Getting past Solyndra: Government support for emerging
technologies in clean energy plays a critical role in advancing
By David B. Goldstein
The anti-clean-energy echo chamber has been publicizing the bankruptcy
of Solyndra, a manufacturer of solar energy panels, arguing that
President Obama's clean energy job creation program is ineffective. But
most of this criticism is just political posturing and not really
trying to learn from these failures, which importantly have not
prevented solar energy from growing dramatically while reducing costs.
One direct source of the problem is that China has succeeded in
reducing the cost of manufacturing first-generation solar panels to
such an extent that many companies around the world cannot compete.
Notwithstanding this success, most American solar companies remain
ahead of their overseas competition, as I illustrate below.
The issue of American industry remaining competitive with China is, of
course, not unique to clean energy: many American producers are
challenged to keep up with Chinese competition. But with solar, the
Chinese government has been particularly effective in developing an
industrial policy that provides Chinese manufacturers with a number of
advantages in the global solar industry, including access to lower cost
capital, subsidized electricity rates, free access to land, cheaper
labor, domestic manufacturing requirements, and a much shortened
permitting process for factories.
America, in contrast, has generally avoided industrial policy.
Opponents of industrial policy argue that the market can pick winners
better than government can, and I believe that this principle is
generally correct, but I also think that innovation needs government
support. The lesson from China is not to tremble and retreat in the
face of its challenges. We are a great country of innovators, and we
need to support that.
We would do well to focus on the success stories in our domestic solar
industry, which include American companies like: First Solar, which is
producing next- generation solar panels cheaper than their Chinese
competitors; SolarCity, which is using an innovative business model to
bring hundreds of megawatts of solar to military bases; and Amonix,
which is developing innovative high concentration solar photovoltaic
(HCPV) technologies. These are only a few of many examples of success
in the made-in-America solar industry.
Such vigorous competitive forces are good for the consumer. They bring
the price of solar—and other clean energy and energy efficiency
investments—down over time while product quality improves.
However, when developing policies to support emerging industries, the
details are critical. So some closer examination of the issue of
government support for clean energy can be helpful.
One existing challenge with energy incentives for maturing technologies
occurs when they don't reward production, but rather focus on cost.
Cost-based incentives are employed by many governments around the
world, probably because they are so simple to administer. This can make
some sense for very early stage energy technology companies, which pose
a real risk of not performing and thus are much more likely to receive
financing when incentives are tied to cost, instead of production. But
solar energy has been in existence for decades and no longer falls into
this category. The challenge for solar is to ramp up production and cut
costs through greater deployment.
Last year, the amount of solar installed in America doubled from the
previous year, and growth hasn't slowed even in a tough economy. The
failure of a few solar companies has to be placed in the context of the
explosive overall growth of this sector of the clean energy industry.
The right response to these few failures and to general fiscal concerns
is not retreat from innovation and healthy competition with China; the
right response is to make sure we're using the right policies for the
right stages of technology development and generally have a much
greater emphasis on performance-based policies.
The Natural Resources Defense Council believes that government support
for emerging technologies in clean energy plays a critical role in
advancing innovation and bringing the costs of these innovations down
(that ultimately benefit consumers), and that the long-term effects
repay the Treasury hundreds of dollars for each dollar spent on
B. Goldstein has worked on energy efficiency and energy policy
since the early 1970s. He currently co-directs the Natural Resources
Defense Council's Energy Program. Goldstein initiated and coordinated
the dialogue that led to the adoption of tax incentives for efficient
buildings in the U.S. in the Energy Policy Act of 2005.