Worried about China gaining a competitive edge in the green-energy market? Don’t be.

posted at 3:21 pm on October 5, 2012 by Erika Johnsen

News flash: Compared to free enterprise, central planning is a reliably inefficient, costly, and ill-fated way to allocate resources.

Just kidding, totally not a news flash. It’s just good ol’ fashioned common sense — leastaways, you’d think it would be common sense, given that historical examples abound, except that President Obama doesn’t quite seem to get it. Whenever he goes into touting-his-green-energy-”investments” mode, he is constantly suggesting that not only is China gaining an advantage over us in the clean-energy market of the future (how he presumes to know that ‘wind and solar are the future’ is still a mystery to me, seeing as how consumers have yet to voluntarily cotton on to these technologies), but that we should follow suit and adopt some of the same central-planning measures China does in order to keep up with their supposedly burgeoning market — and it’s akin to the deaf willfully following the blind. Via the NYT:

China in recent years established global dominance in renewable energy, its solar panel and wind turbine factories forcing many foreign rivals out of business and its policy makers hailed by environmentalists around the world as visionaries.

But now China’s strategy is in disarray. Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.

The result is a looming financial disaster, not only for manufacturers but for state-owned banks that financed factories with approximately $18 billion in low-rate loans and for municipal and provincial governments that provided loan guarantees and sold manufacturers valuable land at deeply discounted prices.

China’s biggest solar panel makers are suffering losses of up to $1 for every $3 of sales this year, as panel prices have fallen by three-fourths since 2008. Even though the cost of solar power has fallen, it still remains triple the price of coal-generated power in China, requiring substantial subsidies through a tax imposed on industrial users of electricity to cover the higher cost of renewable energy.

Nutshell version: The Chinese government provided subsidies and other incentives that messed with market signals, creating a massive oversupply that means China’s green-energy market is in a whole heap of financial trouble. And President Obama’s grand scheme for catching up to China’s artificially jacked up green-energy market is to… follow up with more of the exact same central-planning crapola? Well, doesn’t that sound awesome.

I am most definitely worried about America’s green-energy market in and of itself, but not because of competition from China (and even if they were winning the green-energy race, so what? It’s called free trade). With the Obama administration encouraging rent-seeking and diverting resources into the technologies that they’ve deemed to be future winners (which must, by definition, be actual losers, since the private market isn’t choosing to do much investing in them of their own free profit-seeking will), I’m worried that other technological and investment opportunities that could actually be economically viable may be falling by the wayside while we’re off an wild green goose chase. I’m worried that we’re quixotically killing off energy-market innovation through our own political hubris, the results of which we can already see magnified in China’s policy decisions.


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It’s not possible to get an edge in an industry that cannot provide large quantities of of a useful product or service.

“Green” energy is nothing more than an expensive fad. At best it’s a “feel good” purchase for guilt ridden rich white liberals. They’ll buy a few kilowatt hours and pat themselves on the back for being environmentally conscious but that’s as far as wind and solar have the ability to go.

Alberta_Patriot on October 5, 2012 at 3:26 PM

Milton Friedman Pencil Story

John the Libertarian on October 5, 2012 at 3:28 PM

They’re gaining an edge in Afghanistan, very cleverly, due to Obama’s ineptness or intentional abdication.

Schadenfreude on October 5, 2012 at 3:30 PM

President Downgrade.

rbj on October 5, 2012 at 3:33 PM

Sorry Erika, but inherent in your remarks is the underlying premise that is ANY of the FedGov’s business to be picking and choosing, even as you cite ‘free market’ forces. Cognitive dissonance.
THe thing to worry about is EVERY solar front company that the Obama Administration has financed with OUR tax money has been owned / operated by major Obama campaign financiers. A thousand-fold kickback for their donations. Which in turned will be skimmed and kicked back to the Obamunists again. Massive money laundering, right out in the open and few dare call it so or are even aware of it (see recent survey of most folks not knowing wth ‘Solyndra’ even is / represents)
The issue isn’t or should not be ‘green energy’. It should be illiberal eco-marxist fraud.

