Solar Panels Are Better Off Cheap, Even If It Means They're Not American

The U.S. government is doing everything in its power to give American solar manufacturers an advantage against cheaper solar imports from China. But all that policy is doing is slowing down the entire industry.

When I helped Governor Arnold Schwarzenegger create the Million Solar Roofs Initiative in California a few years ago, we designed it to stimulate mass production of solar panels to bring down cost. What we didn’t anticipate was that the building industry would crater around the same time, and that unemployed roofers and electricians would then find new jobs installing those clean energy systems, which created competition and dramatically lowered installation costs.

In fact, about 60% of the cost of installing a rooftop solar powerplant is tied up in the American parts and labor other than the solar panels themselves. I emphasize the "Made in America" portion of this industry because the majority of solar panels are made in China, but you can’t outsource the job of the worker on a rooftop in Fresno, New Orleans, or Trenton. Those jobs are powering an important sector of the U.S. economy right now, in an industry that is still lagging behind the slow economic recovery.

Why does this matter? Because the U.S. Department of Commerce recently imposed new tariffs on Chinese solar panels, ranging from 31% to 250% and effectively killing the goose that is laying golden eggs on American rooftops. It did so in an over-reaction to complaints that China subsidizes its panel exports, giving them an unfair advantage over U.S. manufacturers. While it may be true that the few, struggling U.S. solar panel makers need help competing with the many foreign competitors, sending American construction workers back to the unemployment line is hardly the way to level the playing field.

I just spent a week in China and visited with government officials and solar companies. Chinese solar panels out-compete those of other nations for all the obvious reasons: cheaper labor, rents, and raw material costs. They also lower prices because of stiff competition from other Chinese manufacturers; one official told me there are over 1,000 companies producing components for various kinds of solar products in China today. All of this adds up to the same reason we buy everything from plastic lawn flamingos to Nike sneakers from China, not because of sinister government subsidies designed to put American workers out of a job.

Let’s also recall that the U.S. government subsidizes everything from American solar panels to pork rinds by its multi-billion dollar giveaway of our tax dollars to the oil industry. In Lives Per Gallon: The True Cost of Our Oil Addiction I calculated the real price of gas or diesel to be around $6 more than we pay at the pump, thanks to tax breaks, defense of oil around the globe, and health care costs related to petroleum air pollution. How ironic that we are "protecting" the solar industry in the name of clean energy and fair competition by effectively killing it with a misguided tax and massive subsidies of fossil fuels.

And we had better get smarter about these policies soon. Japan and Germany are turning off their nuclear power plants, while one of the two in California is currently shut down for unexplained leaks in cooling pipes. Energy officials estimate that the state will survive a hot summer without the plant only because of the massive addition of solar and other renewable energy resources in the past decade, a trend that will slow significantly if solar panels become more expensive as a result of our own government’s myopia.

If China is subsidizing solar panels, let’s thank them and ask them to do more. The cheaper those panels are, the more Americans will go back to work installing them all over the country, making us less dependent on borrowing from countries like, uh, China,  and less dependent on fossil fuels that foul our lungs and threaten our national security. Seems like a good deal to me.

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  • Trevor L.

    I think we are missing another key point. We espouse capitalism in our country when it benefits our own interests. The criticism that China is selling cheaper or may increase prices is the foundation of capitalism. It is a hypocritical approach that appears to justify greed. Our government and consequently its voters are not myopic, we want more and more money.

  • Morris

    Interesting article. Thanks for the update. I never thought going solar would be affordable until I seriously looked into it. We used www.arosaenergy.com and they got us some real good rebates - was very smart investment. 

  • cesium

    They're cheap now, but once China succeeds in destroying American solar manufacturers, they will do what anyone would and thoroughly exploit their monopoly by substantially increasing prices. Something that they have a history of doing.

    Re: "raw material costs" available to Chinese manufacturers. Let's think about that for a second... who controls the majority of rare earth minerals that are vital for solar panels? Oh right, China. Why can't we get them for cheap? Because China is heavily restricting exports of them under the pretense of lowering 'pollution.'

  • cesium

    Fair enough on the raw materials part.


    "When they start jacking up the prices, we can always start up the manufacturing plants here again."  Yeah, that's not how it works.  The company who was once manufacturing the panels would most likely have gone bankrupt.  Once that happens, all their assets are liquidated.  This includes the plant and all the machinery.  You'll need a massive capital investment to restart any sort of plant, and since it will take a few months to get operational, in that time the Chinese have the opportunity to simply drop prices temporarily to crush the American plant.  It's unlikely any company here would make the investment necessary to compete given the past history of the industry.

    "PV is now cheaper per watt installed than nuclear." Source? I can't recall hearing anything in the last year that backs that up.  Even if it is, solar is ridiculously less efficient in the sense that the space needed is enormous compared to nuclear or anything else.  Solar, in my opinion, makes sense to use on rooftops and the like.  I believe they're idiotic to use in a solar farm - e.g., the Topaz farm in CA is going to cost $2B and use 10 square miles to produce only 550MW.  For a bit more cash and 1/10th the space you can have a nuclear reactor producing 1+ GW.

  • Darr247

    Actually, if you do a little fact checking, you'll find we sold and exported to them the majority of the raw materials they made into PV panels the last few years. Yet they're making them and shipping them back over here for less than they're paying us for the raw materials.

    Look it up!

    With the NFPA/NEC finally getting it covered, using panels from China, and installers getting more experienced (ergo more efficient), PV is now cheaper per watt installed than nuclear... we should be putting in every square foot they'll sell us for prices cheaper than the raw materials we send over there. When they start jacking up the prices, we can always start up the manufacturing plants here again.

  • marysaunders

    Amen, brother.  I have followed this tempest in a nutshell for some time on Renewable Energy World. 

    How will they hurt real people next?