The choice between cheap green tech or local green tech
A few weeks ago I posited the idea that as China “exports deflation” with super cheap EVs and solar panels, the US will need to choose between building out its green energy base faster with cheap Chinese goods, or protecting its nascent green tech industry with tariffs. Now, we’re beginning to get an idea of what those two choices might look like.
Last week US Treasury Secretary Janet Yellen staged an event at a swing state solar panel manufacturer to warn China that, “China’s overcapacity distorts global prices and production patterns and hurts American firms and workers” and that China needs to take “necessary steps to address this issue.”
Meanwhile, in Europe, Politico reports that EU ministers plan to abandon support of local solar manufacturers as the companies lay off hundreds of workers. Last year China provided 80% of Europe’s panels, while local companies only produced 3% of the EU’s needs.
The result of Europe’s decision is that solar panels are so cheap that residents are using them as fencing. Scaffolding and roof installation labor costs have become a bigger cost than the panels themselves, which fell to 11-cents each in March, half of the cost a year ago.
Exactly how long these prices will stay low is a mystery, as China is expected to produce twice the global solar panel demand this year, and as much as three times the world’s demand in 2025. The Financial Times reports one manufacturer complaining of crates of unsold panels sitting in Chinese warehouses long after closing their factory. In a market economy these companies would eventually go bust, but perhaps the Chinese government will support green tech’s losses as a matter of national economy policy.
China seems to be accelerating every aspect of green technology manufacturing. Its wind turbine manufacturing industry dominated global sales last year, as four of the world’s top five turbine manufacturers were Chinese in 2023, up from two in 2022. In the EV universe, BYD briefly beat out Tesla to hold the title of the world’s largest EV car manufacturer at the start of 2024, with 626,000 units sold in the first quarter, up 13% from last year. Adding more pressure to global competition, BYD produces an EV priced at $10,000 (and it says it could cut the price more), while Tesla’s cheapest car sells for $45,000 in the US – before a federal tax credit. Cheap EVs, even ones with just a 190 mile range, could be very popular in middle-income countries.
The old saying about product manufacturing is that you can choose only two: quicker, cheaper, or better. It seems China has solved the quicker and cheaper challenges for green tech. Can American companies protected by tariffs really make green tech better? That’s the bet the Biden Administration seems to be making.
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Ideas
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