rayra on October 5, 2012 at 3:33 PM

and even if they were winning the green-energy race, so what? It’s called free trade)

If China is providing massive subsidies and low-interest loans to push green energy development, is that still free trade?

hawksruleva on October 5, 2012 at 3:33 PM

And the only real / necessary usage of solar power is people living in remote areas / off the grid, or those with critical life or death electrical power needs who can plainly see where our national power grid is heading as the Obamunists / EPA marxists relentlessly drive fossil fuel power generation capacity offline. And do so withOUT a concomitant increase in nuclear energy. Even as they try to coerce everyone into driving short-range electric vehicles. Which are ALSO a grossly-inefficient counter-ecological scam.

rayra on October 5, 2012 at 3:36 PM

What I find amazing is china makes this ‘green energy’ krap with coal used as fuel and it puts tons of those nasty carbons in the air? Yet, china and other countries don’t have to have the epa/un mandates after them at every front like we do here?
L

letget on October 5, 2012 at 3:36 PM

China’s biggest solar panel makers are suffering losses of up to $1 for every $3 of sales this year

…JugEars experience…is for business to lose $2.99 for every $3.00 of sales…so he’ll send all his people to China to learn how they can do it so much better?!

KOOLAID2 on October 5, 2012 at 3:37 PM

If only we could be China for a day? – Tom Friedman

jnelchef on October 5, 2012 at 3:37 PM

Whenever he goes into touting-his-green-energy-”investments” mode

I would love to see Romney say something about government “investing” in the next debate. He touched on it in Wednesday’s debate, pointing out that 0bama only picks losers. But when Zero starts bragging about his “investments” in education, energy, etc, Romney needs to remind him that the whole point of investing is to see a return, so if the government did it the right way, then why are we $16 trillion in the hole?

UltimateBob on October 5, 2012 at 3:39 PM

If China is providing massive subsidies and low-interest loans to push green energy development, is that still free trade?

hawksruleva on October 5, 2012 at 3:33 PM

Its better, first they waste their resources, can sell it to us for less than cost, and we do not have to waste our money.

astonerii on October 5, 2012 at 3:40 PM

With stated evidence of significant overcapacity, drastic price downs ( even by PRC standards ) and dwindling demand, WHY ON EARTH IS THERE ANY TALK OF ENTERING THE MARKET.

It is GONE

Jabberwock on October 5, 2012 at 3:40 PM

19 cents / KW hour for solar? I’m paying about 10 cents from the power company. Closing in. Obviously there is the whole ‘nighttime’ thing…

tlynch001 on October 5, 2012 at 3:41 PM

…JugEars experience…is for business to lose $2.99 for every $3.00 of sales…so he’ll send all his people to China to learn how they can do it so much better?!

KOOLAID2 on October 5, 2012 at 3:37 PM

YA – but, hey, they make it up on volume…/ (and gubmint subsidies)

dentarthurdent on October 5, 2012 at 3:42 PM

Green energy, for these filthy Commies, is grinding up Gulag bodies and using them for fertilizer.

They’re no better than any other Commies, who’ve infected the earth.

Communism is an infection – and the Oval Office is infected.

OhEssYouCowboys on October 5, 2012 at 3:43 PM

astonerii on October 5, 2012 at 3:40 PM

Ding, ding, ding, ding, ding!

TexAz on October 5, 2012 at 3:46 PM

Ding, ding, ding, ding, ding!

TexAz on October 5, 2012 at 3:46 PM

China is already one of the lowest costs places to get things physical made. If the government of China has to subsidize it and it still makes no sense. It cannot make sense anywhere else.

astonerii on October 5, 2012 at 3:48 PM

American’s crave Chinese rice grown in you-know-what. We’ll give them a trade agreement to join the party.

