Tariffs on Chinese solar makers and the impact of subsidies

Today’s New York Times article on the finalization of anti-dumping tariffs against Chinese solar cell makers makes an interesting point about the impact of subsidies. Kieth Bradsher writes:

 

To the dismay and even the anger of Chinese regulators, hundreds of solar panel manufacturers in their country have followed a common pattern of using lavish loans from state-owned banks to buy and install as much foreign-made factory equipment as possible while setting aside very little for research and development.

“They made quite a lot of money but did not invest,” Li Junfeng, a longtime director general for energy and climate policy at the National Development and Reform Commission, China’s top economic planning agency, said in an interview last month in Beijing.

 

China has built out an enormous amount of solar capacity that I believe will allow it to lock up the solar market now so that it can dominate it once panel prices stabilize and organic demand catches up. But one overlooked issue is that the massive subsidization of Chinese solar makers provided a disincentive to innovate and produce a more efficient panel because Chinese companies weren’t really competing on technological grounds, they were in a race to produce as many panels as cheap as possible.

Tech breakthroughs are tricky in sectors like solar where fundamental physics and material science roadblocks are in place. But it sure would have been nice if more of the $18 billion that Chinese solar makers got in government loans had gone into producing a more efficient solar panel.