The recent failure of solar panel companies in the United States raises some serious questions about economic stability, energy sustainability and environmental sustainability both inside the country and in the world. Given the fact that solar power is not competitive versus conventional power sources at the moment, it is obvious that subsidies are needed if the future mix of energy production in the country is to have renewable sources like solar energy. And given the projections about the depletion of raw materials for many conventional energy sources and the adverse effects that these energy sources have on the environment, there should not be any doubt that a significant shift towards renewable sources is imperative. The recent failures of solar panel manufacturers should serve as an urgent reminder that drastic action is needed in this area.
A lot of the discussion in the media and in the political sphere have focused on possible corruption in the way funds were handed out to one company called Solyndra, and a lot of wrong arguments are emerging from the superficial analysis surrounding the issue. The subsidization of solar panel manufacturers is being demonized due to a corruption case. What may well be needed at this crucial juncture in the country's history is higher subsidies if it can save solar panel manufacturers from closing down. For things like solar panel manufacturing, technological considerations are likely to dominate over managerial efficiency considerations, at least in the short run, and real or false bugbears about the effect of subsidies on managerial ethos should not divert our attention away from the critical need to sustain a renewable energy industry and to enable higher levels of renewable power production in the coming years. As for the global picture, China is likely to pick up some of the manufacturing slack due to the failure of American companies. Also, since this industry is in its infancy, China can benefit a lot in the future if its companies grab larger market share now. However, the failure of US solar panel manufacturers will most probably have a negative impact on the future trajectory of global renewable energy production. After all, despite its short-term economic distress and despite its systemic problems, the United States still has significant amount of human resources and intellectual property in this area. To allow short-term profitability problems to hamper the development of this critical sector would be a serious mistake. However, it is a mistake that the political establishment seems to be only too willing to overlook. Allowing corruption considerations to become convoluted with the core economic considerations is a sign of naivete. In fact, what may be needed at this juncture is something beyond subsidies. Given how crucial renewable energy is likely to become, nationalization of some beleaguered solar panel companies should be considered seriously. And where will the money come from to cover the short-term losses of these companies while the management tries to improve the cost structure ? Cuts in useless defense spending is one answer. Let there be no doubt that a laissez-faire approach in such a crucial sector can prove disastrous in the long run. While importing panels from China is always an option, it is stupid to expect that China will be able to provide most of the solar energy needs of the United States or the world. After all, the Chinese economy has only so much human capital, so much intellectual property in the area, so much infrastructure and so much resources that it can investment in this area. Further, the trade deficit problems of the United States and its resulting over-dependence on foreign capital inflows can seriously curtail its ability to import critical items in the future. The United States is not the United Kingdom and nationalization is not a commonly discussed idea. However, given the unprecedented circumstances in the area of energy sustainability, it may be the one way to save the United States from being paralyzed in the energy area in the long run. Skeptics will enumerate numerous problems. For example, nationalizing failing solar panel manufacturing firms can create an atmosphere of moral hazard in which those firms that are financially sound can dispense with sound fundamental practices and engage in irresponsible investment or resort to other irresponsible activities since the implicit or explicit guarantee of government bailout or nationalization is there. However, such considerations of detail should not distract our attention from the bigger problem of energy sustainability. All systems have problems and even the laissez-faire framework has its own serious systemic problems as the collapse of the housing sector showed. Allowing unnecessary paranoia to prevent bold steps in the area of energy sustainability is something that the country can ill afford.
by C. Jayant praharaj ( send comments to [email protected] )
A lot of the discussion in the media and in the political sphere have focused on possible corruption in the way funds were handed out to one company called Solyndra, and a lot of wrong arguments are emerging from the superficial analysis surrounding the issue. The subsidization of solar panel manufacturers is being demonized due to a corruption case. What may well be needed at this crucial juncture in the country's history is higher subsidies if it can save solar panel manufacturers from closing down. For things like solar panel manufacturing, technological considerations are likely to dominate over managerial efficiency considerations, at least in the short run, and real or false bugbears about the effect of subsidies on managerial ethos should not divert our attention away from the critical need to sustain a renewable energy industry and to enable higher levels of renewable power production in the coming years. As for the global picture, China is likely to pick up some of the manufacturing slack due to the failure of American companies. Also, since this industry is in its infancy, China can benefit a lot in the future if its companies grab larger market share now. However, the failure of US solar panel manufacturers will most probably have a negative impact on the future trajectory of global renewable energy production. After all, despite its short-term economic distress and despite its systemic problems, the United States still has significant amount of human resources and intellectual property in this area. To allow short-term profitability problems to hamper the development of this critical sector would be a serious mistake. However, it is a mistake that the political establishment seems to be only too willing to overlook. Allowing corruption considerations to become convoluted with the core economic considerations is a sign of naivete. In fact, what may be needed at this juncture is something beyond subsidies. Given how crucial renewable energy is likely to become, nationalization of some beleaguered solar panel companies should be considered seriously. And where will the money come from to cover the short-term losses of these companies while the management tries to improve the cost structure ? Cuts in useless defense spending is one answer. Let there be no doubt that a laissez-faire approach in such a crucial sector can prove disastrous in the long run. While importing panels from China is always an option, it is stupid to expect that China will be able to provide most of the solar energy needs of the United States or the world. After all, the Chinese economy has only so much human capital, so much intellectual property in the area, so much infrastructure and so much resources that it can investment in this area. Further, the trade deficit problems of the United States and its resulting over-dependence on foreign capital inflows can seriously curtail its ability to import critical items in the future. The United States is not the United Kingdom and nationalization is not a commonly discussed idea. However, given the unprecedented circumstances in the area of energy sustainability, it may be the one way to save the United States from being paralyzed in the energy area in the long run. Skeptics will enumerate numerous problems. For example, nationalizing failing solar panel manufacturing firms can create an atmosphere of moral hazard in which those firms that are financially sound can dispense with sound fundamental practices and engage in irresponsible investment or resort to other irresponsible activities since the implicit or explicit guarantee of government bailout or nationalization is there. However, such considerations of detail should not distract our attention from the bigger problem of energy sustainability. All systems have problems and even the laissez-faire framework has its own serious systemic problems as the collapse of the housing sector showed. Allowing unnecessary paranoia to prevent bold steps in the area of energy sustainability is something that the country can ill afford.
by C. Jayant praharaj ( send comments to [email protected] )