Should we worry about Chinese government subsidies to its solar industry? Or send the Chinese a thank-you note?
A group of seven U.S.-based manufacturers of solar panels is alarmed. These manufacturers, led by Solar World, a German firm with a plant in Oregon, filed a complaint with the United States International Trade Commission, which reached a preliminary conclusion in December that U.S. companies were, in fact, being harmed by subsidized imports.
If the Commerce Department goes on to find that Chinese firms have been dumping solar panels on the U.S. market at prices below their costs, it could impose steep tariffs of 50 to 250 percent on Chinese panels, according to this report in The Times by Matt Wald. The Chinese government provides billions of dollars of low-cost financing and free or cheap land to Chinese solar firms.
But much of the solar industry -- led by Jigar Shah, the founder of Solar Edison, entrepreneur and environmental advocate -- thinks this complaint is a terrible idea. Tariffs would raise the costs of solar power to U.S. business and consumers, at a time when those are coming down; they could also set off a solar trade war that would harm other U.S. solar companies.
As it happens, the U.S. had a trade surplus of nearly $1.9 billion in the solar sector with China in 2010, as exports of raw material and factory equipment more than offset imports of finished solar panels, according to the Solar Electric Industries Association,. What's more, Jigar says, most of the 100,000 or so jobs in the U.S. solar industry -- he says as much as 97-98 percent -- are downstream of the manufacturing business in project development, logistics, construction and installation.
"SolarWorld's petition will do far more damage than good to the U.S. solar industry as a whole," Jigar wrote in this letter to Gordon Brinser of Solar World. "Every morning, thousands of hard-working Americans put on their tool belts and go build solar power plants. Our country needs more of those jobs, not fewer."
What got me thinking about this brouhaha was an email the other day from a California company called Solar Power Inc., or SPI, that underscored for me just how committed the Chinese are to getting their solar panels onto rooftops in the U.S.. SPI said it had secured construction financing worth $44 million from the state-owned China Development Bank to fund construction of solar projects in New Jersey.
Why would a Chinese bank finance solar panels in the U.S.? Well, it turns out that SPI is 70 percent-owned by LDK Solar, a Chinese company founded in 2005 that now says it "the world's largest producer of solar wafers in terms of capacity and a leading high-purity polysilicon and solar module manufacturer."
LDK bought its controlling interest in SPI Solar last year in an effort to gain direct access to the U.S. commercial market. With revenues expected to top $90 million last year, SPI is small to mid-sized developer of rooftop PV -- it installed panels atop the Staples Center and the Fox Studios in Los Angeles and a Costco in New Jersey. "We're a downstream market for LDK," said Mike Anderson, vice president of communications for SPI Solar.
The big question should be
The big question should be why would China subsidize both the production and sale of solar equipment to America rather than using the glut of subsidized production domestically in what is now the most polluted country in the world? The answer seems to be that they are looking for a solar monopoly and the easiest way to do that is kill off the international competition. This will deal a heavy blow to global greentech innovation as, in spite of all the Chinese subsidization, the greatest actual breakthroughs in greentech continue to come from other nations, particularly America.
Do you think it's good that a country with the worst environmental practices in the world could hold a monopoly in green energy cashing in on foreign consumption subsidies while pouring out more nauseous gases than have been released through the entirety of human history?
The idea that solar installers and downstream companies will lose out if fair trade is enforced is a sham. What it really may do is force China to use the green equipment it produces domestically (reducing its own emissions) while allowing American companies to continue innovative methods to lower the cost of clean energy for generations to come.
I'm boycotting Chinese "green" imports and encourage anyone who cares about the future of clean energy to consider the same.
If you disagree with what
If you disagree with what Solarworld AG is doing to the US solar workforce, I suggest a boycott.
I ruled out Solarworld in my own home, and for resales, as if you read their warranty on their modules, they have so many restrictions. They are not even IEC 61701 certified!
Suntech was. So guess what I have. Hi-Performa!
Marc, thanks for a solid,
Marc, thanks for a solid, balanced analysis. But I take issue with one thing in particular that you said: "Until the U.S. brings a halt to crony capitalism (which would be good), U.S. companies are in no position to whine when they find it elsewhere." It does not seem likely that either (or any) country would bring an end to subsidies to its favored industries unilaterally, because that would ensure it loses that industry in its country. Isn't this the type of dispute that the WTO was set up to adjudicate? The US strategy of taking quick unilateral action to forestall further damage to its industry and then letting the WTO pass judgement seems sound.
The problem of Chinese subsidies in the solar and other industries may allow US consumers to buy "cheap stuff" in the near term, but it presents a Faustian bargain in which the US loses industries and then later is wholly dependent on other countries for key products and, importantly, cannot further innovate in that industry based on its own technical knowledge. The British experience with its manufacturing sector provides lessons in this regard.