Limerick on October 5, 2012 at 3:49 PM

I know Romney said he “likes green energy,” but green energy, and that is mainly wind and solar, heavily subsidized, makes no sense from either an economic or an energy perspective.

On wind in particular, a recent Master Resource comment of mine: I often hear that “someday” green energy and wind will be economically viable, so we should subsidize it now. No, when someday comes, then go ahead and produce your windmills. Actually, don’t. It is a hazard to the birds. No joke. It’s killing birds by the thousands, including the bald eagle. Stop it.

anotherJoe on October 5, 2012 at 3:52 PM

anotherJoe on October 5, 2012 at 3:52 PM

There is a difference between ‘liking’ warp drive and having one. Let the boys make one and Mitt will talk.

Limerick on October 5, 2012 at 3:56 PM

Alberta_Patriot on October 5, 2012 at 3:26 PM

They are buying a few kilowatt hours of electricity at an inflated price. It may come from “renewables” but probably from the local gas or coal fired plant. They feel good because they think they are doing something of value. Pity the fools.

chemman on October 5, 2012 at 3:58 PM

Oil, natural gas, and coal. Everything else is a waste of time and money.

nazo311 on October 5, 2012 at 3:59 PM

Worried about China gaining a competitive edge in the green-energy market? Don’t be.

Trust me, I wasn’t worried.

But then you knew that anyway, Erika.

Bitter Clinger on October 5, 2012 at 4:00 PM

This is a great article on alternative energy from IEEE Spectrum, and why we should not expect it to take off in the near (or even medium-term) future.

thirteen28 on October 5, 2012 at 4:01 PM

chemman on October 5, 2012 at 3:58 PM

This!

It is an exchange. Like trading $ for Euros for Yuan. The magic is accomplished with a calculator when you flip the switch. You get the power, the bucks go to whoever.

Limerick on October 5, 2012 at 4:01 PM

rayra on October 5, 2012 at 3:36 PM

Exactly. I live off grid and it made sense in the rural area I’m in. It would have cost me twice as much to bring grid power in and then I’d have a monthly bill. If people want solar/wind let them do a CBA and pay for it if it is cost effective for them. The government needs to butt out big time.

chemman on October 5, 2012 at 4:03 PM

LED lighting also in big trouble in China.UKE JOHNSON explains how a commoditization approach to high-quality LEDs for solid-state lighting has failed in China.

Advances continue but those rosy projections of cheap LED lighting may not happen.

Steveangell on October 5, 2012 at 4:04 PM

Well, that’s not going to stop the Failure-in-chief from blowing every penny he can get his grimy little hands on to give to his cronies in the Green Energy field for the sake of? Fill in your own blank on that one!
Final Update for those following:How to take on the Obama Enemy media: http://paratisiusa.blogspot.com/2012/09/an-open-letter-to-those-who-should-know.html?spref=tw

God Bless America!

paratisi on October 5, 2012 at 4:05 PM

Limerick on October 5, 2012 at 4:01 PM

I stopped at a rural gas station in Arizona. The pumps said the station was completely powered by green energy. I looked around for the wind generator and solar panels. None to be seen. If there had been another gas station close by I would have left. This owner was foolish in that he was being parted from his money faster just so he could feel better.

chemman on October 5, 2012 at 4:08 PM

China is already one of the lowest costs places to get things physical made. If the government of China has to subsidize it and it still makes no sense. It cannot make sense anywhere else.

astonerii on October 5, 2012 at 3:48 PM

Of course – no EPA, no NLRB, and no labor unions.
And we could compete better if we got rid of those things too.
I’m sure bayam will be here any minute to defend all those impediments to our economy though….

dentarthurdent on October 5, 2012 at 4:10 PM

News flash: Compared to free enterprise, central planning is a reliably inefficient, costly, and ill-fated way to allocate resources.

Erika Johnsen

.
Nonsense. I heard the President say during the debate, that Social Security is much more efficiently run by the government than it would be by private (business).
.
( to me, that was the single most outrageous quote during the debate )

listens2glenn on October 5, 2012 at 4:15 PM

Eat sunshine, comrades.

