Made in Japan, Made in China, Made in Korea — Is Solar the Car Industry’s Act Two?

We believe that the best way for America to get out of this mess is by becoming the world’s leader in renewable energy, green products and jobs.  This agenda is a mantra for President Obama and his platform.
Here’s a fly in that ointment, however, and it won’t surprise you where it comes from – China.

It seems that the Chinese government is subsidizing its leading producers of photovoltaic solar panels so they can sell here for less than American-made panels. Chinese firms such as Suntech Power Holdings are opening offices and production facilities on American soil to avoid tariffs, similar to what the Japanese car companies did over the past 40 years with great success.  Journalist Keith Bradsher of The New York Times unearthed plenty of examples of this plan in his article.

So, how do we reconcile this situation?  How can we stop the Chinese government from helping its solar industry lower prices?  Do we really want to? Ultimately, isn’t this good for American consumers because it will make solar panels more affordable?  Isn’t it good for the environment because it will enable more homeowners to install solar systems?

The answer is yes — and no.  As the costs of photovoltaic panels come down, federal and local subsidies for homeowners installing solar systems are being reduced.  These reductions in tax credits are increasingly more aggressive than the reduced cost of panels. Thus the consumer will not be able to readily enjoy the money-saving benefits offered by cheaper Chinese panels.

Furthermore, the technology and manufacturing source of photovoltaic panels is not of great concern to many homeowners.  They hire a local electrical or solar contractor to design and install their home solar
system.  They evaluate the total cost of the system, including tax breaks, on a net-net basis.  Thus the customer for the cheaper Chinese panels is really the electrical and solar contractors.  They will probably be more than happy to buy the Chinese products if it enables them to make better margins, while still offering a competitively priced system to their homeowner customers.

I see one way to solve this while encouraging Americans to use American-made photovoltaic panels for their home systems:  let’s see more stimulus money trickle down to help our own solar producers compete with
the Chinese.  If that means more subsidies so be it.  Or, how about giving consumers additional tax breaks or a feed-in tariff system for specifying to their contractors that they want American-made panels?

I am not in favor of protectionism, and I do generally support free markets.  However, these are not ordinary times, and it is mission critical that America be the worldwide leader in renewable energy and green jobs.  If a relatively small portion of that stimulus package money is needed to make this a reality, so be it.  The United States has a grandstand opportunity to renew its global leadership role through green technology.  Thomas Friedman reminds us of the unique opportunity that lies before the U.S. in the following video.

Now it is up to us to act.   If this isn’t motivational enough, picture the contrary, 20 years down the road, our economy is hanging in balance as we trail China in global manufacturing and now renewable energy — it isn’t pretty, is it?