Message to US Solar Panel Manufacturers: Stop Whining and Get Busy Innovating

19 january 2013

When the International Trade Commission voted unanimously that imports of Chinese solar cells have harmed U.S. solar manufacturers, which will result in tariffs added to solar modules manufactured in China, a new era in the solar industry began. Sadly, this era is seemingly based on American whining and foot stomping instead of focusing on innovation and market development.

Why should U.S. solar manufacturers stop bellyaching? Here are five reasons:

First, instead of seeking protection from the ITC on products that are constructed of ordinary silicon, glass and aluminum, U.S. solar manufacturers should instead work to understand the dynamics of the market and economies of scale involved with these products. They should do what they do best: innovate and develop new or better technologies.

Americans are the best innovators in the world.  But despite what manufacturers from Spain to Sacramento say, solar panels are not technologically based products. There is little to no innovation in solar panels — instead their manufacturing, assembly and price are based on inexpensive labor, which is an advantage currently enjoyed by China.  The next time you make a call from your cell phone or open your computer, ask yourself where those components were made.  So if and when it becomes less convenient for China to support its domestic silicon, glass and aluminum industries (aka solar panels), India, South Korea or any of a number of other countries eager to stimulate job growth in their own country will step up and try to fill the void.  So why would U.S. manufacturers try to race to the bottom and try to compete with China for a product based on inexpensive labor?

Second, these tariffs will not affect the flow — or price — of these products into the U.S.  Why? As for price, if convenient to China, it could lower the price of these products even further to clear the artificial affect of the tariff.  Or, ironically using the money that it has earned from consumers in the United States, China could simply offer U.S. solar developers free financing on China-made products or, more aggressively, offer free or low-cost financing for entire projects that cost into the hundreds of millions or billions of U.S. dollars (and thus use the product itself as bait).  As for flow, these products have already found their way into the U.S. market through the very same U.S. manufacturers that are crying the loudest.  Where did SunPower, which is owned by a French oil company, build its solar panel manufacturing plant with money it received from the U.S. Government?  Mexicali.  They don’t mix silicon in Mexicali.  Get the picture?

Third, the premise that U.S. solar developers would choose to purchase US made panels over those made In China (even if the Chinese panels were more expensive) is untested and, most likely, economically nonsensical.  Why?  Developers of solar projects worldwide if they are going to be financed need panels from companies that have strong balance sheets and will be around for the duration of the warranty.  To project patriotism into what is a simple business decision in this case (predicated on investment/banking regulations), conveys the feeling that U.S. solar manufacturers want protection that defies economic reality.  Are developers going to pay more money for U.S.-made panels or assume higher contingent liability risks for the honor of buying American products?  Have you been to Walmart in the last fifteen years?  If anyone thinks that a U.S. or European solar developer, or even a manufacturer or supplier, would not sell out immediately for a cash offer from a China-based entity — without remorse for the hundreds or thousands of jobs that would or could be lost in America — is, well, not being honest.

Fourth, solar development projects in the United States and the industry that it supports are fueled by power purchase agreements — from U.S. utility companies.  These agreements, often signed with renewable energy developers to comply with environmental regulations, are also regularly supported by federal and state tax incentives and financed by government-backed entities, often using government-owned land.  Talk about artificially supporting a domestic industry.  The long term, healthy development of the industry in the United States would benefit profoundly if taxpayers and elected officials understood that such welfare for privately owned companies (in many cases not U.S. owned companies) distorts the market, risks taxpayers money, gets in the way of the healthy development of energy policy and, in this economy, is just plain wrong.

Finally, for centuries, the Dutch, Portuguese, Spanish, French, British, Canadians, Australians, Americans, and now the Chinese have supported their domestic industries outside of open market dynamics.  Such government support is based on domestic policies to create jobs and stimulate growth, rather than an orchestrated effort to manipulate world prices and force job losses in other countries.  If China wanted to control or manipulate the U.S. solar industry, or almost any other industry, it could wipe it out over night.

So, instead of whining and seeking artificial protection, American solar manufacturers should innovate and create new jobs at home based on new products.  That is what we do best. Stop blaming the Chinese for our lack of thought and grit.  How will we know when we have such a product?  Because it won’t be possible to make it in China.