As Chinese President Hu Jintao meets with President Obama this week, America's new enthusiasm for trade restrictions against Chinese renewable technologies may mar the conversation.
Last week, Obama signed a defense appropriation law including a "buy American" provision that prohibits the Pentagon from purchasing Chinese solar panels. The 2009 American Recovery and Reinvestment Act restricted the use of stimulus money to purchase foreign-made materials. And now Congress is entertaining a host of other buy-American initiatives with broad application to Chinese-made renewable technologies.
America needs policies that will release its potential for alternative energy, but a trade war with China is a terrible idea — for American jobs, prosperity and the environment.
The Chinese have successfully challenged European and American dominance of solar panel and wind turbine manufacturing. Chinese companies now account for half of the world's solar panel production. But American manufacturers, investors and consumers gain far more from China's low-cost solar panels and super-efficient wind turbines than they lose.
On a recent visit to China, I toured solar panel plants owned by that nation's largest manufacturers, including Yingli, Lightway and Daqo. Yingli, for example, uses dozens of giant steel casting furnaces made by GT Solar, a Merrimack, N.H., company employing 450 workers. GT Solar controls 80% of the China market for this component and a significant share for other systems it sells to Chinese manufacturers. Last year, its revenues from China were $544 million. A spokesman for GT Solar, Jeff Nestel-Patt, told me that demand for the company's products by Chinese panel manufacturers has been crucial to its survival.
I saw more of GT Solar's furnaces at Daqo's manufacturing facility in Wanzhou, which produces solar panels and polysilicon. Daqo also does business with more than a dozen U.S. companies, in Buffalo and Rochester, N.Y.; Hemlock, Mich.; Pasadena, Texas; and Wilmington, Del. Its wire saws, used to cut ever-thinner photovoltaic cells, come from Applied Materials in Santa Clara, Calif. Its firing furnace comes from Despatch Industries, which operates a union shop of about 400 employees in Lakeville, Minn.
According to John Farrell, managing director of Despatch's solar business group, Chinese solar manufacturers represent upward of 80% of the company's business, with more than $100 million in orders for 2011. A trade war with China, Farrell said, "will kill the solar business in the U.S. 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. The U.S. industry will grow through cost reductions, not barriers."
In addition to U.S. manufacturers, U.S. investors benefit from China's renewable energy industry. Daqo, like many large Chinese solar companies, is listed on an American stock exchange, and U.S. investors own a significant number of shares. "If China retaliates, the trade war will hurt U.S. manufacturers very badly, and, indirectly, U.S. investors will suffer if stock prices decline," said Daqo's chief executive, Gongda Yao.
Finally, widespread proliferation of low-cost solar panels from China generates tens of thousands of installation, construction and manufacturing jobs in the U.S., as well as providing cheap, abundant energy.
The same dynamics apply to wind power. Garth Heron, with the international business division of Goldwind, headquartered in Xinjiang, told me he can deliver turbines to the U.S. that produce energy at 11 cents a kilowatt-hour, a price that makes wind competitive with coal, oil and nuclear. Goldwind is publicly listed and many of its principal investors are American. Goldwind manufactures its turbines in China, but other components — pylons, propellers, high-tensile bolts, electric panels, gearboxes — are from the U.S. Typically, 50% to 80% of the end product is American made. Low-cost, efficient turbines such as Goldwind's stimulate demand, and that creates jobs for American installers, steelworkers and electricians and profits for wind farm operators.
Stefanie Spear is president of Expedite Renewable Energy, which installs wind and solar projects in Ohio. "If buy-American provisions are mandated for solar and wind, it could drive up the project costs and hurt renewable-energy adoption in the U.S.," she said. "It doesn't make sense to mandate buy-American when the U.S. government won't support even a bare-bones federal energy policy such as renewable-electricity standards." (Such standards would require utilities to get a specified amount of power from renewable sources.)
The Chinese preeminence in renewable-energy development flows from its decision to increase wind and solar to 15% of its energy portfolio by 2020 — an ambition requiring $758 billion in government incentives and even greater investments from private entrepreneurs. We should not be erecting trade barriers designed to dampen China's admirable commitment to renewable power. Instead, the United States needs to implement a national energy policy that creates market-based incentives friendly to homegrown renewable manufacturers.
Robert F. Kennedy Jr. is an environmental advocate and attorney and a partner in VantagePoint Venture Partners, which has a small stake in Goldwind.