"the utility has to buy the power for a predictable period at a price that is a no-brainer good deal for the family or business putting the solar panels on their rooftop."
Sadly, it is not a no-brainer good deal for the tax payer who ultimately pays for it. It is all well to have the biggest solar power industry, but what if it is all just virtual and breaks down once the subsidies stop?
The title is politically loaded. There's something that article is trying to say vis-a-vis government subsidies and free trade, but it never quite materializes, at least I couldn't understand it. But I had no trouble understanding the political outrage it is dripping with.
He's mad that even though the government is administering a massive Keynesian stimulus as are a lot of others right now, including China, unlike those countries none of it seems to be routed towards solar power eagerly enough to create a big market for it here, and the resultant manufacturing jobs. So if you decide to bet the farm on solar and cover the roof of your house/commercial building with panels, you'll have to import them which negatively affects our balance of trade - even if you want to buy an American brand like AM.
I personally don't have a manufacturing fetish, but a lot of people are deeply worried about the comparative advantage in cheap labor that exists in China and neighboring countries, because not so long ago you could make a good living and provide for your family with a skilled labor job in an American factory, and many of those jobs have evaporated or been devalued as manufacturing has been exported.
There is not as much money in service work and IP creation doesn't involve as many people as manufacturing, so there's a lot of quite skilled and hard-working people who are unable to get decent and dignified work. A young or single person can easily contemplate relocating to an area of greater economic activity, but if you're middle-aged and have a family that may not be a practical option. This is reason there are so many crappy little web development and design companies out there, people who saw the change coming in time have tried to switch towards digital manufacturing with varying degrees of success. But many feel there's a lot less money in digital development than in physical manufacturing - after all, physical manufacturing doesn't employ just factory works, but machinists, construction workers, truckers, truck builders and so on.
Think of it like the dustbowl agricultural failure that led to mass migration during the great depression, but with factories instead of farms. If employment doesn't recover within the next 12 months, there will be a great deal of pressure after the 2010 elections for punitive tariffs on imports a la Smoot-Hawley, which will include computer equipment since most of it is manufactured in Asia. Outsourcing will continue apace, not least because it's currently absurdly cheap to ship the stuff from there to here, exacerbating the problem.
Outsourcing manufacturing has been very good for consumers and I feel that evolving towards a more globalized economy is a Good Thing, but while large wage differentials persist it's very destructive of small-scale wealth that depended on wages from local manufacturing. Most people are not, and don't want to be, entrepreneurs, and are angry because they invested a lot of hard work in building up their family's capital only to see their 'business model' (work hard, get paid) shredded.
Importing solar panels from China is not even remotely similar to importing oil from the Middle East. If we derived our energy primarily from solar power, we wouldn't need a constant stream of solar panels to keep doing it, the way we need a constant stream of oil now. Also, since the company that makes the machines that makes solar panels, we could easily start producing them for ourselves if China suddenly decided to increase the price the way OPEC has the power to do with oil.
Quite true, buying solar panels is a capital spend rather than an operating cost. But if a trade war broke out, it would take a year or two to build the physical manufacturing facilities here, and we'd be at a competitive disadvanatage until that is done.
If you think of trade economic warfare - and a great many people do, whether we agree or not - then physical goods are the ammunition. We do not fully understand a software-based economy yet, and for the foreseeable future software still has to run on a physical substrate, most of which takes place overseas.
Suppose, just for example, we had a trade war with China and began levying punitive tariffs. China responds by, say, telling the companies that currently manufacture iPhone hardware to stop supplying Apple and start building a 4g version for the Chinese market. The government there has the economic and political heft to do that. It would not be a rational decision, but remember that rationality in war = predictability and thus defeatability. Surprise is a key strategic element.
Well, where would Apple be if their suppliers suddenly cut them off? Sure, they could take their designs to manufacturers in other countries, even in the US. But it would probably take a year to ramp up production with sufficient quality control. What do you think would happen to their stock price?
This is just silly. The problem with columnists/pundits who argue for investing in xyz "because we're falling behind" particularly where it relates to immature technologies is that governments have a notoriously bad track record at playing/picking favorites that ultimately win out.
