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China-US Solar Trade War Has Complex Arguments

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As a homeowner who has benefited from cheap solar panels from China, I am torn by the recent moves here to slap a tariff on Chinese solar imports, because of course green jobs here will help the US economy, and normally I lean towards buying local and keeping jobs here at home. (And only if we develop a constituency for clean energy to match that for dirty energy will we get the political support for clean energy that is essential for the long term future of civilization.)

But. Cheap solar now – currently made in China – already has the potential for benefits that go far beyond jobs today.

On the one hand, we should all be thankful that at least one nation is investing bigtime in producing carbonfree energy, as the Chinese government is, now. The world will have a safer climate future because of the intelligence of the current Chinese government. That that heavy subsidizing of solar results in cheaper solar around the world truly is a benefit to humanity: see China Won’t Ape US on Carbon: Disastrous.

We need solar to get to grid parity, and what the Chinese government is doing will do more to get it there than anything our  now completely dysfunctional government could do in the foreseeable future: it can barely keep the lights on in congress.

On the other hand, like many Californians, I am also the past beneficiary of the local green jobs boom in the 33% renewable by 2020 state, having easily securing the sort of job in solar that would be hard to come by in other industries. I know first hand how much the US needs a nationwide green “gold rush” of new jobs in solar domestically like this.

Of course, on one hand: cheap Chinese solar means China benefits economically from its solar policy of government support and protection. We don’t. (But we could. We could supply our own government support, as we did with nuclear, oil, and coal.)

On the other hand, the US itself also earns money from exporting polysilicon, the raw material from which PV solar panels are made, as Renewable Energy World’s Steve Leone points out in an excellent piece on the complexity of this issue. More Chinese solar panels result in more US jobs, at least in raw material exports. (What an irony that a developed nation like the US is now a raw material supplier to what was only recently a developing nation.)

China has become the world leader in highly automated cell and module production. But it’s leading manufacturer, China’s Suntech sources half its polysilicon from outside China, and 30% of that comes from the US.

And China sees the world as a level playing field of intertwined green energy destinies, and feels threatened by US solar competition. Suntech – which has a manufacturing plant in Arizona – sees price competition from the US as well, and from thin film manufacturers like First Solar, not just polysilicon-based solar competitors.

“We’re in a hyper competitive environment,” Andrew Beebe, Chief Commercial Officer for Suntech, told Leone. “The cost leader here is a US company, First Solar. It’s not due to one country or another; it’s due to the extraordinary rush of companies that has taken place over the last couple of years, and it’s led to an oversupply of capacity. It’s been a great time to be a customer of solar, but the inevitable ramification of that is not everyone is going to make it.”

Adding to the intertwined fates of China and the US on solar trade policy is the fact that one of the factors in China’s success in cutting solar pricing is partly due to US policy. The Obama administration had set a goal to reduce solar prices to $1 a watt by 2014, invested in the DOE programs of subsidies and incentives needed to achieve it, and is on track to get to that goal.

(Related: “Clean Energy Push Rivals Manhattan Project”: WSJ)

But Obama policy led in turn to the the Chinese government increasing investment in its own solar plants to supply the targets (along with meeting the EU targets – as well meeting its own much more demanding renewable policies: see China Even Beats US to Cap and Trade.) China is good at mass production on the scale needed to make things cheaper globally. China has invested billions in solar loans and cossets its manufacturers with support that the US can only dream of.

So, on the one hand, the US just cannot compete with China on price.

On the other hand, the tragic losses of the price war have resulted in some incredible deals for homeowners. US solar manufacturer Evergreen, which recently went bankrupt trying to compete in this price war is now auctioning off its assets in a liquidation sale that led to some incredible deals in solar panels for a lucky few in the US, at just 54 cents a watt. Some homeowners will be the lucky beneficiaries of that liquidation – and the climate will benefit.

The many stakes in this new trade war on solar are complicated. I’m sure you can add yet more layers to this complex argument on both sides.


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