January 25, 2011
China's President Hu has left the country. And some would argue that he has taken American jobs with him.
The question then is how to develop the policies to build out this country's manufacturing base and especially the one centered on renewable energy. Activists and their supporters in Congress say that more government involvement is necessary, which includes not just favorable environmental laws but also lucrative tax breaks. Not so, say free marketers, who maintain that that the United States should help fund research and development but that international markets will determine where such products are made.
"As long as solar panels are getting cheaper, we shouldn't worry about where they are being produced," writes Edward Glaeser, an economics professor at Harvard, in the New York Times. "We should continue financing research ... but we shouldn't pretend that cheaper solar energy will end up employing millions of our less-skilled citizens."
Glaeser's thoughts are in response to the decision by Massachusetts-based Evergreen Solar to close its plants in that state and to lay off 800 workers there. Those jobs will go China - a move that the company says it needs to make to stay "liquid." China, it says, subsidizes its green energy manufacturers that will help offset Evergreen's production costs. Moreover, the cost of Chinese labor is considerably cheaper than here. At the same time, the Asian giant loaned the company $33 million to make the move.
The statement may be completely honest but it flies in the face of what Massachusetts and the National Renewable Energy Laboratory has tried to do. Evergreen's plant there has received about $23 million in state grants. The contention that Professor Glaeser is making that there is nothing wrong with clean energy. But government's effort to grow such businesses often fails.
The reality, he says, is that the "ideas" are American bred. But the production processes whereby those dreams become real are cheaper in China: First Solar is a major vendor here that puts the nuts and bolts together in China. And then there's Solyndra, which is a solar maker that received a $535 million loan guarantee only to close a domestic plant.
As for Evergreen, the country's third largest solar producer: It says that falling solar panel prices panels -- 30 percent since 2008 -- have eroded its profits. To prosper, it says that it must cut costs, necessitating the closure of its Massachusetts plant this quarter.
"Solar manufacturers in China have received considerable government and financial support and, together with their low manufacturing costs, have become price leaders within the industry," says Michael El-Hillow, chief executive of Evergreen. "While the United States and other western industrial economies are beneficiaries of rapidly declining installation costs of solar energy, we expect the United States will continue to be at a disadvantage from a manufacturing standpoint."
Production Costs
While global production costs for clean technologies are falling because of economies of scale, there's no disagreement that labor costs are cheaper in China. What then is government's proper role in fostering promising new industries?
Part of President Obama's economic message is that the development of green energy would not only create new enterprises, it would help lift the country. His theme has been punctuated by the U.S. Energy Information Administration, which says the development of alternative fuel forms would escalate with renewed tax breaks.
To that end, solar credits will be prolonged until 2016, which is something the industry says will create 440,000 new jobs and inspire $230 billion in investments. The breaks given for certain efficiency upgrades have also been extended while wind developers will receive a one-year production tax credit extension that is now valued at 2 cents per kilowatt-hour of electricity produced.
Advocates of such government incentives also tout them because they generate jobs and all at a time when the global community is wrestling not just with economic troubles but also with a way reduce fossil fuel usage. According to the Worldwatch Institute, the renewables sector now employs globally about 2.3 million people.
With more progressive leadership across the world, the institute says that green jobs could expand by the millions in the decades to come. Its best case scenario projects global wind power employment to increase to as much as 2.1 million in 2030 while solar photovoltaic job creation would generate as many as 6.3 million new jobs by 2030.
A similar study sponsored by the United Nations' Environment Program pegs job growth in all renewable energy fields to be 20 million over several decades. It says such an expansion would be predicated on an aggressive, global approach to curbing greenhouse gas emissions. That would involve both a massive shift from fossil fuels to cleaner forms of generation as well as to cleaner burning forms of transportation fuel.
"Government officials now have yet another reason to put the full weight of their support behind renewables," says Michael Renner, senior researcher for Worldwatch. "In addition to protecting our planet and phasing out an increasingly limited resource, policies that support renewable energy also support job creation."
But where will those jobs be created? The United States can't stop the migration of industries to China if they find it cheaper to build there. But it can contribute to the development of the technologies that will be sold all around the world. That innovation spawns opportunities and positions countries to prosper accordingly.
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Ken Silverstein
EnergyBiz Insider
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