Taking this column specifically, what if it turns out that natural gas is far cheaper and far more abundant than solar - at least in the mid and near term? (after you factor in recent shale gas discoveries, it is). Why not instead develop technologies through companies that enable solar like Applied Materials and in the meantime buy subsidized panels from other countries if that's your cup of tea?
I should note that many of us here are also aware and even aim to replace longstanding competitors who are larger, often better capitalized and are certainly more entrenched with technologies that are cheaper, without the legacy overhead costs and are more agile. Why shouldn't this happen in solar/energy?
In solar in particular, look at thin film solar firms like Nanosolar - http://www.treehugger.com/files/2009/09/nanosolar-solar-powe... - yes, one of their robotic plant may be in Germany, but it is a US developed technology that may end up being far cheaper than traditional solar panels. If anything, American firms have shown when the incentive exists, they can play catch up and they can do it quickly and generally better as US dominance across an array of industries shows (disclosure: I'm a Canadian).
I don't understand why Friedman would prefer to produce solar panels in America than ship them from China. Trading between nations makes sense for the same reason trading between individuals makes sense: specialization is efficient, leading everyone to greater wealth.
He mentions that China will have a great export platform in renewable energy technology as the world adds 2.5 billion more people. So he's anticipating future demand. It seems to me that that is useful information for entrepreneurs, but it's nothing that demands government action. If entrepreneurs decide it would be profitable to supply that impending demand, then they will. If the government has to subsidize to make that happen, then maybe it shouldn't happen.
Just because there will be future demand for something doesn't mean we need government action to supply it. I'm sure those billions of people will want pants and meat and toothbrushes too, but there's no particular reason why America has to be the place to produce those. Just let people produce whatever they decide is most profitable for them to produce, and we're likely to get a more efficient outcome than one decided by central planning.
I think solar energy is great. If we want it, all we have to do is worry about the demand side, not the supply side. That is, consumers and governments should buy the best, cheapest solar panels available. I don't think it matters where the production, or the R&D, happens.
He suggests that trading solar panels with China might be similar to trading oil with Saudi Arabia. I don't understand why. Trading with Saudi Arabia is considered a problem because the money is thought to fuel terrorism. China doesn't have the nicest foreign policy on the planet, but I'd love to make them more rich, not less, because they seem to be becoming more peaceful as they grow richer. And if China ever starts funding terrorism, it is much easier to set up new solar panel factories than it is to set up new oil fields.
China doesn't have the nicest foreign policy on the planet
The Chinese policy of non-interference in foreign affairs has shocked people who look at Chinese relationships with N. Korea and Burma. However, I personally feel that Chinese foreign policy is no worse than that of Britain, France or America.
"If we want to launch a solar industry here, big-time, we need to offer the kind of long-term certainty that Germany does..."
The problem here is that there are no long-term certainties in a free-market economy. Providing energy is a competitive business and if solar energy is to grow it has to be a better choice for the consumer economically than the current alternatives at the true unsubsidized cost.
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[ 2.8 ms ] story [ 37.8 ms ] threadSadly, it is not a no-brainer good deal for the tax payer who ultimately pays for it. It is all well to have the biggest solar power industry, but what if it is all just virtual and breaks down once the subsidies stop?
It's how America doesn't produce anything anymore.
The USA is "Consumers 1.0" but 2.0 is taking over elsewhere.
The next leap in solar might not even be invented in the USA, it certainly won't be produced here.
This article is about an American company that produces equipment that makes solar panels and microchips.
I personally don't have a manufacturing fetish, but a lot of people are deeply worried about the comparative advantage in cheap labor that exists in China and neighboring countries, because not so long ago you could make a good living and provide for your family with a skilled labor job in an American factory, and many of those jobs have evaporated or been devalued as manufacturing has been exported.
There is not as much money in service work and IP creation doesn't involve as many people as manufacturing, so there's a lot of quite skilled and hard-working people who are unable to get decent and dignified work. A young or single person can easily contemplate relocating to an area of greater economic activity, but if you're middle-aged and have a family that may not be a practical option. This is reason there are so many crappy little web development and design companies out there, people who saw the change coming in time have tried to switch towards digital manufacturing with varying degrees of success. But many feel there's a lot less money in digital development than in physical manufacturing - after all, physical manufacturing doesn't employ just factory works, but machinists, construction workers, truckers, truck builders and so on.
