A common refrain during the Obama administration’s multi-billion push for subsidies and loan guarantees to the domestic solar power industry was that the money was needed to prevent China from dominating the market.
Nothing could dent this thinking. When federally-backed Solyndra went bankrupt costing taxpayers about $528 million, China was fingered as the culprit for having undersold domestic manufacturers on the solar panel market. This in turn was cited as proof we need to continue backing these domestic companies.
Sen. John Kerry, D-Mass. — Obama’s secretary of state nominee — provided a classic example of this rhetoric in late 2011:
We cannot allow long-time opponents of renewable energy to focus the discussion only on Solyndra (whose higher priced panels could not compete as solar costs came down) when we should be thinking about competing with China to win the next energy revolution. Why? Because the race is on to put the right policies in place so hundreds of thousands of new, good-paying renewable energy jobs will be created here, and not in China.
So, how is China’s heavily-subsidized solar industry doing, anyway? It must be paying off in a big way, providing all sorts of jobs and cheap energy, right? Err, no, as journalist Ying Ma notes in the current issue of the Weekly Standard:
Chinese solar companies face a gloomy outlook. The industry may have reaped enormous government financial support that drew open envy from President Obama; but according to the state newspaper China Daily, numerous small and medium-sized solar cell manufacturers have gone bankrupt, and more than 80 percent of China’s 43 polysilicon companies have stopped production, as prices and orders have declined. China’s largest solar manufacturers are battling severe financial problems.
LDK Solar, the largest maker of solar wafers in the world, faces a mountain of debt totaling about $3.6 billion. Xinyu, the company’s hometown in Jiangxi Province, has come to the rescue. Last July, the city government approved a measure to fund approximately $80 million of LDK’s loans. Then in October, LDK raised some $23 million by selling a 19.9 percent stake to Heng Rui Xin Energy, a renewable energy company partly owned by Xinyu.
Suntech, the world’s largest solar panel maker, also needed a bailout from its local government. Burdened with over $2 billion of debt, it received nearly $32 million in emergency funds in September. The loan was organized by the city of Wuxi in Jiangsu Province, where Suntech is headquartered, and was extended by the local branches of state banks, including the Bank of China and the China Development Bank.
Ying Ma notes in conclusion:
[T]urmoil in the Chinese solar industry teaches that massive state spending cannot forestall changes in market conditions, though it can distort market incentives and lead to overcapacity, inefficiencies, and other unintended consequences. The logic of the free market applies across national borders and without regard to the wishes of big-government dreamers.
Sound advice. Maybe someday it will be taken seriously in a capitalist country.