China's PV Feed-In Law Results in Solar Boom, Unlike Weak US Subsidies

One need only look at China for an example of the potent effect of government subsidies.

In July, China instituted a national solar PV feed-in law, which has already led to a non-residential pipeline of over 1000 projects, adding up to 14 gigawatt (GW). 

China’s PV market will exceed 1.6 GW in 2011, up 230% from 2010.

"The earlier-than-expected release of the national PV FiT policy has opened the door to explosive growth in project development activities in China," says Ray Lian, an analyst at Solarbuzz, in its first edition of the Solarbuzz China Deal Tracker."

Most of the projects are large – over 1 MW – which is creating  opportunities for project developers and engineering, procurement and construction companies. State-owned enterprises are doing most of the project development – the top 10 companies account for 9.7 GW of the total pipeline.

The feed-in tariff has allowed reasonable rates of return on non-residential PV projects, as steep decreases in module prices in 2011 have lowered the cost of new installations.

US solar firms are preparing a trade complaint against China and the Obama administration notified the World Trade Organization of nearly 200 Chinese subsidy programs – particularly in solar and wind – that may violate free trade rules. 

Contrast that with US Subsidies

In the US, every new energy source has received substantial government support in its early years, and subsidies for timber, coal, oil, gas, hydro and nuclear have always gotten far more than what renewables get today, concludes a report.

"All new energy industries received substantial government support at a pivotal time in their early growth, creating millions of jobs and significant economic growth. Subsidies for these ‘traditional’ energy sources were many, many times what we are spending today on renewables."

Energy industries have enjoyed a century of federal support. In inflation-adjusted dollars, the report says, nuclear spending averaged $3.3 billion a year over its first 15 years and oil & gas subsidies averaged $1.8 billion. Nuclear subsidies amounted to over 1% of the federal budget and oil and gas subsidies were about half a percent.

In marked contrast, government support for renewables has averaged less than $0.37 billion, or about a tenth of a percent of the federal budget.

"America’s support for energy innovation has helped drive our country’s growth for more than 200 years," the report says. Furthermore, "Current renewable energy subsidies do not constitute an over-subsidized outlier when compared to the historical norm for emerging sources of energy."

"The energy industry’s entrenched infrastructure is nearly impossible to compete with absent federal tax incentives," the report continues. "Such incentives were instrumental in overcoming the risk factor and establishing the current petroleum industry, and they are as necessary now for the alternative fuel businesses as they were 100 years ago."

The report concludes with a call to support emerging energy technologies, "to drive innovation, create jobs, protect our environment, enhance our national security in a time of rapid change, and to further a distinctly American way of life in which resources once thought to be endless are replaced by ones that actually are."

G-20 leaders, in committing to abolish the hundreds of billions of dollars in government subsidies for fossil fuel industries, said, they "encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change."

Here’s the report.