China is clobbering the United States in producing solar panels, and it looks like it will only get worse as time progresses, reports Keith Bradsher at the New York Times.
This is a common thread in alternative energy: China vs. The West in the race to dominate alternative energy.
It makes for a great story, and it’s always presented as though America stands to lose out on some new green arms race, but it’s not exactly true. The United States has a crop of solar and alternative energy companies that can go toe to toe with any other nation, including China.
The New York Times builds its article around Suntech Power (STP), a Chinese company that sells panels “below the marginal cost of producing each additional solar panel–that is, the cost after administrative and development costs are subtracted.” In other words, basically at a loss.
Suntech just turned in a Q2 with $10 million in profits–an 82% drop, year over year–and sales of $321 million, which is a 33% drop.
Meanwhile, First Solar (FSLR), an American company, who is the current solar leader turned in a Q2 with $180.6 million in net income, on revenue of $525.9 million. Both of those numbers are almost double what they were a year ago. SunPower (SPWRA) is another American solar company that just turned in a solid quarter as well. Solyndra is a promising solar startup based in California, that has over $2 billion in orders in its backlog. These are just a few examples of promising alternative energy companies based in the United States, there are many more.
Is it possible these companies won’t lead the world, and the United States’ will lose in the clean tech battle? Of course, but before we get too distracted or upset about it, maybe should consider what it would mean.
According to the New York Times, “Chinese companies that have cheap loans, electricity and labour, paying recent college graduates in engineering $7,000 a year.” If we decided to stick engineers in $7,000 a year jobs manufacturing solar panels, would we consider that a big win for the country? No way. (See John Carney’s essay on comparative advantage.)
There are people like John Doerr and Jeff Immelt, who lament that the U.S. could fall behind in alternative energy. They want the government to give out more subsidies to prop up their clean tech businesses.
That’s how the countries that have more solar power than the United States have done it. Germany, and Spain have feed-in tariffs. Spain’s ended horribly, German has some problems too. China has rolled out a subsidy as well. If it were really important to the United States, we could add a feed-in tariff as well, which would fix the price of fossil fuels to be equal to solar energy.
That brings up a bigger question for the United States. When we attended venture capital meeting in the spring, clean tech investor Paul Maeder of Highland Capital asked “Do we want cheap energy or expensive energy?”
The answer seems pretty obvious, we want cheap energy. That’s why we use coal, that’s why passing a cap and trade bill is fraught with complications, that’s why we don’t have a smart grid, and a number of other technological advancements. If we want to lead at alternative energy today, then we need to be willing to say, “Yes, give us expensive energy.”
We don’t want that. So, for now, it might look like other nations are moving ahead of us through installed solar panels, or produced solar panels, but they do so at considerable cost.
In the long run, as panel prices fall closer to parity with other forms of energy, the United States will be a leader in installed alternative energy, and all this hand wringing over China beating us will look overblown.
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