“Energy idiocy”: Solar Panel Tariffs

Chicago economist John Cochrane:

It's time to start a new series on “energy idiocy.” You just can't make this stuff up… From today's WSJ:

BRUSSELS—Chinese solar-panel manufacturers will face import tariffs of up to 67.9% at European Union borders under a plan from the 27-nation bloc's executive body…

Europe, like the US, subsidizes the installation of solar panels. So, we subsidize things to make the prices to consumers go down and encourage the industry. Then when the industry is encouraged and prices do go down, we pass tariffs to make prices go up. This is almost as fun as oil, which we subsidize to make prices go down, then pass regulations to try to stop people from using it.

The US doesn't get to indulge in any Europe bashing here, The U.S. has already placed tariffs on solar-panel imports from China.

We also subsidize ethanol, but only from midwestern corn. We have tariffs against ethanol from Brazilian sugar cane, which is a whole lot better environmentally (is a lot less closer to using 1 btu of petroleum to produce 1 btu of ethanol, wash away topsoil and fertilizers down the Mississippi, drive up corn prices)* but seems not to show up at the Iowa caucuses.

Of course it was a bit of a miracle that prices came down in the first place. Usually, subsidizing and protecting an industry in the idea that just making it bigger makes it cheaper leads to large inefficient industries. The correlation between big and cheap comes from competition. Hence revealing that it was the Chinese who figured out how to exploit European subsidies and actually make panels cheaper.


Please read the whole thing - this is just a teaser.

3 thoughts on ““Energy idiocy”: Solar Panel Tariffs

  1. The tariff’s are imposed because the Chinese state has been heavily supporting the Chinese solar manufacturers financially. Chinese panels makers have been earning only 2$ for every 3$ in costs, with the Chinese state making up the difference. That is called dumping, and the EU and USA are fully in their right to impose tariffs in order to protect their PV manufacturers, who cannot operate similar structural loss making enterprises as the Chinese have been able to do for years.

  2. I agree with all your facts. I also agree with John Cochrane’s main thesis – I will try to state it differently. China has been offering a “free lunch” to solar consumers (which basically means heavily taxpayer subsidized PV – while they could exist in N. Africa, I’m not aware of any PV projects in the first world that would have been built on purely economic grounds). By “free lunch” I mean a transfer from China’s savers/taxpayers to e.g., German taxpayers/consumers.

    Yes, that isn’t fun for a German PV manufacturer – but they are only in business because of a transfer from German taxpayers to the company (and to the Norwegian ratepayers/utilities who supply the necessary hydro storage). For a German PV installer the Chinese subsidy is a win – their costs go down a bit (not hugely, because the PV cells are a modest part of the life cycle cost of PV solar). And the German taxpayer and consumer win.

    Mostly winners from the Chinese subsidy, unless you are a Chinese taxpayer/saver.

    Long run view – I don’t think the Chinese PV companies created out of the subsidies have a future. How long will taxpayers be willing to continue funding an energy policy that obviously doesn’t work?

  3. Renewable energy systems do have a significant rôle to play, but not as a major source of power for large prosperous countries. Attempts to use them as a major source of power will probably end only after they have failed to do the job and we have spent untold billions of dollars on them. However, in remote areas and in small island nations, they probably do have a major rôle to play.

    Probably only nuclear power can provide sufficient clean energy for large developed countries. However, our pressurized water reactors are a serious mistake. We should be doing the necessary R & D work to prepare better nuclear technologies for wide-spread implementation.

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