal subsidization certainly would not only harm solar-panel manufacturers but possibly also slow growth across the value chain. Chinese leaders look at the United States and want what we have. They want to become a global research and development powerhouse that creates and exports cutting edge technologies with big profit margins. China’s traditional command-and-control economic system was not good at creating those innovation incentives, so they are working to reform that system, but reform takes time. In the meantime they are trying to fill the gap with heavy government subsidies. Problem is, that approach can actually reduce innovation, not only in China, but also in the United States. Bureaucrats are not adept at picking winning companies and winning technology standards. When Chinese officials heavily subsidize their favorite domestic solar manufacturers, those subsidies can reduce prices to levels that other firms cannot match, thus driving competitors out of the market and reducing incentives for innovation. When China exports those products to the United States, the same dynamic can play out here. The long-term result is that a small number of heavily subsidized Chinese manufacturers could dominate the global solar market. That may make Chinese leaders happy, but if those firms are not producing the best solar technologies—for example, if their solar panels are not as efficient as they need to be to compete with traditional fossil fuels—that can slow solar-market development worldwide. To keep this market growing, the best thing the U.S. government can do is to create a good environment for technology innovation, and that will require a combination of demand-side policies and protection from adverse price incentives.

Only solar innovation can solve warming – China dominated market prevents this

Sivaram 15 (fellow at the Council on Foreign Relations)

(Varun, Why Concentration of the Solar Industry in China Will Hurt Technology Innovation, July 29, 2015, http://www.greentechmedia.com/articles/read/why-concentration-of-the-solar-industry-in-china-will-stunt-innovation)

Some contend that by subsidizing its domestic manufacturers, China also subsidizes clean-energy deployment around the world. This sort of argument by pro-deployment activists suggests that China’s dominance in solar manufacturing is a boon to the world. In the near term, they are right: solar deployment is booming around the world, fueled by cheap Chinese panels. But in the long term, today’s silicon technology will not suffice for solar to displace a substantial fraction of fossil fuel energy. This near-term/long-term disparity stems from the economics of electricity grids: solar’s value declines as its penetration on the grid increases. Therefore, for solar to play a leading role in slashing global emissions, it needs to be an order of magnitude cheaper and boast a higher efficiency at converting sunlight into electricity. The next-generation technologies to do just that exist in laboratories today. I worked on one promising technology, solar perovskites, which could beat silicon on efficiency and cost if ramped up to scale production. But there are two reasons why dramatically superior technologies likely will not emerge if the solar industry remains concentrated in China. First, Chinese firms are more likely to pursue incremental process improvements and cost reduction -- optimizing factory layouts, strengthening supply chains -- rather than product innovation. Some might argue that this is a dated caricature of a newly dynamic Chinese innovation complex which benefits from lavish state-funded laboratories and improved coordination among universities, research institutes, and corporations. Still, solar technology researchers in China are struggling to close the gap with Western counterparts, and most major solar manufacturers have displayed little interest in seriously funding alternative technologies. (The major exception, Hanergy, which bought up several innovative U.S. startups, recently lost over half its market value in the Chinese stock market and just announced it would cancel plans to deploy new, flexible thin-film panels.) As panel manufacturers scrape by on razor-thin margins, kept afloat by government credit, investing in fundamentally new technologies is far from a priority. The second reason for pessimism that innovation will flourish in a Chinese-dominated solar panel industry is that increasing vertical integration will stifle disruptive change. China not only dominates the panel manufacturing business, but has also consolidated the entire upstream supply chain within its borders, from polysilicon to solar-cell production. Where the supply chain is not formally vertically integrated, it is de facto monolithic, simply by virtue of co-location in massive industrial centers like the Yangtze River Delta Economic Zone. This trend of increasing vertical integration stands in stark contrast to another industry based on silicon but far more innovative: semiconductors. The trend in that sector was dis-integration, from vertically integrated giants IBM and AT&T in the 1950s to today’s global network of suppliers competing at every step of the value chain to redesign components and dramatically improve the performance and cost of electronics. By contrast, clustered solar supply chains in China will reinforce the industry’s focus on today’s technology, rather than allowing competition to drive tomorrow’s advances.

2NC Link/A2: High Prices Good

Tariffs don’t make prices too high for increased demand BUT make manufacturing competitive again

Wickstrom 14 (owner of Synchro Solar in Portland)

(Brion, Tide has turned on China in solar trade battle: Guest opinion, http://www.oregonlive.com/opinion/index.ssf/2014/09/tide_has_turned_on_china_in_so.html)

Industry analyst group GTM Research recently pointed out that the recent decision would raise prices about 15 percent. However, GTM estimates after dropping 60 percent in two years and more than 200 percent since 2010, such a shift would present a minimal impact on solar adoption within the residential market.

