Canadian Solar Could Shift Production If the U.S. Tariffs Imposed

Canadian Solar could supply the US market from its domestic facilities if US regulators impose tariffs on its Chinese manufacturing operations, according to a top official at the company, one of the world's largest solar module makers.

The comments – at the Jefferies 2012 Global Clean Technology Conference in New York yesterday – follow a petition to the International Trade Commission (ITC) and the Department of Commerce in October to intervene against allegedly predatory practices by China.

The petition, by the Coalition for American Solar Manufacturing (CASM), led by SolarWorld, seeks the imposition of anti-subsidy and anti-dumping duties, possibly retroactive penalties, on Chinese exports of solar modules and cells to the US. The agencies are expected to issue preliminary determinations in March.

"We don't know if there is going to be a tariff," Michael Potter, Canadian Solar's chief financial officer, told the conference. "A lot of people are betting there will be. We think this whole petition is very ill thought out. We believe strongly that we don't have unfair subsidies. We don't believe we're dumping."

The Kitchener, Ontario-based company has manufacturing assets in China that could be affected by a ruling in favour of the petitioners. But Canadian Solar can tap its large domestic manufacturing capacity if tariffs are imposed, he said.

"We can easily source non-Chinese cells and supply the US market from a Canadian source so it shouldn't be really that much a disruption for us at all," Potter said.

He said that a spike in shipments from the company in the fourth quarter of 2011 is not unusual and should not raise questions about the company's practices.

"We believe we compete fairly and follow the rules you're supposed to follow," Potter said. "I don't believe there is anything unusual in the demand profile in Q4 that would cause anybody to ask any questions. Why would shipments go up in Q4? Shipments almost always go up in Q4. If you look back in history, it tends to be a good quarter.

In the US, the expiration of the cash grant programme was also responsible for some increased demand in the fourth quarter, he said. Developers acted to "safe harbour" projects, meaning they spent 5% of the capital costs before the 31 December deadline to remain eligible for the grant even if the project is not installed until this year.

"People that were using module spending as the way to reach their 5% goal in spending were ordering more modules in Q4 to hit it," he said.

Overall demand for modules is still growing, Potter noted.

"It's kind of lost a little bit in the noise about the profitability and tight margins in solar right now, but one thing that's happened with the fall in the costs and [average sales prices] of the modules is that it's driven demand in places of the world that would never buy solar" previously, he said.

While India, for example, could never subsidise the sector at the level that a more developed country such as Germany could, Potter noted that the current cost of solar is significantly below the cost of diesel-generated power, even without subsidies.

"It makes sense in a lot of places in the world to use solar instead of other power generation," he said.