solar paranoia

Sorry but this article in the NY Times detailing how China is 'racing ahead' of the US in solar is way off base. The title doesn't even match up against what the author has written.

"Chinese companies have already played a leading role in pushing down the price of solar panels by almost half over the last year"

Actually the drop had a lot more to do with the oversupply of a key input, high purity polysilicon, and the drop in demand following the credit crisis. Asian solar companies cost structures continue to drop at the rate they always have.

Shi Zhengrong [...] said in an interview here that Suntech is selling solar panels on the American market for less than the cost of the materials, assembly and shipping.

Sounds like a great business. I guess you make up the difference on volume. Why aren't we Americans in this great business?

“I don’t see Europe or the United States becoming major producers of solar products — they’ll be consumers,” said Thomas M. Zarrella, the chief executive of GT Solar International.

Actually Europe and the US are already large producers of solar products. They just don't buy a lot of GT Solar's equipment. They have more differentiated and innovative products than the commodity products that roll off of GT Solar's equipment.

Suntech, based here in Wuxi, is on track this year to pass Q-Cells of Germany, to become the world’s second-largest supplier of photovoltaic cells, which would put it behind only First Solar in Tempe, Ariz.

So wait. The largest solar company is a US company? And it's growing faster than all the others? And it has a differentiated product with insanely huge margins on par with software companies? Really we should give that up for this great negative margin polysilicon module business.

Alright enough of this. The US has 2 large solar players: First Solar and SunPower. Both make differentiated products that earn larger margins than the other players. There are a number of smaller companies pushing newer technologies. You've got GT Solar which is the arms dealer for those fighting the commodity module war in China. Europe also has some high end solar manufacturers. The US and Europe are aso the only places where companies make high purity polysilicon; the one component of solar modules that actually makes real money. The Chinese have been trying for years will little success.

The Chinese manufacturers are just that - manufacturers. They use commodity equipment to make commodity products that have low margins. They are good at that type of business. They have cheap labor. They should be in that business. This is not a business the US should be in just like we should not be in the business of bending metal into cars. Low priced labor areas are a far better place to do this. The US, as always, is a better place to do innovative, high margin work which is what it is doing. In the car analogy the US should, as it does, develop the electrical systems, car designs, crash technology, etc. That's where the money is.