Dance to the Revolution

It’s easy to blame China for the failure of U.S. solar firms, but SolarWorld and other six unnamed U.S. companies’ anti-dumping and countervailing duty case against Chinese solar panel manufacturers has the potential to hurt, rather than help, the green economy in the U.S. Here is why:

Solar panel manufacturing is a highly capital intensive industry, that is, its capital-to-labor ratio is extremely high. The capital cost of a solar panel manufacturing company is usually at several hundred million dollars, and because of mechanized production, the employee number is usually around a couple of hundreds. China has heavily subsidized its solar industry, and these low-cost Chinese solar panels had fueled the installation of solar in U.S. and other developing nations.

This comes to the second part of my argument. Solar sales, distribution, installation and maintenance, unlike manufacturing, are not capital intensive. If only we shift a little down to the value chain, we’ll see an industry that employs (mostly) local people. It is really this simple: when solar panels are cheap, more people would be able to afford them, and there would be more local distribution/ installation / maintenance jobs.

According to the National Solar Jobs Census Oct. 2011 report by Solar Foundation™ and BW Research Partnership, 52.4% of all solar workers work at installation firms, that is, 52,503 jobs in installation in 2011, and the installation sector expects to add 13,068 workers over the next 12 months. The solar manufacturing companies in U.S. employs 24,064 workers, among them, sales occupation leads the job growth at 66.1%, not production. These are not the jobs that are “stolen” by the Chinese, because Chinese solar companies would have to hire U.S. distributors, marketing firms, local sales force, rather than shipping thousands of Chinese to North America attempting to sell to American consumers. Sure enough, the Census found 17,722 jobs in solely solar sales and distribution firms (that is, not including the sales personnel at manufacturing firms).

Scott Lincicome of White & Case made some very good comments about U.S. government subsidies to solar firms and called this row “subsidy envy” – this is true to some degree, though we should bear in mind that the extent of U.S. subsidy has no affect on the legal merit of the allegation against China. For more on the legal aspect (more, more) of the case, I suggest following IELP blog.

All I’m saying is simply this: if you are one of the many many Americans who are supporting this case, supporting tariff on Chinese solar panels because you think the Chinese companies are stealing American jobs, please think again. Only when the price of solar panels (or other renewable energy components such as wind turbines) goes down, can there be more local sales, distribution, and installation/maintenance jobs for the American people.

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