China Is the Dominant Player

Despite rapid growth in recent years, solar power is more entrenched in European countries like Spain and Germany, which have promoted its development with strong incentives called feed-in tariffs that require electric utilities to buy solar power at a high, fixed price. The United States accounted for $1.6 billion of the world’s $29 billion market for solar panels; California is by far the leading solar state.

In recent years, China has emerged as the dominant player in green energy — especially solar power. It accounted for at least half the world’s production in 2010, and its market share is rising rapidly. China’s Big Three solar power companies — Suntech Power, Yingli Green Energy and Trina Solar — all announced in August 2011 that their sales in the second quarter were up between 33 and 63 percent from a year earlier.

But, analysts say, China has achieved this dominance through lavish government subsidies in its solar industry that are detrimental to American companies and other foreign competitors. While most U.S., Japanese and European companies still have a technological edge, China has a cost advantage, analysts say. Loans at very low rates from state-owned banks in Beijing, cheap or free land from local and provincial governments across China, huge economies of scale and other cost advantages have transformed China from a minor player in the solar power industry into the main producer of an increasingly competitive source of electricity.

In early December 2011, American solar panel manufacturers won a round against China when the United States International Trade Commission reached a preliminary conclusion that they were being harmed by imports.

The vote cleared the way for additional steps by the commission and the Commerce Department that could result in heavy tariffs on Chinese imports. The Commerce Department had responded to the industry filing in November by agreeing to open an investigation into the complaints.

Chinese officials, angered by the trade complaint, vowed to investigate American subsidies to renewable energy. And some American importers of solar panels, and operators of solar power installations, warned that sanctions against the Chinese could raise the cost of solar energy in the United States.

Chinese dominance of the industry has drawn concern in Congress, which in January 2011 approved a provision to require the Defense Department to buy only American-made solar panels. The issue of unfair trade practices regarding clean energy also was at the heart of a case the Obama administration filed against China with the World Trade Organization in December 2010.

The Solyndra Scandal

Even with government support, American companies have a hard time competing with foreign producers. In August 2011, three U.S. solar power companies — Solyndra of California, Evergreen Solar of Massachusetts and SpectraWatt of New York — all filed for bankruptcy. In the case of Solyndra, the company had received $527 million in loans from the federal government. 

The Energy Department, which approved the company’s financing, said China’s subsidies to its solar industry were threatening the ability of Solyndra and other American manufacturers to compete. The price of a solar array, measured by cost per watt of capacity, had fallen 42 percent since December 2010, the agency said. Solar panel prices  plunged by 42 percent per kilowatt-hour in the past year as manufacturers sharply increased capacity, particularly in China. Meanwhile, demand had been somewhat weak in the main markets in the United States and Europe.

On Sept. 13, 2011, a House subcommittee released documents suggesting that a final review of the $527 million in loan guarantees for Solyndra may have been rushed so that Vice President Joseph R. Biden Jr. could announce its approval at a groundbreaking two years ago.

But at a subcommittee hearing, officials of the Energy Department’s loan office and the White House budget office defended their decisions, which they said were carefully reviewed and not politically inspired.

The collapse of the Solyndra deal turned what was once portrayed by some as a shining example of the promise of federal subsidies to stimulate economic growth through green jobs into a grim lesson in what others call the futility of federal meddling in the marketplace.

China’s Commitment

China’s efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China. The Chinese government charges a renewable energy fee to all electricity users. The fee revenue goes to companies that operate the electricity grid, to make up the cost difference between renewable energy and coal-fired power.

In the United States, power companies frequently face a choice between buying renewable energy equipment or continuing to operate fossil-fuel-fired power plants that have already been built and paid for. In China, power companies have to buy lots of new equipment anyway, and alternative energy is increasingly priced competitively.

But China’s commitment to renewable energy is expensive. Although costs are falling steeply through mass production, solar power is still at least twice as expensive as coal.