What it would do, however, is two things.

First, it would cut into the profit margins of companies, including Solar City, SunEdison and Grape Solar, that have built their business models on access to dumped and improperly subsidized Chinese solar modules.

Second, it would make U.S. manufacturing price-competitive. Remaining producers would hire back employees and new players would enter the marketplace knowing they can compete on a level playing field.

Indeed, Bloomberg New Energy Finance has stated the trade dispute could regenerate American solar manufacturing and further boost the U.S. solar market.

The trade case is cited as one reason that SolarCity, which as recently as January had testified against SolarWorld, announced it would open a manufacturing facility outside of Buffalo, N.Y., while Suniva recently broke ground on a new facility in Saginaw Township, Mich.

And US manufacturing will drop prices in the long run

Parkinson 15

(Giles, Solar Costs Will Fall Another 40% In 2 Years. Here’s Why., January 29th, http://cleantechnica.com/2015/01/29/solar-costs-will-fall-40-next-2-years-heres/)

It sees a precedent for this in the oldest major solar market in the world – Germany. “Costs today are well below costs in the United States and other less mature markets, and total installed costs have declined around 40 per cent over the last 3 years in the country. The exact drivers behind cost declines may vary between countries, but we believe the German example continues to prove that overall system costs have yet to reach a bottom even in comparatively mature markets.” Total cost reduction will not come from polysilicon While much of the cost reduction over the last 5-10 years has resulted from polysilicon price reductions, future cost reductions will necessarily come from non panel related balance of system costs. Polysilicon price reductions have accounted for significant portions of cost reductions, and were once the largest single cost component in panels, but this has changed drastically and rapidly over the last decade. It now represents no more than 10- 11 cents per watt so even if costs are halved, the effect on the total system cost would be incremental – not revolutionary. Panels to fall in price to $US0.50/watt Deutsche Bank says that while overhangs like trade cases or minimum price agreements could cloud the near term, market inefficiencies will be worked out over the long term and the clearing price will reach $0.50 or lower within the next several years. Companies like SunEdison have publically targeted $0.40 cent per watt panels by the end of 2016, and many Tier 1 Chinese manufacturers are achieving sub $0.50/w already in 2014. :Given that most manufacturers are improving 1-2 cents per quarter, less than ten cents improvement (to reach $0.40) over the next 12 quarters is likely conservative.

2NC A2: Kills Demand

Demand inevitable – Price increase is way too small to kill it

Kanellos 14 (Editor in Chief at Sandisk)

(Michael, Six Reasons Solar Needs To Stop Whining About Chinese Tariffs, JUL 30, 2014 , http://www.forbes.com/sites/michaelkanellos/2014/07/30/six-reasons-solar-needs-to-stop-whining-about-chinese-tariffs/2/#7821e92778db)

The Coalition for Solar Energy has accused SolarWorld of trying to cripple the solar industry. The Solar Energy Industry Association has asked SolarWorld to sweep the issue under the rug in a settlement. The industry, however, should support SolarWorld, or at least stay silent. And here is why: 1. The Evidence is Pretty Compelling. SolarWorld has had problems maintaining market share, but it’s doing great in court. It has prevailed at every juncture. The E..U. also found for SolarWorld in 2013—a negotiated settlement followed soon afterward. Chinese military agents may have hacked SolarWorld in retaliation. When Rambus was engaged in a bitter battle with Samsung and other memory makers in a worldwide patent dispute, each side was scoring victories. So far, everything is somewhat one-sided 2. The Impact Won’t Be Huge. Greentech Media issued a report this year that the tariffs could raise the price of Chinese solar modules by 7 to 20 percent with the average coming in at 14 percent. It sounds sharp until you put it into context. Chinese module makers have enjoyed a 25 percent advantage in price: even with a tariff they aren’t disastrously behind. More importantly, solar modules account for less than 30 percent of the price of a complete solar system: labor, permitting, financing, electronics and other soft costs make up the bulk of the cost of a solar project. A 14 percent increase thus translates into a 5 percent increase. But wait, there’s more. Let’s not forget how the cost of solar modules has plummeted over the past several years. In 2008, modules cost $4 a watt, notes Raymond James’ Pavel Molchanov. He expects it to hit 65 cents by the end of the year. 3. The Industry Continues to Grow at an Amazing Rate. 37 gigawatts of solar got installed last year and 40 to 46 gigawatts will get installed this year, according to Solarbuzz. Installations will hit 100 gigawatts in 2018. “PV manufacturing will also grow substantially between now and 2018, reaching revenues of more than $200 billion during that period,” the firm said.

