In the last two years, China has emerged as the dominant player in green energy — especially in 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.
This 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.
U.S. Companies at a Loss
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 have sharply increased capacity, particularly in China. Meanwhile, demand has 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, which declared bankruptcy in August, 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.
How Solar Power Works
There are several ways to use the sun’s power to generate electricity. One of the most promising is called concentrating solar power. This involves using mirrors to reflect and focus the sun’s rays, providing heat, which in turn helps power a generator. Another is photovoltaic panels, such as the displays on the rooftops of homes and office buildings (some of these displays, especially in California, have recently experienced problems with theft).
Drawbacks and Incentives
The drawback to solar power is that it is expensive to produce: generating power from photovoltaic panels costs more than four times as much as coal, and more than twice what wind power costs. In the United States, the federal government and states have offered a variety of incentives to encourage homeowners and businesses to put panels on their roofs, and for utilities to buy power from large displays. Solar panels produce no energy at night, but that is not a significant problem because the electricity is often most needed in the daytime, when consumers turn on lights and televisions and air-conditioning.
Solar energy is also used to heat water and pools — and of course a properly designed house will optimize the light and heat qualities of as it floods through the windows.
For now, electricity generation from the sun’s rays needs to be subsidized because it requires the purchase of new equipment and investment in evolving technologies. But costs are rapidly dropping. And regulators are still learning how to structure stimulus payments so that they yield a stable green industry that supports itself.
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