Forbes ran quite a provocative piece yesterday about some new subsidies given to Chinese solar panel manufacturers in the form of billions of dollars of loans (I don’t know if they are cheap loans but based on how China is doling out money, I’d venture to say the answer is yes). According to the article, the loans are designed to help the companies make the transition from primarily low cost manufacturers to more integrated project managers via, “more strategic long term, project planning, financing and building large-scale projects for utilities and commercial customers. Companies such as Suntech and Trina Solar will receive $7.3 and $4.4b respectively.
The author goes on to make the point that, “subsidies in the West can lure some manufacturing back. Sure that could happen and Mike Miskovsky, general manager for Canadian Solar’s U.S. division says, “low price alone doesn’t guarantee market share. “More important is the best value per dollar spent on a watt,” he says. If cheap panels don’t generate as much electricity as slightly higher-priced panels, they are not as attractive. So we have two arguments here. The first argument goes like this create subsidies to lure manufacturers back to the West. But what happens when those subsidies run out? How do those manufacturers compete? We dismiss those calls outright because they lack sustainability. The second argument as Mike Miskovsky explains relies upon total cost of ownership. We can’t find fault in that!
But maybe a third argument exists one in which the solar panel producers can take a page from – the US mini-mills who didn’t ask for subsidies (well, they may have but they didn’t get too many according to MetalMiner research) but identified a new way of operating moving away from the old blast furnace methods of production and developing lower cost production methods. Consider the following from Nucor’s website, in its steelmaking operation it has, “over 8000 people who are among the best paid in the industry, yet Nucor has the lowest labor cost per ton of steel produced safely. This link explains many other elements of the firm’s “unconventional thinking.
Apple has disrupted the PC/laptop industry with its low cost iPad. It can compete on innovation. Let’s stop sounding the calls for subsidy and instead create incentives for innovation. Why can’t one of the US solar panel manufacturers become the next Nucor?