Chinese Solar Subsidies Are a U.S. Necessity

Here at The Motley Fool we usually try to stay out of political discourse, but on the eve of Chinese President Hu Jintao's visit to Washington, D.C., one major topic needs to be addressed: solar subsidies. Much has been made in the media about China's subsidies for solar manufacturers and that nation "taking" clean technology jobs the U.S. desperately wants to have at home. I'm here to make the case that we in fact need those subsidies to make the U.S. a "green" country.

If we truly want to become a greener society, it is in our best interest to allow China to provide subsidies to Chinese solar manufacturers. We cannot produce panels that come close to competing with Asian supply, as we saw with the closing of Evergreen Solar's (Nasdaq: ESLRD  ) Devens plant last week. We need China's low-cost labor and low- interest loans to help make solar cost-competitive with fossil fuels here in the U.S.

One reason the U.S should not fear a Chinese subsidy is the very nature of solar energy. Unlike fossil fuels, the energy itself comes from the sun, so there is no ongoing dependence on manufacturers once the panel is installed. In fact, there are ongoing jobs created at any solar installation that would benefit the U.S. economy (although it offsets similar fossil fuel jobs). The Chinese subsidies aren't holding back U.S. manufacturing: They're helping build a U.S. green energy industry. Without them, solar would be years behind where it is today.

Large Chinese manufacturers have a lot hanging in the balance. Trina Solar (NYSE: TSL  ) , Yingli Green Energy (NYSE: YGE  ) , and LDK Solar (NYSE: LDK  ) have all benefited from Chinese subsidies giving them the ability to expand rapidly. The largest solar manufacturer, Suntech Power (NYSE: STP  ) , received 50 billion yuan last year to expand capacity.

Chinese companies are not alone in leveraging inexpensive labor in Asia to fuel low-cost panels. First Solar (Nasdaq: FSLR  ) has most of its manufacturing in Malaysia, and SunPower (Nasdaq: SPWRA  ) is just now coming home, announcing its first U.S. manufacturing last year.

As both an investor in solar and a certified tree hugger, I hope the U.S. doesn't push China too hard on solar subsidies. We need to realize they're helping us achieve our goal of a greener future.

Interested in reading more about solar? Add one of these stocks to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his Motley Fool CAPS picks at TMFFlushDraw.

First Solar and Suntech Power Holdings are Motley Fool Rule Breakers recommendations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (5)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 18, 2011, at 1:25 PM, ajstudebaker wrote:

    "We cannot produce panels that come close to competing with Asian supply, .." Unfortunately for the U. S., that statement seems to be true of a a great many industries. Unless we find a way to compete in more industries with Asian supply, we're on our way to Buffett's sharecropper's society.

  • Report this Comment On January 18, 2011, at 5:29 PM, jaketen2001 wrote:

    Touché

    The US is busy subsidizing security for oil supplies, and the spread of 'democracy'. China is subsidizing (read:investing) in solar energy. The US is subsidizing the bailout of money centers and car makers, has a war on drugs, this list of bottomless pits the US is involved in is endless. There is no real law (just WTO trade agreements) against subsidies. We subsidize giant sugar producers and mega farmers. Bottomless endless pits with no return. So China is making an investment in something that will provide a benefit. Didn't we used to do that?

  • Report this Comment On January 19, 2011, at 9:25 AM, mbr8879576 wrote:

    If you can't win them, join them ?

    Uncle Sam can print more money and subsidize the Solar employment in the USA ?

    Clean energy worth it ?

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