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Obamas Solar Policy: If You Cant Beat the Chinese, Tax Them

Posted in Science on 29th Mar, 2012 06:21 AM by AlexMuller

Why is it right for Americans to provide low-cost loans to its solar panel manufacturers, but when China does it, it is an illegal subsidy and demands tariffs in response?


The answer to that also addresses a fundamental science policy question: Why do Americans insist on subsidizing solar panels no one wants to buy?


Solar power will hopefully be the energy of the future. Enough sunlight reaches Earth in a single hour to power the planet for an entire year. However, significant hurdles, such as efficiency, storage and transmission, have held it back for the last 50 years. Breakthroughs are just around the corner, it has been said for decades, so many venture capitalists stopped buying that dream long ago. But with more scientific research, substantial technological breakthroughs will occur in the not-too-distant future.


No, really. They will.


That’s why, on the surface, President Obama’s support for solar power was sensible, but a closer examination of its implementation reveals contradictory and self-defeating policies.


Solar power is booming. Imports from China were a tepid $21 million in 2005 when Congress and President Bush authorized the solar investment tax credit. It was renewed in 2008, and in 2011 installations totaled nearly $2.7 billion. That’s a huge win for solar. And just as advocates for solar power had hoped, a larger market drove down prices. Solar energy cost has declined by two-thirds in the last four years, meaning it will soon start to close in on fossil fuels.


The only problem is that the American market growth is fake, funded primarily by the government, while the real revenue benefit has occurred for Chinese manufacturers. America, the home of Silicon Valley, basically abandoned thin-film silicon to chase after new technology while China embraced it, once again showing that the U.S. government is not particularly qualified to predict market outcomes or to pick winners and losers in the green tech sector.


To address the widening trade gap, the Obama administration’s Commerce Department accused China of illegally subsidizing solar power manufacturers. They hit them with a 2.9% to 4.73% tariff,  with an even larger one likely to follow in May. The rich irony here is that the administration claims the tariffs are necessary because China has been unfairly lowering the price of solar panels using subsidies in the form of low-interest loans – in other words, exactly the same thing the Obama administration did with Solyndra and a dozen other companies.


China has a nearly inexhaustible cheap labor supply, few environmental standards, and can leverage the power of the state to crank out cheap solar panels. The only real crime here is that China picked the right technology while all the wonks in Obama’s Energy Department consistently picked the wrong ones. Kudos to the technocrats in Beijing.


The administration would respond by saying China is “dumping” solar panels – that is, buying market share with subsidies to drive competitors out of business. With Solyndra, however, Obama did the same thing; he just didn’t violate international trade laws because the goods were not for export. In other words, we were subsidizing things no one wanted to buy.


Additionally, the new tariff may inadvertently punish the American solar industry, as well. Between 40% and 50% of planned solar installations use panels manufactured in China – nearly half the market. So, the Obama administration is making it more expensive for Americans to switch to green energy, an enormous contradiction in the President’s clean energy agenda.


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