China offers big new tax rebate on solar power (Is this good or bad?)

SunTech solar panel maker from china
© SunTech

Bad for shareholders, good for renewable energy production

The solar industry is having money problems, especially in China. As I explained in this post about the SunTech bankruptcy, it's frequent for fast-growing industries to expand quickly as a whole while individual companies have a hard time making money (competition is so fierce, they all try to undercut each other, and as soon as there's oversupply, whatever small profit margins the most efficient players had evaporate). The solution to that is usually consolidation once the industry matures, grows slower and attracts fewer new entrants. At that point the stronger players buy up the weaker ones and the few dominant companies left standing at the end generally don't compete so ferociously with each other that they all lose money... We're not there yet in the solar industry, and that's good for those who buy solar panels. What's bad for individual companies also mean lower prices and faster innovation for customers.

Wikipedia/CC BY 3.0

What complicates things is that certain governments will support their solar companies, as China does. This puts companies that aren't getting subsidies at a disadvantage. But most big countries have various incentives for renewable energy or solar specifically, making it hard to know who's really getting more help (and if one country is getting a lot more help than others, by buying their products you are getting a subsidy from their government, so that's not bad either). But if we don't look at it from an economic perspective and just look at the environmental impact, all this means is that the industry is getting more resources and will grow faster than it otherwise would, which is good for the planet. Some would like to see these subsidies end, but I'd say that fossil fuel subsidies should be cut first; that would save more money, and be fairer since they've been around for decades while renewable energy is still a relatively small industry.

© SunTech

Back to China: They've decided to refund 50% of the value added tax to solar panel manufacturers from October 2013 to 31 December 2015.

a sharp decline in prices, coupled with slowing demand, has hurt global solar panel makers and Chinese firms have also borne the brunt.

The US and European panel makers have blamed Chinese firms for playing a big role in that.

They have accused the Chinese companies of flooding the market and of selling the panels below fair price, a practice known as "dumping".

There have also been claims that China provides subsidies to its firms, which helps them keep their costs low and as a result sell goods at lower prices, resulting in tariffs from countries such as the US.

China has denied these allegations.

However, these disputes and falling prices have hurt Chinese firms and even fanned fears over the long term future of some of the companies.

Prompted by these concerns and the rising pollution levels in the country, China has been trying to boost domestic demand for solar panels. (source)

This will no doubt enrage non-Chinese solar manufacturers. But it'll also support low solar panel prices and boost demand for solar within China, so that's good for the environment.

Via BBC

See also: 300,000 mirrors: World's largest thermal solar plant (377MW) under construction in the Mojave

Tags: China | Solar Power

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