International Ties

Clean-tech trade barriers bad for US

By Robert F. Kennedy Jr (China Daily)
Updated: 2011-01-22 07:37

When US President Barack Obama met Chinese President Hu Jintao on Wednesday, the United States' new enthusiasm for trade restrictions against Chinese renewable technologies was a concern.

On Jan 14, President Obama signed a defense appropriation law including a "Buy American" provision prohibiting the Pentagon from purchasing Chinese solar panels. This constraint is on top of a US government launched WTO case intended to reduce imports of Chinese wind turbines. I have long advocated a national energy policy that will release the US' monumental potential of renewable technologies, but a trade war with China over renewables is a terrible idea - not just for US jobs and prosperity, but also the environment.

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The Chinese have mounted a robust and successful challenge to European and US dominance in solar panel and wind turbine manufacturing. Chinese companies now account for half of the world's solar panel production. But the US gains far more in the way of jobs and prosperity from China's low-cost solar panels and super-efficient wind turbines than we lose.

These gains come from the benefits to US manufacturers, investors and consumers.

On a recent visit to China, I toured solar panel plants owned by the nation's largest manufacturers, including Yingli, Lightway and Daqo New Energy. Like most of China's other manufacturers, Yingli's solar panel factories use dozens of giant steel casting furnaces made by GT Solar, a company in Merrimac, New Hampshire. GT Solar controls 80 percent of the China's market for this component and significant market share for hydrochlorination systems and chemical vapor deposition (CVD) reactors.

Last year, GT Solar's revenues from China were $544 million. GT Solar's Director of Marketing Jeff Nestel-Patt acknowledges that demand for his products by Chinese panel manufacturers have been critical to his company's survival.

Daqo's firing furnace comes from a Minnesota company, Despatch Industries, which operates a union shop of about 400 employees in Lakeville, Minnesota. According to its Director of Solar Operation John Farrell, Chinese solar manufacturers represent upwards of 80 percent of Despatch's business and more than $100 million in orders for 2011.

Farrell fears a trade war with China.

"It will kill the solar business in the US," he warns. "Not just us, but the entire industry. Low cost Chinese panels are driving the widespread proliferation of solar energy. If you force people to buy from higher-priced manufacturers, you drive up the costs of renewable power."

Daqo, like many large Chinese solar companies, is listed on US stock exchange with American investors owning significant positions.

"If China retaliates, the trade war will hurt US manufacturers very badly and indirectly, US investors, will suffer if the trade barriers cause stock prices to decline," says Gongda Yao, Daqo's CEO.

Finally, widespread proliferation of low cost panels generates tens of thousands of jobs with solar installers and local content manufacturers and provides a cheap, abundant, local and democratic source of energy for regular Americans.

In the wind sector, the same dynamics hold. Garth Heron of Goldwind in Beijing says he can deliver state-of-the-art direct drive turbines to the US that produce energy at 11 cents a kilowatt-hour. Such low prices make wind competitive with coal, oil and nuclear. Goldwind is publicly listed and many of its principal investors are US citizens.

Like other Chinese companies, Goldwind manufactures its turbine in China but the other components of the wind turbine - the pylons, propellers, high tensile bolts, electric panels and gear boxes, etc. - are all sourced in the US, typically, between 50 and 80 percent of the end product is manufactured in the US. Cheaper, more efficient turbines stimulate demand, and that creates jobs for installers, steelworkers and electricians in the US and big profits for farmers and other wind farm operators.

Stefanie Spear, president of Expedite Renewable Energy, installs wind and solar projects in Ohio. "If 'Buy American' provisions are mandated for solar and wind it could drive up project costs and hurt renewable energy adoption in the US," says Spear. "A trade war with China could torpedo manufacturing jobs in our country and it doesn't make sense to mandate 'Buy American' when the US government won't support even a bare bone federal energy policy such as Renewable Electricity Standards."

Chinese pre-eminence in wind energy arose from an ambitious feed-in-tariffs program and other national policies intended to ramp up wind energy development in China 12-fold by 2020 and solar development by 20,000 percent. The Chinese have committed to increasing wind and solar to 15 percent of their energy portfolio by that year - an ambitious target requiring $758 billion in government incentives and even greater investments from private entrepreneurs.

We should not be fighting the Chinese with trade barriers designed to dampen its admirable commitment to renewable power. Instead, the US needs to lead the way by implementing a national energy policy that creates market-based incentives friendly to home grown renewable manufacturers.

The author is an environmental advocate, senior attorney of Natural Resources Defense Council, and partner in VantagePoint Venture Partners.