It’s Not Easy Subsidizing Green
By: Jarrett Skorup
The bankruptcy of â€œgreen jobsâ€ darling Solyndra is still in the news because it could cost U.S. taxpayers $535 million due to a federal â€œstimulusâ€ program loan guarantee. The Silicon Valley solar-panel makerâ€™s failure comes on the heels of another â€œgreenâ€ corporate-welfare beneficiary going under, Evergreen Solar. These deals were big losers for Americans.
Both businesses reject claims that company management or the current market for â€œgreenâ€ energy products were the cause of their failure. Instead, company officials cite intense competition from lower-cost Chinese manufacturers: â€œThe solar power market is intensely competitive and rapidly evolving,â€ wrote Evergreen Solarâ€™s chief executive officer, Michael El-Hillow. â€œIn particular, solar manufacturers in China continue to receive considerable government and financial support and, together with Chinaâ€™s low manufacturing costs, have become price leaders within the industry.â€
â€œPrices of silicon came down as the Chinese volume increased; they were able to get to very low costs and become competitive,â€ said former Solyndra CEO Brian Harrison.
U.S. Department of Energy Department officials are promoting the same party line, saying that â€œless expensive solar panels made by government-subsidized companies in China undercut Solyndraâ€™s products.â€
“Chinese companies have flooded the market with inexpensive panels, and Europeâ€”currently the largest customer base for solar panelsâ€”has suffered from an economic crisis that has significantly reduced demand and forced cuts in subsidies for solar deployment that were important to Solyndra’s business model,” said Jonathan Silver, who heads the Department of Energy’s loan-guarantee program, to the House Energy and Commerce Committee.
Proponents of costly government â€œgreen jobsâ€ subsidiesâ€”without which these firms would probably never have existed on such a scaleâ€”claim that select â€œcleanâ€ energy (wind, hydro and solar but not nuclear or natural gas) is the wave of the future, and worth risking taxpayer dollars to support.
If that is so, why wouldnâ€™t they welcome lower-cost Chinese versions of these products, which presumably would bring about our economyâ€™s transition from â€œevilâ€ fossil fuels even more rapidly? Or at the very least, let the Chinese government, instead of American taxpayers, take the hits for allocating capital through politics rather than market realities.
Those favoring these energy subsidies may disagree, believing that sending taxpayer money to politically connected companies is actually a â€œjobs creator.â€ Disregarding the mountains of evidence that government is notoriously bad at picking economic winners, just looking at these two solar companies should show that this is a bad argument: The companies combined to employ about 1,500 people at the time of their bankruptcies (a few hundred for Evergreen Solar and 1,100 for Solyndra). On top of the federal funds, Evergreen Solar received $58.6 million from the state of Massachusetts and millions more from Michigan sources, while Solyndra got $535 million in federal aid and more from California. This is, in the words of my colleague Michael LaFaive, an expensive game creating the illusion of jobs.
State and federal governments should stop using selective economics and get out of this game altogether.
â€” Jarrett Skorup is a 2009 graduate of Grove City College and former student fellow at The Center for Vision & Values. He is the research associate for online engagement for Michigan Capitol Confidential at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Centers are properly cited. Mr. Skorup can be reached at Skorup@mackinac.org.