TW: Friedman makes two points: the U.S. lacks an industrial policy relative to alternative energy in particular solar which appears to the likely next big energy play and due to lack of predictable demand in the U.S. the manufacturing base for solar is emerging off-shore leaving the U.S. behind perhaps permanently.
I agree with the former but not so much the former is causing the latter. In comparison to numerous significant countries the U.S. does not have a clear solar or alternative policy. It has not been the American way to create "industrial" policy per se. We have been much more "free market" for better or worse. As I have opined previously new paradigms of political and economic leadership are emerging from China, India and even Germany, Brazil etc. Those countries are making big bets on solar and as a result are creating domestic demand for solar products. Should the U.S. follow suit with a more dirigiste "solar industrial" policy?
The other point Friedman makes about the domestic demand driving domestic production has some merit but the two do not necessarily follow hand in hand. It is entirely possible that the U.S. could generate significant domestic demand whilst importing the vast majority of its solar panels from international sources should they be cheaper.
That China could develop cheaper production seems intuitive, that Germany can less so. I am not clear on all of the reasons. Currencies, tax treatment and subsidies are the likely culprits but then that is what industrial policy does- provide favored treatment to the target industry. We do it all the time with state and localities chasing factories amongst themselves. With globalization perhaps a more national focus becomes relevant.
From Tom Friedman at NYT(h/t reader CM on the link):
"...The reason that all these other countries are building solar-panel industries today is because most of their governments have put in place the three prerequisites for growing a renewable energy industry: 1) any business or homeowner can generate solar energy; 2) if they decide to do so, the power utility has to connect them to the grid; and 3) the utility has to buy the power for a predictable period at a price that is a no-brainer good deal for the family or business putting the solar panels on their rooftop.
Regulatory, price and connectivity certainty, that is what Germany put in place, and that explains why Germany now generates almost half the solar power in the world today and, as a byproduct, is making itself the world-center for solar research, engineering, manufacturing and installation. With more than 50,000 new jobs, the renewable energy industry in Germany is now second only to its auto industry. One thing that has never existed in America — with our fragmented, stop-start solar subsidies — is certainty of price, connectivity and regulation on a national basis.
That is why, although consumer demand for solar power has incrementally increased here, it has not been enough for anyone to have Applied Materials — the world’s biggest solar equipment manufacturer — build them a new factory in America yet. So, right now, our federal and state subsidies for installing solar systems are largely paying for the cost of importing solar panels made in China, by Chinese workers, using hi-tech manufacturing equipment invented in America.
“About 95 percent of our solar business is outside the U.S.,” said Splinter. “Our biggest U.S. customer is a German-owned company in Oregon. We sell them pieces of equipment.”
If you read some of the anti-green commentary today, you’ll often see sneering references to “green jobs.” The phrase is usually in quotation marks as if it is some kind of liberal fantasy or closet welfare program (and as if coal, oil and nuclear don’t get all kinds of subsidies). Nonsense. In 2008, more silicon was consumed globally making solar panels than microchips, said Splinter.
...making these complex machines requires America’s best, high-paid talent — people who can work at the intersection of chemistry, physics and nanotechnology.
O.K., so you don’t believe global warming is real. I do, but let’s assume it’s not. Here is what is indisputable: The world is on track to add another 2.5 billion people by 2050, and many will be aspiring to live American-like, high-energy lifestyles. In such a world, renewable energy — where the variable cost of your fuel, sun or wind, is zero — will be in huge demand.
China now understands that. It no longer believes it can pollute its way to prosperity because it would choke to death. That is the most important shift in the world in the last 18 months. China has decided that clean-tech is going to be the next great global industry and is now creating a massive domestic market for solar and wind, which will give it a great export platform.
In October, Applied will be opening the world’s largest solar research center — in Xian, China. Gotta go where the customers are. So, if you like importing oil from Saudi Arabia, you’re going to love importing solar panels from China."
http://www.nytimes.com/2009/09/16/opinion/16friedman.html?_r=2&th=&adxnnl=1&emc=th&adxnnlx=1253374250-fSo8QBkitP93eqmw0v8sXg
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