China’s Exports of Solar Panel Equipment and the Rise of a “Green” New Jersey

The NY Times reports; “Installers, often working through big-box chains like Home Depot or Lowe’s, are taking advantage of hefty tax breaks, creative financing techniques and a glut of cheap, Chinese-made panels to make solar power accessible to the mass market for the first time. The number of residential and commercial installations more than doubled over the last two years to 213,957, according to Greentech Media, a research firm.”

In a NY Times Room for Debate piece from January 2011, I anticipated and celebrated this trend and received a lot of angry comments.  My debate piece was based on research that Aparna Sawhney and I have conducted on U.S import trends in renewable power equipment.  The rise of India and China as exporters of green tech to the U.S is impressive.

Folks were angry with me because they believe that U.S “green jobs” will be lost and nascent U.S green companies will lose out to China’s green juggernaut.   This is likely to be true for firms that produce a perfect substitute for a product that China can mass produce.    International trade lowers the price of goods. In a world where we haven’t priced carbon, we need renewable electricity generation equipment to be cheap.  Trade with China helps to make this a reality.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

7 thoughts on “China’s Exports of Solar Panel Equipment and the Rise of a “Green” New Jersey”

  1. “are taking advantage of hefty tax breaks,”

    Solar power isn’t cheap, China or no China. It’s expensive, with an expensively maintained illusion that it’s cheap.

    1. What is the price attached to turning the Florida peninsula into a northern extension of the Florida Keys?

    2. Kindly address the trend data, Brett. On your logic, if the Mississippi is rising by a foot every hour, and it’s still three feet below the top of the levee, there’s nothing to worry about.
      The purpose of the subsidies is to make renewable energy cheap through economies of scale and experience. And unlike the subsidies poured at nuclear energy for 50 years, they are indisputably working. In 5 years’ time or less, they won’t be needed for wind and solar. That’s even assuming the current stacked deck, with the enormous implicit subsidy of fossil fuels by exempting them from paying for their climatic and other pollution externalities.

      1. On my logic, a 90% subsidy for levees doesn’t make them cheap, it just hides the cost.

        If solar were the only alternative to drowning our coasts, you might have a point, we’d have to go with solar despite the cost. But there are a whole spectrum of alternatives to coal, ranging from conservation to nuclear, and giving photovoltaics a huge subsidy doesn’t improve where it stands relative to them, it just distorts choices.

  2. So, Matthew, just out of curiosity, do you consider it “cheating” for a government to subsidize exports? Doesn’t it distort your precious free market?

  3. The reaction to the proposed anti-dumping action on Chinese PV modules revealed the conflicting interests of US solar panel manufacturers and installers. There’s no guarantee that the former will survive; the latter necessarily will. There are plenty of niches in the supply chain, from the equipment to manufacture purified silicon to inverters, in which high-wage manufacturers in the US and Germany have found a comparative advantage.

    Worth noting also that there’s no real national security argument for controlling your own supply of solar panels and wind turbines. Once installed, they run for 30 years with common-or-garden maintenance; the manufacturer surely doesn’t have much of an ongoing hold over the plant owner (contrast aircraft engine spares).

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