2012-01-03

Co.Exist

A Trade War In The Solar Industry Doesn't Make Sense

China’s production of lower and lower cost solar panels is destroying the American solar industry (think Solyndra). But instead of trying to artificially stop that decline, we should focus on becoming solar innovators.

The 20th century, a period of unparalleled economic growth in United States, can be summed up in a phrase: “As GM goes, so goes the nation.” Throughout the century, the Midwestern industrial heart of America--Detroit and surrounding cities from Toledo to Youngstown, Cleveland to Pittsburgh--pumped out iron and steel and autos. It was a microcosm of our present global supply chain economy.

Lobbying on Capitol Hill was left to the big boys: GM, Ford Chrysler, GE, AT&T, big energy companies, big food companies, and more. A steel supplier relied on the Big Three auto companies to work with Congress to create the market for steel and tires. GE helped its own supply chain through its lobbying efforts.

That was the 20th Century.

The playing field of the 20th century no longer exists. Twenty-first-century technologies have turned the concept of trade on its head, eliminating borders and changing the rules of the game. Anyone running a fast-growth company must navigate this new world, and America-centric thinking will not provide the competitive capability necessary to succeed in it.

The lack of understanding of these truths in the solar industry has been brought to my attention in the past few weeks. SolarWorld, a predominantly German solar panel manufacturer (with locations in the U.S.), is upset that the Chinese government is subsidizing its homegrown solar panel manufacturers by copying earlier German and Japanese subsidy programs. These subsidies are driving down the cost of panels worldwide.

We have already seen the casualties--over 300 manufacturers in China and U.S. companies like Solyndra and Evergreen that could not compete globally on price. Now, SolarWorld has submitted a petition asking President Barack Obama’s administration enact punitive duties on China for unfair trading practices.

SolarWorld president Gordon Brinser noted in PV Magazine that "China will dominate a new generation of technology that will reduce America’s dependence on fossil fuels, and we will see our increasing dependence on our Far East energy source eclipse our future potential for greater energy security." But this is a false worry. The 20th-century world of America as the producer and seller of goods from cradle to grave has not existed for decades. America is no longer the world’s core manufacturer. But it is a technological and creative leader.

The combination of American design and global manufacturing has created an international economic network that has supplanted the country-specific world of old. That’s why Apple products are "Designed by Apple in California” but assembled in China. America is a master of creative design and early engineering; China has become a master manufacturer in the global supply chain.

While SolarWorld is focused on maintaining America as a solar manufacturing leader, the solar industry should actually be focused on solar deployment in America. It doesn’t matter where the panels come from, it matters that we put them up. In the U.S. alone, we have created 100,000 jobs in the deployment of solar doing it rooftop by rooftop and community by community. A key to making that work is reliable, low-cost panels.

If China successfully replicates German manufacturing subsidies to manufacture low-margin commodity solar products, the solar industry and America should let it. This increases deployment, and deployment is the ultimate goal.

Many companies have had to reinvent themselves as low-cost producers to gain marketshare. But it takes entrepreneurs to reimagine industry sectors, and those people still largely live in the United States.

SolarWorld has the resources and expertise that could quite possibly create a technological advancement that would be the envy of the rest of the solar industry. Their breakthroughs could further lower costs, and lead the industry in its efforts to deploy more PV to create even more American jobs. What we don’t need is a trade war that breaks down the global supply chain and destroys American jobs. Wouldn’t it be nice if in the near future we could all read with pride, "Designed by SolarWorld in California?”

A 21st-century global market takes 21st-century thinking. Because, “As goes solar deployment, so goes America’s (and the world’s) 21st-century energy system.”

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2 Comments

  • Lisabeth Rosenberg

    Yes, it takes entrepreneurs to reimagine industry sectors but it seems unfair for our tax dollars to artificially support businesses that are not fully developed. (Too bad I couldn't get a subsidy a 30 year old business that I had to close in 2010).I am sadden by the ever declining support towards research and development.  Solar can only improve, by the government investing in education and science. Having a child in the Chicago Public School system now, I am shocked the abysmal educational resources that my tax dollars have supported. I no longer have the luxury of sending my child to private school.  Our children are falling behind. They are our future. Nurture our garden: Plant the seeds, feed and water them, and they will grow.  Stop looking for the quick buck and lining the wrong peoples' pockets. Support EDUCATION and R&D.