I come not to curse the Chinese but to praise them for unleashing the forces of global competition in the solar power sector by using the dynamic equilibrium of subsidies and incentives to shake-up and shake-out the solar industry. The result is that the global competition for market share is a wide open race and already the two most recent market leaders, Germany and Spain, are being shown as sprinters rather than marathon runners in this race.
Bragging rights have always been important in the solar sector since economics was never its strong suit. In fact, on economics alone—as the old joke goes—solar power is the energy source of the future—-way into the future!
The United States, especially California, used to lay claim to bragging rights about renewable energy leadership and the Million Solar Roofs initiative was designed to live into that aspiration. Then along came Spain and Germany with feed-in-tariffs that sucked the oxygen out of the California dream and resulted in a stunning growth of market share putting these two EU countries in the #1 and #2 place for renewable energy bragging rights. Spain recently announced a dramatic pull-back in feed-in-tariff rates and Germany is expected to follow. The reasons are complex but rapid building, rising costs and the impacts of the recession are all part of this dynamic equilibrium at work.
While these forces at work in the EU would have produced the same result, the Chinese actions over the past year to dramatically increase their market share of renewable energy use and manufacturing has accelerated the process worldwide.
The yin yang rationale for this rapid greening of the Chinese energy strategy appears to be the happy interplay of the need for economic stimulus action at home to keep the economy growing combined with the desire to gain global market share in manufacturing and export of both wind and solar technology driving down its cost at home while growing profits abroad. And there is the political problem of preparing a credible defense for Copenhagen and expected criticism that China isn’t doing enough for climate change.
Methinks the Europeans busy pandering in Brussels over the Chinese yin of rejection about climate change and feeling smug about their feed-in-tariff subsidized market share growth did not expect the “yang” of the Chinese massive investment in taking the EU market for renewable energy technology just when the EU was recession weak.
Consumers and ratepayers of the world unite! The Chinese are our friends!
Once again the Chinese have set upon subsidies in our midst and used them against the forces of rising energy costs and rising rates. The real reason Spain and Germany are now rethinking feed-in-tariffs is that those subsidies are now flowing as market share growth to China instead of encouraging political contributions to keep supporting the tariffs at home. Ah, the ruthless efficiency of competitive global markets.
The Chinese strategy is shrewd and well timed. Keep the economy going, go for global market share and rub the noses of the climate changers in an inconvenient truth—the way to a clean energy market is THE MARKET. When renewable energy technology costs get at or near grid parity there will be plenty of it built.
So China set its own version of a renewable portfolio standard target of 17% of electricity by 2017 from renewable sources. The wind target of 3% by 2017 will, by itself, create a massive need for production capacity to achieve that domestic goal let alone gain market share from global exports. The Chinese media reported that the government planned to build seven 10-gigawatt wind farms to create a substantial base of wind energy.
China used its own feed-in tariff to stimulate solar farm projects at home with the FiT covering 50% of the upfront cost of the projects. Just like home, the pigs are lining up at the stimulus feed-in-trough to get a piece of the action and build that intended production capacity and global market share. Of course, the Chinese firms Renesola, (SOL) Suntech (STP), Yingli Green (YGE) and Solarfun (SOLF) have the most to gain from this domestic stimulus program. Let’s hope they do well—REALLY well—and compete with each other to drive down the cost of solar technology for all of us.
US and EU companies need not apply. Besides, they will be busy dealing with the falling prices caused by the Chinese production expansion especially in the recession weakened economy. The EU companies are busy scrambling from their FiT problems. This should accelerate the consolidation across the sector and weed out the weaker players. This is also good for consumers and our own renewable energy policy aspirations because lower global cost bring us closer to that grid parity holy grail and boosts the long term potential for renewable technology.
The actions of the Chinese in shaking up the global market for renewable energy production and the drive to lower production costs to gain market share is the best news possible for American and European ratepayers stuck in the FiT subsidy rut with growing RPS standards being imposed by our politicians without regard to the rate implications ahead for us.
The Chinese are our Friends! They want to keep the lights on at prices we can afford.