Mason on October 5, 2012 at 4:40 PM

China’s biggest solar panel makers are suffering losses of up to $1 for every $3 of sales this year, as panel prices have fallen by three-fourths since 2008.

Maybe they can make it in volume.

AcidReflux on October 5, 2012 at 5:39 PM

Maybe they can make it in volume.

AcidReflux on October 5, 2012 at 5:39 PM

There you go, the Chevy Volt plan.

slickwillie2001 on October 5, 2012 at 6:27 PM

News flash: Compared to free enterprise, central planning is a reliably inefficient, costly, and ill-fated way to allocate resources.

Just kidding, totally not a news flash. It’s just good ol’ fashioned common sense — leastaways, you’d think it would be common sense, given that historical examples abound, except that President Obama doesn’t quite seem to get it. Whenever he goes into touting-his-green-energy-”investments” mode, he is constantly suggesting that not only is China gaining an advantage over us in the clean-energy market of the future (how he presumes to know that ‘wind and solar are the future’ is still a mystery to me, seeing as how consumers have yet to voluntarily cotton on to these technologies), but that we should follow suit and adopt some of the same central-planning measures China does in order to keep up with their supposedly burgeoning market — and it’s akin to the deaf willfully following the blind.

It’s not just “green energy”, it’s everything.

Obama, Friedman, Krugman, Sunstein, Wasserman-Schultz, whoever. In this crowd, all the usual suspects are positively obsessed with the People’s Republic of China. Specifically, with wanting to run the United States and probably the entire planet exactly like the PRC is run by the old men in the Forbidden City.

“Green energy” is just the latest excuse. And to be fair, they are running it just like the PRC; central planning, government administration, massive kickbacks, corruption, you name it. They call it “the Chicago Way”, but it was done that way in China long before Mao- in fact, long before the United States even existed. China, no matter what “philosophy” is supposedly followed by its leadership class, is a peasant-based, “hydraulic state” culture, and has perhaps the longest-lived, and most corrupt, bureaucracy on the face of the Earth.

Sorry, but the change to Communism was one of style, not of substance. All the Chinese peasants got for their efforts was the replacement of an imperialist ruling elite with expansionist ambitions and lousy fashion sense, by an even more imperialist elite with hyper-expansionist ambitions and even worse fashion sense.

The fact that China has been a bureaucratic and borderline psychotic kleptocracy for over 2000 years, and remained so through the transition from the Manchus to the Maoists, should tell us something.

So should the fact that The One and his cronies admire the corrupt, murderous b*****ds who run it.

clear ether

eon

eon on October 5, 2012 at 8:32 PM

Solar makes an alright supplemental power source but tying to make it a primary source is just not possible.

Dollayo on October 5, 2012 at 10:00 PM

That’s quite the sinophobic rant.

I guess you don’t realize that China was the most prosperous and developed country on earth for much of the last 2,000 years.

DarkCurrent on October 5, 2012 at 11:30 PM

^ comment @eon

DarkCurrent on October 5, 2012 at 11:32 PM

Let’s put people to work by letting them run around in wheels like hamsters to generate electricity. Talk about solving two problems at once.

Herb on October 6, 2012 at 1:07 PM

That’s quite the sinophobic rant.

I guess you don’t realize that China was the most prosperous and developed country on earth for much of the last 2,000 years.

DarkCurrent on October 5, 2012 at 11:30 PM

Not Sinophobic, dictator-disliking. There is a difference.

As for China, I probably know a bit more about it than most people, thanks to having read most of the available works on it by the likes of Joseph Needham, James Burke, Frederick W. Mote, et al.

What comes through in all of the history is that China’s bureaucracy stultifies individual initiative. Also, as fast as anything new has ever been conceived or invented, the government (imperial, communist, or the present kleptocracy that isn’t sure exactly what else it is) seizes it, “nationalizes” it, and tells the originator to shut up if he wants to keep his head.

