- The Washington Times - Thursday, April 22, 2010

ANALYSIS/OPINION:

The Obama administration’s use of tax incentives to spur purchase of energy-saving solar panels has drawn the attention of China’s hungry manufacturing dragon, and the monster is now ravaging America’s renewable-energy industry.

The Democrats’ stimulus bill last year pumped $2.3 billion in tax incentives and credits for low-carbon technology manufacturers, including those making solar products. China responded rapidly to the U.S. solar subsidies. The Asian giant has flooded America with cheap solar panels, causing prices to slide about 50 percent during the past year. Accordingly, the People’s Republic has captured nearly 80 percent of the domestic American market; most of the stimulus money for solar products thus has gone into pockets overseas.

A perverse result of U.S. government intervention is that American solar-panel manufacturers now are struggling to compete. For example, BP Solar has made panels at its Frederick, Md., plant for more than 30 years. In 2006, it announced a $70 million expansion that would double production. But last month, BP Solar said the plant is no longer profitable, so it’s sending production overseas and laying off 320 skilled technicians.

Americans have seen this before. Last summer, the Obama administration’s $3 billion “Cash for Clunkers” program offered large cash rebates to Americans who traded in older gas-guzzlers for new, fuel-efficient vehicles. It turned out the primary beneficiaries were Japanese and Korean automakers, much to the chagrin of struggling domestic manufacturers.

While everyone loves a bargain, cheaper prices resulting from government incentives trigger a cycle of boom and bust. As manufacturers gear up to chase new dollars, they increase hiring and production. All is well until the incentives dry up, the artificially elevated demand diminishes and layoffs ensue.

Solar technology has improved, but not enough to make it price-competitive with traditional carbon-based energy sources. If solar progresses to the point that it is cost-effective, more Americans will buy it - without government incentives - because it’s a smart purchase. In the meantime, Democrats have responded to the current green glut from Asia by urging Congress to expand its tax-credit programs. This time, however, lawmakers want only domestic manufacturers of renewable-energy products to be eligible, to the exclusion of foreign competitors.

In 2009, China dumped more money into green technology than the United States, $34.6 billion to $18.6 billion - and that’s OK. Attempts to overtake the Middle Kingdom on renewable-energy spending - whether for domestic or foreign products - will inevitably lead to more market imbalances like those plaguing the solar-panel market.

The Obama administration and Congress are loath to admit that today’s race to be the greenest has been artificially stoked by ideologues playing on the public’s fear of purported global warming. Science, not political fad, should steer policy, particularly when tax dollars are going up in smoke. Americans are open to energy alternatives, but not irrespective of cost. If solar energy is sufficiently cost-effective, consumers will determine its marketplace success. Government should refrain from pouring money into green subsidies, especially when they enrich our economic competitors.

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