The U.S. Department of Commerce recently announced its affirmative preliminary determinations in anti-dumping duties on Chinese photovoltaic (PV) cells. The ruling, if upheld in the second review, will impose levies of 31-250 percent on Chinese exporters, the highest tariff that China's new energy sector is levied. The bad news has put domestic solar PV enterprises in a tougher spot.

After European countries ceased subsidies to PV module products because of the debt crisis, the United States has become a dominant destination for China's solar PV exports. The preliminary determinations of the U.S. Commerce Department have deprived competitiveness of China's PV products in the U.S. market. Expectations abound that, in the upcoming three to six months, a mass shut down will occur amongst domestic PV enterprises.

As a main force in the international foray of China's new energy sector, the PV industry has witnessed quick development. Chinese PV makers exported 1,933 megawatts of PV module products in 2011. Due to the U.S. anti-dumping investigation on Chinese PV makers and the dwindling demand of European countries, China's PV sector witnessed a 33-percent year-on-year plunge in sales and 99.74 percent year-on-year slump in net profit in the first quarter of 2012.

The development of China's PV sector has been highly dependent on export. Statistics show that 98 percent of Chinese PV products were exported in 2011 and only 2 percent were sold at home. Once export is affected, the whole PV sector will be trapped in a critical condition.

Facing the possible punitive duties from European countries and the United States, domestic PV makers can tackle the problem by combining efforts in both foreign and domestic markets.

According to the preliminary determinations of U.S. Commerce Department, if Chinese PV makers can import solar panels from outside the mainland, they can bypass the punitive duties. Therefore, they can import from Taiwanese companies, assemble them and then export to the United States.

To avoid the massive shut down, Chinese PV makers should shift their focus to the domestic market. China's economic growth has urgent demand for energy, with 65 percent of petroleum is imported from foreign countries. Domestic PV makers have a lot to do in meeting the demands of the energy shortage in China.

Since 2011, many PV makers have established power plants in western regions where there is abundant sunshine. But their location should not be restricted in western regions. It may also cover more developed eastern regions where there is more demand for electric power. Although it will cost more, people in the more developed eastern regions can endure a higher price of electricity.

Some people suggest PV makers should establish power stations on top of roofs of homes in eastern regions. For instance, if we do so in 10 million units of affordable housing, we can install 5 gigawatts of solar PV with 500 yuan ($79.1) as the cost for a 12-storey building. The cost is just a small piece of cake compared with the housing prices, but it can give long-term return of energy.

In order to do so, PV makers have to communicate with concerned departments, such as the state grid. It will undoubtedly havea bright prospect. If they can manage to do so, domestic PV makers can not only avoid the possible massive shut down, but also have a prosperous future.

This is an edited excerpt of an article published in the Securities Daily