Think of it like the dustbowl agricultural failure that led to mass migration during the great depression, but with factories instead of farms. If employment doesn't recover within the next 12 months, there will be a great deal of pressure after the 2010 elections for punitive tariffs on imports a la Smoot-Hawley, which will include computer equipment since most of it is manufactured in Asia. Outsourcing will continue apace, not least because it's currently absurdly cheap to ship the stuff from there to here, exacerbating the problem.
Outsourcing manufacturing has been very good for consumers and I feel that evolving towards a more globalized economy is a Good Thing, but while large wage differentials persist it's very destructive of small-scale wealth that depended on wages from local manufacturing. Most people are not, and don't want to be, entrepreneurs, and are angry because they invested a lot of hard work in building up their family's capital only to see their 'business model' (work hard, get paid) shredded.
??? Don't you just have to be where the sun is?
If you think of trade economic warfare - and a great many people do, whether we agree or not - then physical goods are the ammunition. We do not fully understand a software-based economy yet, and for the foreseeable future software still has to run on a physical substrate, most of which takes place overseas.
Suppose, just for example, we had a trade war with China and began levying punitive tariffs. China responds by, say, telling the companies that currently manufacture iPhone hardware to stop supplying Apple and start building a 4g version for the Chinese market. The government there has the economic and political heft to do that. It would not be a rational decision, but remember that rationality in war = predictability and thus defeatability. Surprise is a key strategic element.
Well, where would Apple be if their suppliers suddenly cut them off? Sure, they could take their designs to manufacturers in other countries, even in the US. But it would probably take a year to ramp up production with sufficient quality control. What do you think would happen to their stock price?
Taking this column specifically, what if it turns out that natural gas is far cheaper and far more abundant than solar - at least in the mid and near term? (after you factor in recent shale gas discoveries, it is). Why not instead develop technologies through companies that enable solar like Applied Materials and in the meantime buy subsidized panels from other countries if that's your cup of tea?
I should note that many of us here are also aware and even aim to replace longstanding competitors who are larger, often better capitalized and are certainly more entrenched with technologies that are cheaper, without the legacy overhead costs and are more agile. Why shouldn't this happen in solar/energy?
In solar in particular, look at thin film solar firms like Nanosolar - http://www.treehugger.com/files/2009/09/nanosolar-solar-powe... - yes, one of their robotic plant may be in Germany, but it is a US developed technology that may end up being far cheaper than traditional solar panels. If anything, American firms have shown when the incentive exists, they can play catch up and they can do it quickly and generally better as US dominance across an array of industries shows (disclosure: I'm a Canadian).
This, incidentally is what can happen when the subsidies go away: http://online.wsj.com/article/SB125193815050081615.html
He mentions that China will have a great export platform in renewable energy technology as the world adds 2.5 billion more people. So he's anticipating future demand. It seems to me that that is useful information for entrepreneurs, but it's nothing that demands government action. If entrepreneurs decide it would be profitable to supply that impending demand, then they will. If the government has to subsidize to make that happen, then maybe it shouldn't happen.
Just because there will be future demand for something doesn't mean we need government action to supply it. I'm sure those billions of people will want pants and meat and toothbrushes too, but there's no particular reason why America has to be the place to produce those. Just let people produce whatever they decide is most profitable for them to produce, and we're likely to get a more efficient outcome than one decided by central planning.
I think solar energy is great. If we want it, all we have to do is worry about the demand side, not the supply side. That is, consumers and governments should buy the best, cheapest solar panels available. I don't think it matters where the production, or the R&D, happens.
He suggests that trading solar panels with China might be similar to trading oil with Saudi Arabia. I don't understand why. Trading with Saudi Arabia is considered a problem because the money is thought to fuel terrorism. China doesn't have the nicest foreign policy on the planet, but I'd love to make them more rich, not less, because they seem to be becoming more peaceful as they grow richer. And if China ever starts funding terrorism, it is much easier to set up new solar panel factories than it is to set up new oil fields.
The Chinese policy of non-interference in foreign affairs has shocked people who look at Chinese relationships with N. Korea and Burma. However, I personally feel that Chinese foreign policy is no worse than that of Britain, France or America.
The problem here is that there are no long-term certainties in a free-market economy. Providing energy is a competitive business and if solar energy is to grow it has to be a better choice for the consumer economically than the current alternatives at the true unsubsidized cost.