2NC UQ

Manufacturing industry recovering because of tariffs

Gross 14

(Daniel, America is making lots of solar energy. What’s holding it back from making solar panels?, A CLOSER LOOK AT THE NEW ENERGY ECONOMYAUG. 14 2014 10:59 AM)

But this summer, there have been several augurs of change. First, in June, SolarCity, the solar-leasing company backed by Elon Musk, agreed to buy Silevo, which currently produces solar panels in China. Together, the two firms plan to build a massive factory in Buffalo, New York. “At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world,” SolarCity announced. Meanwhile, 1366, a startup based in Bedford, Massachusetts, has raised $64 million to make solar wafers, a component of solar cells. Later this year, it plans to announce the U.S. location of a large factory. China’s cost advantage over the U.S. is eroding. Second, on July 22, Suniva, the second-largest manufacturer of panels in the U.S., stated it would double in size by opening a new factory in Saginaw Township, Michigan. Backed by private equity investors and based on technology that emerged from Georgia Tech, six-year-old Suniva operates a factory in Norcross, Georgia, where 300 employees can produce 170 megawatts of modules annually. The Michigan plant, which will be up and running later this year, will have a capacity of 200 megawatts and require 350 new employees. And most recently, on July 23, as Solar Industry magazine noted, tiny Andalay Solar announced it would sell American-made modules, to be manufactured in San Jose, California. These announcements roughly coincided with tentative actions from the U.S. government. Responding to complaints from SolarWorld, the Commerce Department in June and July made formal preliminary determinations that China illegally subsidized its solar panel industry and indicated that it may impose tariffs on panels made in China that could add up to 35 percent to the cost of the products. As is the case in so many other areas, U.S. purchasers of solar panels have been historically unconcerned with the provenance of the product. Solar installation—the so-called downstream part of the market—has been booming, and installers typically seek the cheapest possible panels. “Most people invest in solar for financial reasons,” SolarWorld’s Santarris says. Until recently, that made it a no-brainer to buy panels from China or elsewhere in Asia. But China’s cost advantage is eroding. In addition to seeking relief from the government, U.S.-based manufacturers have responded to competition by ramping up volume (which tends to bring down costs) and investing in efficiency and automation. Companies have to wait several weeks to receive goods ordered from China (which ties up lots of capital), wages are rising in China at a 10-15 percent annual clip, and U.S. manufacturers tend to have a better quality record. “As China continues to mature, manufacturing there just isn’t as cheap,” says Matt Card, vice president of global sales and marketing at Suniva. Industry experts say panels produced in the U.S. can cost only 10 percent more than panels made in China. As the solar industry grows, other factors are pushing the production and consumption of U.S-made panels. Government agencies such as the military are among the most prolific purchasers of solar panels, which means their contractors may have to comply with the Buy American Act and the Buy America provisions of the 2009 stimulus bill. In addition, many of the entities arranging large solar installation are cities, states, nonprofits, or public institutions such as universities that tend to ask about the source of the materials used. “Over the last 24 months we’ve also seen a rise in what I term ‘emotional Buy American buyers,’ ” said Card. “These are private companies or citizens who decide they are going to choose American-made panels.” Of course, a few announcements don’t make for a full-fledged renaissance. And the U.S. still accounts for only a tiny sliver of global module manufacturing. But in a rising number of instances—and especially if the tariffs remain in place—the scales may weigh in favor of U.S.-manufactured panels. Suniva’s move to add a 200-megawatt factory will instantly add about 20 percent to the industry’s productive capacity. If SolarCity follows through with its plans, America’s panel manufacturing capacity will essentially double.

Manufacturing industry recovering because of Department of Energy’s Sunshot Initiative – R and D funding spurs innovation

Sekaric 15 (Solar Energy Technologies Office Director at the DoE)

(Dr. Lidija, U.S. Solar Manufacturing Rising on the Horizon, 1/29, http://energy.gov/articles/us-solar-manufacturing-rising-horizon)

