By Gerard Wynn
LONDON May 14 Rejection by the world's trade
body last week of preferential support for domestic solar panel
makers in Canadian province Ontario brings helpful but limited
guidance in a growing number of other disputes.
The case involved domestic content requirements, which block
foreign companies from participating in national support
programmes, and which are intended to suckle local
The World Trade Organisation's rejection of Canada's appeal,
in a complaint brought by Japan and the European Union, should
clarify similar cases, where China claims discrimination in
certain EU countries and the United States has opened a dispute
It does not, however, address a growing, separate set of
more complicated trade complaints regarding perceived dumping
(which means selling at a loss to gain market share) where
China, India, the European Union and the United States are all
considering or have imposed import duties.
The global industry needs similar clarity on dumping, to
avoid a solar trade war where Germany's preference for an
amicable resolution with China is encouraging.
Both types of dispute expose a tension in the goals of
renewable energy programmes between jobs and low-cost clean
One aim is to boost "green jobs", where countries are keen
to grab a foothold in a growing clean technology sector, which
clashes with another to cut costs.
Rules preferring domestic content make little sense right
now, if the aim is to ramp up domestic solar manufacturing when
the global industry is embroiled in a savage shakeout of
over-capacity where some distressed companies are selling
photovoltaic (PV) modules at fire sale prices.
Action against dumping, meanwhile, may directly raise the
price of solar modules through the use of import duties.
The Ontario case was based on the Canadian province's "Green
Energy Act" of 2009.
The Act allowed developers to earn a price premium, or
feed-in tariff, for renewable power if they met local content
Those minimum domestic content requirements were 50 percent
for wind projects and 60 percent for solar, as published in an
Ontario Power Authority "programme overview".
Japan's complaint was partly based on Article 3.4 of the
1994 General Agreement on Tariffs and Trade (GATT).
The paragraph states: "The products of the territory of any
contracting party imported into the territory of any other
contracting party shall be accorded treatment no less favourable
than that accorded to like products of national origin in
respect of all laws, regulations and requirements affecting
their internal sale, offering for sale, purchase,
transportation, distribution or use."
Japan's complaint - subsequently joined by the European
Union - was supported by a WTO resolution panel in December, and
upheld last week against Canada's appeal.
The finding is likely to clarify similar complaints.
For example, India has announced a goal to install 22
gigawatts of grid-connected and off-grid solar power by 2022,
under its Jawaharlal Nehru National Solar Mission (NSM).
Under phase 1, which ends this year, developers could only
use solar modules made in India.
Phase 2 may relax the requirement that all projects meet
domestic content requirement (DCR) rules.
"Some capacity will be kept for bidding with domestic
content requirement," says a phase 2 consultancy document
published on the ministry's website, suggesting other capacity
will be available for foreign firms.
India has proposed to widen DCR to cover more advanced thin
film technologies where U.S.-based First Solar is a
The Ontario case may not bode well for the Indian programme.
The United States formally initiated a dispute at the WTO on
Feb. 11, by requesting consultations with India in the same
manner as Japan had with Canada in September 2010.
"India's measures appear to be inconsistent with Article 3.4
of the GATT 1994 because the measures appear to provide less
favourable treatment to imported solar cells and solar modules
than that accorded to like products originating in India," it
said, referencing identical articles and trade measures to
Similarly, last November China requested consultations with
the European Union, Greece and Italy, "relating to the feed-in
tariff programs of EU member states including but not limited to
Italy and Greece".
Italian energy laws have provided a premium on the feed-in
tariff of up to 10 percent for solar PV systems containing a
minimum 60 percent European content by value, various solar
The latest WTO ruling will probably benefit the industry if
it motivates countries to source solar modules on the basis of
lowest price rather than origin.
But public pressure remains to do the opposite, as
illustrated by a letter in March from an influential group of
U.S. environmental and development non-government organisations
to the U.S. chief trade negotiator.
The letter, signed by 350.org, ActionAid USA, Friends of the
Earth U.S., Greenpeace USA, Sierra Club, among others, expressed
"deep concern" about the country's solar dispute with India.
They argued that India should be encouraged to develop a
domestic solar industry for three reasons: to increase the share
of solar in the Indian energy market; increase political support
for clean energy programmes by creating local jobs; and to avoid
catastrophic climate change.
It did not mention an impact on costs.
India presently has manufacturing capacity of 848 MW for the
production of solar cells and 1,932 MW for solar modules, the
Ministry of New and Renewable Energy reported last December in
its "Phase II - Policy Document".
It is targeting by 2020 manufacturing capacity for
4,000-5,000 MW of solar technologies (this appears to refer to
finished modules) and 2,000 MW of solar cells, according to an
overview published on the ministry website.
Just now may not be the optimum time for ramping up
manufacturing capacity, however, either for established
companies already bleeding cash, or for countries planning a new
industry where they can buy more cheaply from companies with
mothballed capacity selling at distressed prices.