Discussion: (0 comments)
There are no comments available.
View related content: Politics and Public Opinion
“As long as countries like China keep going all-in on clean energy,” President Obama said in last week’s State of the Union Address, “so must we.”
Obama has thrust the U.S. into an arms race in green-energy subsidies. To grasp the difficulty – or perhaps futility – of such a contest, look at SolarWorld, the subsidized German manufacturer now drowning in a sea of cheap Chinese panels.
Bonn-based SolarWorld has benefitted nicely from German solar subsidies for years. In 2008, the company opened U.S. operations in Oregon, with help from local politicians.
Oregon offered SolarWorld up to $100 million in renewable energy tax credits. Boris Klebensberger, the company’s COO, asked for more. The Oregonian reported at the time: “Klebensberger, calling the right to have renewable energy a ‘civil right,’ urged Oregonians to push for more government support and incentives for the sector.”
At that time, an interviewer with GreenTech Media asked Klebensberger: “U.S. incentives aren’t as generous as in Germany. Are you concerned about the ability to succeed in this regulatory environment?”
“That is one of the problems in America,” Klebensberger responded
Obama’s election made the U.S. incentives more generous. In 2009, the Export-Import Bank, a federal agency, approved $61.0 million in loan guarantees for SolarWorld to sell solar panels in South Korea.
On Earth Day 2010, while announcing “Solar Express” – an expedited process for subsidizing solar panel exports – Ex-Im Chairman Fred Hochberg toured SolarWorld’s California factory.
Later in 2010 the Obama administration announced SolarWorld was eligible for an $82.2 million Advanced Energy Manufacturing Tax Credit.
Despite all this help, the company has faltered. In early September 2011, SolarWorld announced it was ending all manufacturing in its its California plant and laying off 186 of its 300 employees there. The Oregonian reported that an industry analyst said of the Oregon plant ” ‘To be honest, it’s just a matter of time’ before the plant sees job losses given China’s pressure on prices.”
Two weeks later, the Obama administration gave the company another hand. The Department of Energy awarded a $2.3 million stimulus grant to SolarWorld to study new manufacturing techniques for solar panels.
September was fruitful for the SolarWorld-Obama relationship: On the 30th of the month, Ex-Im approved an $18.9 million direct loan, at a low 2.63% rate, to an Indian power company buying SolarWorld panels.
Meanwhile, states and the federal government provide plenty of other subsidies for SolarWorld’s customers. If you installed solar panels on the roof of your corner store in recent years, you could get a stimulus grant from the Treasury. Generate electricity with solar panels, and you can get the production tax credit. Many states require their utilities to buy solar- and wind-generated power.
But still, the profits don’t flow. In recent weeks SolarWolrd announced it was laying off more than a third of the workers at its flagship Oregon factory. The company is losing hundreds of millions of dollars a year, and its stock is plummeting.
As a result SolarWorld has pocketed only $27 million of its $100 million in state tax credits, according to company spokesman Ben Santarris. If you don’t make profits, you don’t owe tax credits, and thus you can’t benefit from tax credits. SolarWorld never got any federal tax credits, for the same reason.
Why can’t SolarWorld – or Solyndra before it – turn a profit? Because the Chinese sell their solar panels for much cheaper. Chinese labor is cheaper, but U.S. solar companies like SolarWorld also charge that China “cheats.”
China subsidizes its solar manufacturing and exporting even more than the U.S. does. This allegedly allows it to “dump” panels in Europe and the U.S., helping China kill U.S. competitors and thus corner the market. Santarris calls it “mercantilism.”
Obama’s Commerce Department, three weeks before the election, announced retaliatory tariffs against the Chinese solar industry.
But if Obama wants “affordable renewable energy,” as he says, why doesn’t he welcome cheap solar panels subsidized by the poor people of China. Cheaper energy means more disposable income and cheaper manufacturing, freeing up consumer spending and thus creating new jobs.
But Obama doesn’t just want affordable solar energy, nor does he simply want jobs – he insists on solar jobs. That means more subsidies and tariffs.
Taxpayers and consumers pay the price for these policies. The benefit goes to companies like SolarWorld, which still can’t turn a profit. You have to wonder if this trade war is a war worth fighting.
There are no comments available.
1150 17th Street, N.W. Washington, D.C. 20036
© 2014 American Enterprise Institute for Public Policy Research