Fredric Bastiat Comes to Mind As Solar Makers Seek Bailouts

Fredric Bastiat Comes to Mind As Solar Makers Seek Bailouts
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The 19th-century French economist Frédéric Bastiat demonstrated the folly of dirigisme economics through a fictional tale in which candle makers lobbied government to block out the sun because its natural light was hurting their sales. But suddenly the satire doesn’t seem so funny anymore. A couple of solar panel manufacturers have petitioned for duties that would dramatically increase the cost of solar panels and cells in the United States, a move that threatens to block out sunlight as a source of power for millions of Americans – and trigger a global trade war.

While it has been said that nothing succeeds like success, the growing demand for solar energy has led to failure for some panel and cell manufacturing firms that have been unable to compete at declining prices. But consumers have benefited. As the price of panels and cells has gone down over the past few years – about 60 percent since 2012 according to some estimates – the amount of solar generation in the United States has gone up. Between 2014 and 2016, generation from small-scale solar projects nearly doubled. It increased 72 percent from utility-scale installations between 2010 and 2016. That results from improved technologies, which drive down a good’s price and increases access to consumers. In Bastiat’s time, for example, the cost of candle-making declined dramatically with improved technology and manufacturing, allowing candles – once a prerogative of the rich – to become an affordable commodity for the masses.

Similarly, solar has been growing into a mass market. But even as dropping prices benefit millions of consumers, they threaten the profits of some manufacturers. Just as Woody Allen once observed there are no atheists during final exams, there seem to be no free traders at a failing company. Sunviva, a manufacturer of solar cells and modules that filed for restructuring two months ago after losing $50 million over two years, has petitioned the International Trade Commission for government intervention. But relief for the Atlanta-based manufacturer would come at a steep cost to the rest of the industry and to consumers, including utilities. Under a little-used section of the trade law that allows imposition of global duties rather than actions against a specific country, the company is seeking a price floor of 78 cents a watt for imported solar panels and import duties of 40 cents a watt on solar cells, which currently go for 25 to 33 cents a watt. The impact on utility-scale developers would be enormous, driving up solar module prices in the U.S. market almost 50 percent, according to solar analysts with GTM Research. The impact on consumers would be costly. Duties would cause Americans to pay more for solar power than any country in the world.

If the ITC approves the petition, it would be up to President Trump to decide on proposed duties. The ITC and the President should think twice before they go head with such a move. Using the same section of the trade law, President George W. Bush reacted to competitive problems in the U.S. steel industry in 2002 by imposing tariffs, which he lifted ahead of schedule in 2003. A study concluded that higher steel prices cost the United States 200,000 jobs – more than 6 times as many as the steel industry claimed the tariffs saved. Many small machine-tool and metal stamping shops were decimated by steel costs that rose as much as 30 percent.

It is hard to see whom such a move would help in the solar industry. Domestic panel and cell manufacturers think they might find it easier to compete in a high-duty environment, but they would be trying to do that in a declining market. And the first casualties of such a move would be other sectors of the solar energy industry, threatening companies and employees that focus on installation, sales and technical support. Solar cell and panel manufacturers employ only a couple of thousand Americans. Sunviva alleges that 1200 jobs are at stake. But the overall solar industry employs over a quarter-million people across the United States.

Moreover, casualties would obviously include consumers of solar power, both corporate and individual. Look at it this way: If government implemented a sales tax on consumers of solar power, the outcry – from environmentalists and power users – would be enormous. For all intents and purposes, that is exactly what is being proposed – duties that would drive up the cost to both secondary businesses and end users. Which raises an interesting question: Why are we not seeing many protests from environmentalists against the threat of higher costs for a leading renewable? Environmental organizations were leading supporters of federal tax credits that make solar equipment more affordable. But the dampening effect of high duties on solar take-up would be much greater than the stimulus the tax credits provide. The more you tax something, the less you get of it. An import tax on solar modules and cells would result in fewer people using them – and using non-renewable forms of energy instead.

The goal of technological development is to make new technologies more widely available. Lower prices have always achieved that – from mass production of candles through solar energy. The last thing we should do is erect walls and barriers that would drive prices up – and drag consumers down.

Allan Golombek is a Senior Director at the White House Writers Group. 

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