China reportedly has some two-thirds of the US$39-billion global market for solar panels, but it doesn't use them very much. Why? Because they're uneconomic.
The Chinese subsidize their manufacturers to take advantage of the ultra-expensive alternative energy forced on western consumers via feed-in tariffs. Smart for them, dumb for us, but since everybody is subsidizing renewables, it's hard to condemn the Chinese. Indeed, the terms "solar panels" and "free trade" don't belong in the same conceptual time zone, even if they are reportedly an issue at this week's meetings in Washington between U.S. President Barack Obama and Chinese President Hu Jintao.
There are far bigger issues here than policy hypocrisy. What happens to renewable energy when alarmist climate science collapses? And even if the ideological rearguard action drags on for years, what about the fact that shale gas is about to make renewables look even more ridiculous in terms of both economics and emissions?
The feed-in tariffs that the Chinese are so assiduously avoiding at home are analogous to the medieval scam of coin-clipping, only in reverse. Governments hope that if a small amount of ludicrously expensive renewable electricity is loaded onto consumers' bills, they might not notice. The grand policy rationale behind this piece of economic self-mutilation is that alternatives will eventually yield a market bonanza, and any nation that has successfully promoted solar and wind "champions" will mop up all the business, as in the monopoly fantasies of Karl Marx.
This policy is nonsensical at many levels. Even if climate science is not entirely bogus, the costs of renewables are likely to do far more damage than bad weather. One of the biggest promoters of solar power, Spain, has already seen its subsidy system collapse. Studies have demonstrated that each "renewable" Spanish job was bought at the cost of two regular jobs.
Then there is the fact that Nobel Peace Prize-winning climate science has set the nations of the world at each other's throats. The height of corporate chutzpah displayed itself in Ontario last October when a group of solar companies -- led by Japan's Mitsubishi--complained about the local content rules required to receive Ontario's super-premium, consumer-crushing solar rates. The solar robber barons had the audacity to declare that these "restrictive" rules were bad for the Ontario economy, when the entire Green Energy Act is a bummer. Japan has taken the act (or at least the bits that don't serve its own interests) to the WTO, with European Union and U.S. support.
Similarly, the U.S. is now threatening China on solar panel trade, having already complained to the WTO about Chinese wind turbines. In response, China has pointed out that a US$60-billion chunk of the U.S. "stimulus package," (yet another shot-in-the-foot policy) consisted of renewable subsidies, with "Buy American" clauses attached.
Ironically, U.S. solar companies are moving to China to take advantage of their manufacturing subsidies. Last week, Evergreen Solar -- the third-largest U.S. panel manufacturer -- announced that it was shutting its Massachusetts plant and laying off 800 workers while beefing up its operations in the Middle Kingdom. The Massachusetts plant had received some US$58-million in state subsidies. The company has never made a profit.
One much-used but entirely bogus argument in favour of alternative subsidies is that they are justified by subsidies on fossil fuels. However, the US$312-billion of fossil subsidies handed out in 2009 were virtually all by petro-tyrannies or developing countries. According to the International Energy Agency, assuming all subsidy commitments are met, alternative subsidies will soar from US$57-billion in 2009 to US$205-billion (in 2009 dollars) by 2035, but that assumption is increasingly unlikely.
The bearer this week of the bad news if you're a climate bureaucrat--but good news if you're a consumer--was the IEA's chief economist, Fatih Birol. Dr. Birol noted sadly that shale gas was about to pull the rug from under renewables. The IEA now estimates that shale supplies -- which have half the emissions of coal--could last for 250 years.
Dr. Birol suggested that the U.S. shale gas boom had already contributed to a sharp drop in U.S. renewable investment, but the wind and solar fandango was already imploding. According to Dr. Birol, "There will be strong debates between energy and climate and finance ministries round the world about whether investment should continue to support renewables when the situation on gas has so radically changed." But while such ponderous debates take place, the market will be moving at the speed of profit-oriented thought, and catching on to the fact that aligning with renewable policies is looking dumber by the second.
Policymakers are still looking to take their final stand on the moral high ground. Part of the official Chinese response to the United Steelworkers' complaint was that "If the U.S. closes the door for trading with the rest of the world, including China, in renewable energy products, the U.S. may significantly delay the already long struggle for developing alternative energy sources, if not entirely destroy this opportunity for humankind."
This is an opportunity that needs destroying, and the Chinese may soon realize that they have backed the wrong renewable horse. At least they were never dumb enough to support using solar energy at home. And they have lots of shale gas.