A spat between the United States and China threatens the future of solar power.
Solar power is an environmentalist’s dream, but for decades it was too expensive to be practical. In the past few years, that has finally been changing. Americans are signing up in droves to put panels on their roofs, not only for the good of the climate, but because—once you factor in government incentives—it’s often cheaper than conventional electricity, especially in sunny states. That was unimaginable only 10 years ago.
The boom has been fueled by cheap solar panels from China, which has been heavily subsidizing solar manufacturing. The glut has been good not only for American customers, but for U.S. companies that install solar panels. Startups like Sunrun and the Elon Musk–backed SolarCity have grown explosively by installing Chinese-made panels on U.S. homes and businesses, often through financing mechanisms that require no money down.* As a result, the solar industry has been a bright spot in the U.S. economy, with jobs growing by 20 percent a year. It now employs 140,000 Americans and counting, and is one of the few sectors in which President Obama’s promise of “green jobs” has actually materialized.
But the good times could be coming to an end. It’s not that China is cutting off the supply of cheap panels. It’s that the United States is threatening to slap new tariffs on them that could sharply drive up the price. It would also likely prompt China to retaliate with more duties on U.S.-manufactured polysilicon, a key ingredient in those panels.
The push comes from America’s small and struggling domestic solar-panel manufacturing industry, which can’t compete with the discounted wares from China. Ironically, it’s a German-owned firm, SolarWorld AG, whose U.S. division is lobbying for the federal government to protect it from foreign rivals. On the other side are U.S. solar panel installers that rely on Chinese goods. As analyst Eric Wesoff once joked, one side is wearing an American flag over a German flag, and the other has an American flag draped over a Chinese flag.
The U.S. is justified in wanting to ensure that China isn’t just flooding the market in order to corner it. But it would be far better served by addressing the problem through negotiation than a new round of punitive duties. That’s what the European Union did in a similar case against China, which it settled last year without irreparable harm to any of the parties concerned. China itself appears perfectly willing to pick up the phone. Why hasn’t Obama?