The anti-clean-energy echo chamber has been publicizing the bankruptcy of Solyndra, a manufacturer of solar energy panels, arguing that the President's clean energy job creation program is ineffective. But most of this criticism is just political posturing and not really trying to learn from these failures, which importantly have not prevented solar energy from growing dramatically while reducing costs.

One direct source of the problem is that China has succeeded in reducing the cost of manufacturing first-generation solar panels to such an extent that many companies around the world cannot compete. Notwithstanding this success, most American solar companies remain ahead of their overseas competition, as I illustrate below.

The issue of American industry remaining competitive with China is, of course, not unique to clean energy: Many American producers are challenged to keep up with Chinese competition.

But with solar, the Chinese government has been particularly effective in developing an industrial policy that provides Chinese manufacturers with a number of advantages in the global solar industry, including access to lower cost capital, subsidized electricity rates, free access to land, cheaper labor, domestic manufacturing requirements, and a much shortened permitting process for factories.

America, in contrast, has generally avoided industrial policy. Opponents of industrial policy argue that the market can pick winners better than government can, and I believe that this principle is generally correct, but I also think that innovation needs government support.

The lesson from China is not to tremble and retreat in the face of its challenges. We are a great country of innovators and we need to support that.

While we at NRDC would not support the Chinese approach to industrial policy, nor would its approach work in America, there are certain smart policy approaches we can use that leverage America's strengths in private sector innovation, investment, and job growth.

We would do well to focus on the success stories in our domestic solar industry, which include American companies like: First Solar, which are producing next- generation solar panels cheaper than their Chinese competitors; SolarCity, which is using an innovative business model to bring hundreds of megawatts of solar to military bases; and Amonix, which is developing innovative high concentration solar photovoltaic (HCPV) technologies. [Editor's note: Since this article was originally published, SolarCity's military contract failed to get a government loan guarantee, and will not proceed.] These are only a few of many examples of success in the made-in-America solar industry.

Such vigorous competitive forces are good for the consumer. They bring prices of solar -- and other clean energy and energy efficiency investments -- down over time while product quality improves.

However, when developing policies to support emerging industries, the details are critical. So some closer examination of the issue of government support for clean energy can be helpful. One existing challenge with energy incentives for maturing technologies occurs when they don't reward production, but rather focus on cost.

Cost-based incentives are employed by lots of governments around the world, probably because they are so simple to administer. This can make some sense for very early stage energy technology companies, which pose a real risk of not performing and thus are much more likely to receive financing when incentives are tied to cost instead of production.

Next page: Policies that work, and policies that don't work