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Is the US really losing the solar power competition with China?

September 13, 2011

A lot has been written about China’s rapid rise and current dominance in the manufacture of  solar cells and solar panels.  When Solyndra filed for bankruptcy,  one of the reasons for failure that it cited was the inability  to “compete in the near term with the resources of larger foreign manufacturers“.  The “foreign manufacturers” mentioned in their statement was a clear reference to manufacturers based in China.  Solyndra was not the only US solar manufacturing firm to go under.  Evergreen Solar and SpectraWatt had filed for bankruptcy within the preceding three weeks.  Solyndra, however, was the only one of the three raided by the FBI.

In the aftermath of the three bankruptcies there were numerous articles lamenting the state of the solar industry here, and  charges that the Chinese were dumping solar panels to drive out competitors.  Indeed, the introduction of cheaper Chinese-produced solar panels has been the main factor driving the cost of solar installation down worldwide.  Contrary to popular belief, though, China’s ability to produce cheaply has little to do with labor cost.  The production of solar cells and solar panels is capital intensive activity.  The advantage China has is the commitment of the Chinese government to the industry in the form of loan guarantees.  China is dominating the industry because China has decided to dominate the industry, and put their money where their policies are.

One thing to consider, though, is that the U.S. is still a net exporter of solar technology to China, to the tune of $1.9 billion.  The reason for this is that Chinese companies still import their polysilicon from the U.S.  While China may begin ramping up operations to produce polysilicon, given the current state of  affairs the solar industry the U.S. still has the export advantage.

Furthermore, much of the revenues generated by solar energy in the U.S. were the soft costs involved in the actual installation.  While it’s possible for foreign firms to gain a foothold in installation here, U.S. companies have a strong advantage in that respect.

Of course the net export balance is  little consolation to the U.S. based manufacturers of cells and panels who have to compete with manufacturers heavily supported by China.  In a future post I’ll present some ideas on what the U.S., and U.S. manufacturers could do to help American solar manufacturers survive.

For further reading on this issue:

Solyndra Bankruptcy Reveals Dark Clouds in Solar Power Industry, New York Times, September 6, 2011

United States a Net Exporter of Solar Technology, to the Tune of  $1.9 Billion, IEEE Spectrum, August 29, 2011

US Solar Energy Trade Assessment 2011,  (PDF format), Solar Energy Industries Association

Are the Chinese Using Predatory Pricing to Knock America Out of Solar Energy?  Stephen Lacey, Climate Progress, September 9.2011

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2 Comments leave one →
  1. September 14, 2011 1:53 pm

    I believe you are mis-identifying the problem by focusing on a small problem within a bigger one.

    Rather than differences in business policies, I think the nature of the U.S. disadvantage in all areas related to alternative energy is our huge over-reliance upon oil and coal technology, and political/cultural resistance to changing that. There are some industries where Americans pursue and develop innovation, but energy isn’t one of them. We are a minor player in developing and using new methods of electricity generation, transportation, home and building heating and other energy-related industries.

    Germany uses and installs six times the amount of solar panels annually that we do. Spain has twice our solar power installation. China makes a lot of solar panels, but they don’t keep and use them. Despite their greater population, they use 1/5th of the solar power that we do. That they make and sell one more product cheaply isn’t of particular concern to me.

    • September 14, 2011 2:23 pm

      Actually I don’t disagree with you at all. Whether or not U.S. companies are viable players in the solar energy is less important than a) how much energy we consume (my opinion is that it’s far too much) and the environmental impact of the energy source we choose (there’s no such thing as really clean energy … there are just forms with relatively less obnoxious footprints). I’m pessimistic about the political/cultural atmosphere here with respect to energy. People are so use to cheap oil that they’re ready to throw caution to the winds to keep the petroleum flowing. It’s doubtful that non-conventional sources of fossil fuel are really going to turn out to be cheap in the long run.

      I’ll be doing a post on why I’m focusing on energy at all, probably this evening.

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