Thursday, June 5, 2008

Environmentalists make sure solar technology will never see the light of day

EcoGeek has an article up which summarizes the findings of a Prometheus Institute report, and the conclusion is that solar panels will plummet in cost due to coming oversupplies of silicon, which is currently in short supply. However, the article turns bizarre when the authors insert this editorial comment in the last paragraph:

It may also, though this is probably wishful thinking, push governments to start offering more incentives to those who install solar in a bid to use up the remaining capacity and financially support their manufacturers who by this point will be a very large industry, employing tens of thousands of people.

First of all, one of the benefits of falling prices is precisely the opposite of what the author wants to happen: solar panels might become competitive without the need for subsidies, which would free them from the vagaries of politics. It would blunt any criticism of green technology as government waste, since government would no longer be propping it up. But, to add insult to injury, the cure that they prescribe seems worse than the disease: by propping up the sector, the government would remove the incentives to innovate, and increase the jockeying among solar panel companies for public funds. It could possibly be one of the worst things that the government could do to an infant industry – distort the price mechanism and incentives faced, and ensure that the industry will forever be dependent on the whims of those who hold the pursestrings in Washington. And the "labor-friendly" overtones of supporting industries that create jobs smacks of the techniques that the manufacturing and auto unions used to ensure their own demise, or the increasingly perverse farm subsidies to support a way of life that's long gone despite the money lavished on farmers.

4 comments:

Anonymous said...
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Anonymous said...

Early adapters to most technologies are incented by subsidies - that is: California today uses tax writeoffs to install solar. The benefit is that word gets out, bugs get worked out, etc.

Nonetheless, you are conflating environmentalists with the government when discussing what the author wrote.

You may also want to reflect on the difference between what the guy wrote and what your headline says - namely that he thought it would likely never happen, yet your headline makes it sound as if the policy was enacted and the details of the policy already killed innovation.

Sloppy at best.

DS

Stephen said...

The headline is accurate in that environmentalists have already enacted subsidies for alternative energy – the builder of America's largest wind farm admitted that the project would not be viable without subsidies. And, like you said, California already has write-offs (read: subsidies) for solar installations. Maybe there's a bit of hyperbole in the title, but I think you're nitpicking.

As for the infant industry argument, we could go back and forth on that all day, but what's the point when others have already beaten that subject to death? That's why I linked to a standard econ textbook treatment of the subject – so you can go there and read the arguments for and against subsidizing infant industries and make your own judgment.

Anonymous said...

I didn't take IntEcon at Uni, but these diagrams are familiar from my macro coursework.

Confounding factors to your assertions being valid are numerous, and in order for your assertions to be valid, other energy industry incentives, subsidies, and protection must be removed as well.

As much as I'd like to do that (esp pulling our folks out of the MidEast), it's not going to happen.

So there's unfair competition NOW in the energy industry. As its likely that clean power is a social and ecological good (I'm not convinced that green industry will create new jobs [rather shift existing ones]), and in light of unfair competition, I fail to see why early-adapter incentivization is invalid in today's world. I would like to see a sunset provision, keyed to, say, market penetration or some other metric other than a date certain.

This should not be seen as antagonistic. I like your style and so we disagree on some things, but at least our disagreements make me think.

DS