By the end of 2014, solar deployment is slated to be up nearly 40% over 2013. Today, the booming demand for solar energy supports more than 173,000 jobs and the U.S. has become the third largest solar market in the world. You can find solar energy atop your neighborhood big box store, powering a Las Vegas casino, in the middle of the desert or on your own roof. The latest good news comes from the solar manufacturing sector. In the past nine months, U.S. solar manufacturing has shown unmistakable signs of growth. Strong market demand in the U.S. has attracted some solar manufacturers stateside and as market demand grows, the Energy Department’s investments in this sector have begun to bear fruit. Three solar manufacturing companies that have received research and development funding from the Department’s SunShot Initiative have recently announced new factories or factory expansions in the U.S. These include a new 200 megawatt plant that is up and running in Michigan and an expansion of an Oregon manufacturing facility, with plans to create 200 new jobs there. A third company just broke ground on a 1 gigawatt capacity factory in New York. This manufacturer has found U.S. partners and market conditions favorable enough to aim for a U.S. plant that is two orders of magnitude larger than originally planned. SunShot also supports companies that are manufacturing other solar system components like solar cell measurement tools and PV-ready electric meter collars in the U.S. These companies have leveraged SunShot’s support to develop innovative and advanced manufacturing processes from differentiated technology design to automation in order to establish a competitive advantage needed to make these new facilities a reality here at home. In response, several foreign-based solar manufacturing companies have announced plans to evaluate U.S. market conditions or to build manufacturing facilities here. As solar manufacturing begins to grow in the U.S., SunShot is committed to providing targeted, competitive research and development funding that moves products to market quickly while leveraging American ingenuity and innovation. To this end, today SunShot launched its SunShot Technology-to-Market funding opportunity, which aims to support entrepreneurs and small and large companies to develop solar technologies from prototype to scale-up with $45 million in available funding. SunShot is supporting innovation in manufacturing to ensure U.S.-developed technologies can capture a larger portion of the global value in solar manufacturing, currently estimated to be about $120 billion worldwide, with a strong growth trajectory in coming years. This is an enormous economic opportunity for any country, and the Energy Department’s SunShot initiative will continue to empower U.S.-based manufacturers to embrace this opportunity. And the manufacturing sector pays it forward -- manufacturing-based industries contribute 70% of all research & development funding available throughout the U.S. When we launched the SunShot Initiative in 2011, one of its 2020 goals was that the U.S. solar market could produce the equivalent capacity of solar energy products consumed in the U.S. We are now on track to reach that target, even as U.S. solar demand continues to climb. We are ready to power the nation and fight climate change with domestically produced solar energy technologies.

2NC Hacking Impact

Tariffs are key to prevent Chinese cyberattacks on US companies

Cardwell 14 (Staff writer at the New York Times)

(Diane, Solar Company Seeks Stiff U.S. Tariffs to Deter Chinese Spying, http://www.nytimes.com/2014/09/02/business/trade-duties-urged-as-new-deterrent-against-cybertheft.html?_r=1)

In the daunting battle against corporate online espionage worldwide, one major solar company wants to deploy a powerful and novel weapon: higher tariffs. SolarWorld Americas, the largest manufacturer of solar panels in the United States, has asked the Commerce Department to investigate claims that Chinese military personnel broke into the company’s computers and stole documents important to its business and its long-running trade dispute with China. The company’s request followed the Justice Department’s decision to prosecute five members of the People’s Liberation Army, accusing them in May of stealing online files from a group of American companies, most of which had engaged in trade disputes with China. SolarWorld says the new prosecution underscores the sophisticated ways that Chinese companies are retaliating against trade obstacles, especially the use of cyberwarfare. As a deterrent, the company is proposing that the administration should use tariffs to crack down on such retribution. “We think it is critically important that the Commerce Department set a precedent here and take a strong stand that it will not tolerate cyberhacking of U.S. companies that file trade cases,” said Timothy C. Brightbill, a lawyer representing SolarWorld. While acknowledging that the Justice Department is unlikely to compel the suspects to appear in a United States courtroom, he said the federal government could impose additional steep tariffs on imports of Chinese solar panels. “This is a way that the U.S. could actually make it hurt,” Mr. Brightbill said. A broader investigation by the Commerce Department into the costs of solar panels divided the industry from its start. Domestic solar farm developers and installers of solar systems, whose businesses had benefited from an abundance of cheap imported equipment, worried that the passed-on costs of tariffs would slow solar adoption among consumers. And American companies exporting polysilicon, the main raw material for solar products, to China feared that tariffs would make it harder for them to do business there. Indeed, China imposed steep duties on American polysilicon at the beginning of this year and recently tightened import policies on the material. Still, many executives and officials have been frustrated in trying to hold Chinese companies accountable for what they see as unfair or unscrupulous business practices. A federal judge recently found a state-controlled Chinese drywall manufacturer, Taishan Gypsum Company, in criminal and civil contempt after it abruptly abandoned court proceedings five years into a case that found it liable for contaminated drywall used in the homes of seven Virginia families. Senator Bill Nelson, Democrat of Florida, said he believed the implications of the case went far beyond drywall. “It poses a defining moment for the Chinese government and its companies, which raises grave questions as to the risk of doing business with the Chinese,” Senator Nelson said in July on the Senate floor. “Will the Chinese government and its companies honor their moral and legal obligations under this or any other commercial contract?” In the case of online crime, corporations across many industries are frequently reluctant to cooperate with prosecutions, said Shawn Henry, president of CrowdStrike Services, a security technology and services company, and a former executive assistant director of the F.B.I. They worry that publicizing security breaches risks their reputation and erodes competitive advantages, as well as opening the door to lawsuits.