Solar Power: The Best of Times and Worst of Times

Nothing spoils good news like a bad argument. So it goes for the solar industry, as excitement for technology advancements may be stifled by trade conflict between the U.S. and China.

The solar industry has seen a continuing reduction in solar energy costs and a resulting increase in solar photovoltaic (PV) production over the years as solar companies continue to make technology advancements and reduce costs. The trends can be seen over the course of thirty years through collections of market and company reports shown below.

Between 2009 and 2010, worldwide PV production capacity more than doubled and has continued to increase in 2011. Some news reports over the past few months have been especially positive for the industry, indicating sizeable increases in solar capacity and lower utility bills for states such as California and Arizona.

Some markets have reported reaching grid parity, in which solar electricity without subsidies costs less than that purchased from the grid. As these markets expand, solar power has the potential to play a much larger role in energy production.

But the continuing success of the solar industry rides on successful competition and cooperation between its leaders. Companies in Germany, China, and the U.S. all play different roles in driving down costs. In short, Germany provides high-precision mass-production equipment, the U.S. provides low cost silicon, and China provides low-cost manufacturing. Trade and dependency between the countries is what has allowed for the industry's steady growth over time.

This cooperation is threatened by the brewing conflict between the U.S. and China, where trade protectionism could halt global progress. On October 18, the U.S. government was asked to impose tariffs on imports of Chinese solar products, arguing that Chinese subsidies created unfair competition. In response, Chinese companies are asking for tariffs on American solar products.

On Friday, December 2, the U.S. federal trade panel unanimously voted to continue anti-dumping and countervailing policies for Chinese solar panels. The intention is to protect American jobs and U.S.-based solar companies whose economic security is threatened by China's success. Unfortunately, these actions result in PV price hikes for everyone, and reduce the room for new solar technologies to pursue growth.

In reality, China's solar production success is not due to cheap labor or state subsidies, but from the fast and cheap means by which the facilities can be built. In the U.S., building and land permits take a lot of time and money, and this is where China saves the most on costs.

It seems unlikely that the current political mindset on protectionism in competition will give the solar industry what it needs to thrive. And while there are potential losses for the limited U.S. solar manufacturing sector without tariffs, there are definite losses for the solar industry's future on a global scale with these policies in place.

Certainly the development of the solar industry has been international, and the hope is for it to continue to be.

Source: Technology Review