Sean Sweeney, Ph.D. Trade Unions for Energy Democracy
July 22, 2013 | 10 Comments
What is happening to the solar PV industry? At a time when solar PV should be helping us win the war against rising emissions, and creating jobs, the industry is being hurt by a trade war between the U.S. and China and, perhaps, between China and the EU.
A new report from the Massachusetts Institute of Technology describes why it is that many Chinese and U.S. solar companies are going under, and why a PV trade war exists between these two giants. Jobs are being lost in China, the U.S. and the EU.
In November 2012, the United States imposed an import tariff of up to 30 percent on certain Chinese PV manufacturers in order to compensate for the subsidies Chinese producers enjoyed as a result of their government’s support.
In both the U.S. and Europe, the industry has also been hurt by the fact that political support for policies to help the PV industry and other renewable energy options has weakened. In the U.S., cheered on by fossil fuel companies, right-wing politicians have taken a shoot to kill approach to any measure proposed to help the industry through such things as renewable energy standards (RES), and feed in tariffs (FITs). Also in the U.S., cheap shale gas from fracking has also taken its toll on both wind and solar, as falling gas prices make a tough situation even more difficult for start-up companies and large multinationals alike. Austerity measures in the EU have seen FIT programs pared back in Spain, Greece and elsewhere.
These factors have led to a situation where the Chinese and U.S. PV industry faces serious levels of overcapacity, and some leading solar companies have gone bankrupt or are facing bankruptcy. A recent UN Environment Program (UNEP) report, noting the decrease in investment in renewable energy in 2012 and the “challenging policy environment,” refers to “a production surplus of modules and turbines.”
The authors of the MIT study scratch their heads and wonder why there is not more cooperation between the U.S. and Chinese solar PV sectors. Welcome to the neoliberal capitalist reality.
What does the state of the solar PV market mean? For the next several years, growth in the solar market will slow down — at a time when we need it to be expanding dramatically. Given what we know about the state of the climate and the need for an energy revolution, how can the policy wonks and politicians use the words ‘renewable energy’ and ‘overcapacity’ in the same sentence and not feel outraged by the implications?
In an important 2009 article in Scientific American, Mark Z. Jacobson and Mark A. Delucchi captured in a few paragraphs the sheer extent of renewable energy deployment that is needed to reduce emissions and stabilize the climate. It can be done, but not by dithering around waiting for ‘grid parity.’ And the Stern Review of 2006 was also clear about what would happen if we failed to act — we would see the economic equivalent of the two World Wars and the Great Depression rolled into one as extreme weather events take their toll on all of us.
In its most recent report on investment in renewable energy, the UNEP put on a brave face — emphasizing that investment levels in renewables, although they had fallen in 2012 by 12 percent, had again gone past the $200 billion mark.
“It is encouraging that renewable energy investment has exceeded $200 billion for the third successive year, that emerging economies are playing a larger and larger part, and that the cost-competitiveness of solar and wind power is improving all the time,” said the Bloomberg New Energy Finance Chief Executive Officer Michael Liebreich. “What remains daunting is that the world has hardly scratched the surface. CO2 emissions are still on a firm upward.”
Exactly. In fact, wind and solar (known as ‘modern renewables’) account for barely 5 percent of electrical power generation globally, and less than 2 percent of all energy consumed. According to the IPCC present levels of annual investment in renewable energy is some 60 percent below the levels of investment needed to reach the G20’s climate stabilization goals.
Courtesy Ren 21 report: Take hydro power out of the renewable energy picture, and ‘modern renewables’ remain marginal.
The story of solar PV’s “shake out” can lead to only one conclusion — market competition is getting in the way of the urgently needed transition to a low carbon energy system. Falling prices should accelerate the trend towards renewables, but when private investors see falling prices, they also see falling profits. Investment falls, or companies seek guarantees like power purchase agreements to avoid risk.
There is a way back for solar PV, and for many solar PV companies, but not without a decisive move away from liberalized energy markets and the continued expansion of fossil fuels. The public sector must take charge of the scale up of solar PV as well as wind and other low carbon options. It is no accident that Germany is ‘deprivatizing’ its power generation sector while at the same time it is accelerating the deployment of wind and solar power. Germany, with just over 1 percent of the world’s population and hardly the sunniest country in the world, has today one third (32 percent) of the global solar PV market. The public sector can borrow capital more cheaply than private companies; it can issue bonds; it can recover up-front costs for renewable energy in a variety of ways without shareholders demanding almost immediate returns. Long term investments are not only possible, they are essential if the energy transition is going to actually happen.
UNEP and other advocates of renewable energy see falling prices as a good thing over the long term, because it will increase demand as more ‘consumers’ come to see how solar PV and even wind power becomes affordable. Does that include, I wonder, the 1.5 billion people presently without electrical power? The bankruptcy of major solar PV companies is therefore just a bump in the road, a slight stumble in the long march to the green, low-carbon horizon. This is wishful thinking of the most irresponsible kind. But even if it is true that the solar PV industry will rebound (and it probably will) both the speed and scale of the deployment of renewable power will fall way short of the levels demanded by climate science. Meanwhile, waiting for private markets to shake themselves up again is wasting precious time. Today, new fossil based infrastructure is being built and sources of ‘extreme energy’ are being tapped with new mining and drilling methods — oil, coal and gas corporations are talking in gigawatts, while renewable companies are still in megawatt territory at best.
The energy transition the world desperately needs to survive is crying out for more public intervention, long term public investment, and democratic control. Integrating renewables into the electricity systems of the world also requires cooperation, and the sharing of skills and knowledge — not price wars, ‘unbundling’ and neglect of both human and physical infrastructure. And it needs unions whose members have the skills and professionalism to make the system work.
UNEP is reluctant to challenge the neoliberal orthodoxy; in fact it helps perpetuate all of the dangerous myths about the capacity of the private sector to deliver a renewables-based energy system. Many unions and their allies in the social movements have grasped this reality and are organizing a movement for real solutions to the energy emergency, the climate crisis, and to the falling pay and conditions of workers in the energy sector globally.
Lead image: Solar eclipse via Shutterstock