This is how China, the nation that invented gunpowder, higher mathematics, contour transport canals, the waterwheel, the sidewheel for ship propulsion, the compass, mechanical clocks, rockets, much of basic medical knowledge (including being the first to recognize that blood circulates in the body, and why), double-entry bookkeeping, celestial navigation, cast iron, wrought iron, steel, and even deep drilling for oil and natural gas, has never progressed much beyond the Middle Ages as far as anyone but their leadership is concerned.

Innovation is worthless to the average person if those above them can take anything they want from that person and give nothing in return. This is a pattern characteristic of “absolute states”.

China has been such an absolute state throughout its history. No matter who is in charge. The reason is that it needed a vast bureaucracy from the outset, to manage irrigation (hence the term “hydraulic state”). Vast bureaucracies inevitably result in autocartic governments, and the social stagnation that comes from being in a state where, as Burke says, “there is no incentive to use one’s talents to rise in the world, because rising in the world is out of the question”. For two more examples of such states, check out ancient Egypt and Persia. Both of which helped give birth to the Islamic world as we know it today.

The resemblance between the lot in life of the average person in China and the Islamic world today is an inevitable result of cultures run on autocratic principles. The problem isn’t the country- it’s the principle.

clear ether

eon

eon on October 6, 2012 at 4:12 PM

Not Sinophobic, dictator-disliking. There is a difference.

Clearly sinophobic, hence the superfluous insulting remarks about fashion sense and ridiculous claims that China has hyper-expansionist ambitions. (Seriously? Let’s compare China’s record of expansionism with that of the West over the last few centuries, shall we?)

As for China, I probably know a bit more about it than most people, thanks to having read most of the available works on it by the likes of Joseph Needham, James Burke, Frederick W. Mote, et al.

Impressive indeed. Here I’ve had to glean most of what little I know from Chinese and Japanese sources, numerous visits over several decades and living here for the last 7 years.

What comes through in all of the history is that China’s bureaucracy stultifies individual initiative. Also, as fast as anything new has ever been conceived or invented, the government (imperial, communist, or the present kleptocracy that isn’t sure exactly what else it is) seizes it, “nationalizes” it, and tells the originator to shut up if he wants to keep his head.

This is how China, the nation that invented gunpowder, higher mathematics, contour transport canals, the waterwheel, the sidewheel for ship propulsion, the compass, mechanical clocks, rockets, much of basic medical knowledge (including being the first to recognize that blood circulates in the body, and why), double-entry bookkeeping, celestial navigation, cast iron, wrought iron, steel, and even deep drilling for oil and natural gas, has never progressed much beyond the Middle Ages as far as anyone but their leadership is concerned.

So how is it that Chinese managed to come up with all those innovations if in fact China’s bureaucracy always stifles innovation as you claim in the preceding paragraph? As for never having progressed much beyond the Middle Ages, see the link in my final comment below.

Innovation is worthless to the average person if those above them can take anything they want from that person and give nothing in return. This is a pattern characteristic of “absolute states”.

Yes, just as it’s been throughout most of Western history as well.

Vast bureaucracies inevitably result in autocartic governments, and the social stagnation that comes from being in a state where, as Burke says, “there is no incentive to use one’s talents to rise in the world, because rising in the world is out of the question”.

Really? No one in China today or the past ever had incentive to use their talents to rise in the world? The example of Mr. Yi Fan mentioned in the Forbes article linked below is just one of millions that demonstrate the absurdity of Burke’s assertion.

The resemblance between the lot in life of the average person in China and the Islamic world today is an inevitable result of cultures run on autocratic principles. The problem isn’t the country- it’s the principle.

clear ether

eon

eon on October 6, 2012 at 4:12 PM

China has had the fastest sustained growth of any major economy for the last few decades and has a rapidly expanding middle class. That doesn’t seem to be occurring in the Islamic world, does it?

DarkCurrent on October 7, 2012 at 12:19 AM