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.