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White House's Solar Scandal

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RichardAWilson
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Post: #1
White House's Solar Scandal

Here's a piece I wrote as a response in another forum:

First of all, the bureaucracy wasn't the issue in this matter. We're talking about a loan gurantee.

(Private individuals and institutions loaned the money with Washington's backing, much like we loan money to the banks with the knowledge that, should those banks fail, federal insurance will kick in and return our savings to us.)

The problem with "loan gurantees" lies with how they're allocated. To whom should I gurantee a loan?

Secondly, the economics of renewable energy are more complicated than the economics in other sectors.

A few years ago, solar energy wouldn't have even made sense.

However, coal, gas and even uranium have since become more expensive. Chinese and Indian demand more than ensure that those fossil fuels will continue becoming more expensive in the future.

The matter is complicated even further because we're beginning to witness the Peak Resource Scenario, whereby it becomes more and more expensive (I.e. Marginal Cost) to drill and mine the world's remaining reserves.

With that noted, new innovations and advancements have been made in solar cell technology.

( First-Solar is the world leader in those innovations and is mass producing cells that are made with much cheaper materials than traditional cells).

All of things brings us back to basic economics. Demand for solar energy had skyrocketed between 2000 and 2010. During this time, hundreds of new competitors were created. (Most of them in China with State Backing)

The laws of economics dictate that economies and markets go through cycles.

- A new innovation is made, demand for that innovation soars, new companies enter the field to serve the demand and then too much production leads to a consolidation in the sector so that a few of the most efficient firms remain.

Just that scenario has happened in the solar sector.

I should note that there will be more victims in the consolidation phase of the solar sector.



Even Evergreen Solar, which had a promising business model and wasn't backed by Washington's Loan Guarantee Program, is crashing and burning.

Evergreen had over a billion dollars in assets and was producing around 80 megawatts a year. Hell, I wouldn't be surprised if some of the Chinese solar firms are forced into dismantling and merging with more efficient firms.

All of this brings us back to the initial question. We shouldn't be blaming the "bureaucracy" for this mess.

Instead, we should begin questioning the effectiveness of guaranteeing private investments.

Solar energy can still be a profitable business for the most efficient firms (Such as First Solar and General-Electric).

Why should we guarantee private loans to private companies when the market will decide on its' own which companies are deserving of capital?

I can understand the "infant industry case" where such subsidies and guarantees might be needed to launch a new economic sector. However, we're beyond that phase with the solar sector.

It is, after all, becoming a mature industry.

This post was last modified: 18.11.2011 06:58 by RichardAWilson.

18.11.2011 06:56
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Helsworth
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Post: #2
RE: White House's Solar Scandal

Well you probably know by now my stance on solar panels. I say give construction subsidies to capital intensive projects such as 4th generation nuclear reactors and hydroelectric dams.


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18.11.2011 08:10
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RichardAWilson
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Post: #3
RE: White House's Solar Scandal

I'm pro-solar energy. If General-Electric is betting on solar energy, than there's money to be made.

I just don't think Uncle Sam needs to be writing loan guarantees that will only serve to to prolong the inevitable for those companies that can't make money from solar.

Let the markets do the deciding - and the allocation of money.

If you're going to promote solar energy, do it by offering home-owners, utilities and businesses a solar installation incentive that can be used to purchase solar panels from the most efficient producers

- like General Electric and First Solar of Arizona.

Governments aren't effective at picking winners. Look at Japan and S. Korea.

This post was last modified: 18.11.2011 08:36 by RichardAWilson.

18.11.2011 08:34
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