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.

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