Renewable Energy Policy Outside the United States
Part 7: The Case of PVs—Success Induced by Government Support |
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Earlier sections considered the various ways that governments outside the United States support and nurture renewable energy technologies. This section looks at the effect of such support on one particular technology—photovoltaics, which have potentially widespread applications—in order to gauge whether these policies really work. The question of what works is not straightforward. The definition of success will be different for an environmentalist concerned about reducing local air pollution and executive of a PV firm. One might care about installed capacity and electricity production domestically, while the other might care more about total sales, regardless of the destination. And the workers at the plant are likely to care about domestic jobs, not the nationality of the job providers. Here, however, success in PVs will be examined as a function of ownership of manufacturing firms and share of the global market. With those criteria in mind, the evidence is compelling that the policies described in this report have not only encouraged the deployment of renewable energy technologies, they also stimulated the development of their manufacturing sectors. Since 1988, the global market for solar photovoltaics has changed dramatically in several ways. First, the market for solar photovoltaics has grown rapidly. Global shipments jumped from 40.2 megawatts in 1989 to 151.7 megawatts in 1998—an increase of 480% in just 10 years. Annual percentage increases in shipments were consistently in the double digits.34 These changes have been prompted in large measure by the policies of Japan and Europe in support of PVs, especially in contrast to the attitudes of U.S. policymakers, which have sometimes amounted to outright hostility. The domestic U.S. market for photovoltaics has been in decline at a time when global sales are booming, eroding the ability of U.S. firms to compete globally. (See Figure 4.) Governments have played a significant role in this reversal. From 1974 to 1984, the U.S. solar industry soared from 45 solar collector manufacturers with 1.3 million square feet of annual production to 225 firms and 17.2 million square feet. The solar market was helped during this period by government assistance, both federal and state, mainly in the form of tax credits. As these tax credits began to expire, however, and as oil prices dropped significantly, the industry began to shrink. From 1984 to 1986, the number of manufacturers dropped by 127, more than half. After 1990, the rate of growth of solar collector shipments stabilized at about 4% per year.35 Despite slack domestic demand compared with growth elsewhere, export sales have continued to drive the expansion of the U.S. photovoltaic industry. For example, total shipments of PV cells and modules reached 31 peak megawatts in 1995, a 19-percent increase from 1994. Much of that was driven by exports, which accounted for 64% of total shipments that year.36 Finally, the U.S. manufacturing presence has declined sharply in favor of Japan and Europe. The two leading U.S. manufacturers, Siemens and Solarex, remain nominally American companies, but each has been acquired in whole or part by a European concern. In 1990, the German conglomerate Siemens bought ARCO Solar, while in 1998 British Petroleum acquired Amoco, the parent (with Enron) of Solarex. The most important question for the purposes of this report is whether these shifts were induced by government policies. It seems obvious that they were. There are essentially two different sets of forces at play. First, U.S. policymakers have chosen to reject strategies designed to commercialize renewable energy in favor of continued reliance on fossil fuels, especially oil.37 In contrast, Europe and Japan have sought to stimulate both the deployment of renewable energy technology and the development of manufacturing capacity. The effectiveness of these contrasting policies is illustrated by the fact that the U.S. solar industry continues to grow, but largely because of non-U.S. demands. These exports are fueled in part by demands in Japan and Germany, which in 1995 accounted respectively for 18.2% and 18.9% of U.S. exports.38 Whether that growth will continue if Japan and Europe successfully establish their own manufacturing capacity, as they are now doing, is an open question. Second, the market has shifted in the direction of grid-interactive installations. For example, in 1995 U.S. shipments for grid-interactive electricity generation doubled for the second year in a row, to 4.6 peak megawatts.39 Similarly, Japanese shipments jumped from 35 MW in 1997 to 49.2 in 1998, and all of this capacity growth was to serve grid-connected PV systems. Capacity growth the previous year had also been devoted exclusively to the new program in Japan.40 Japan's renewable energy efforts are focused most specifically on solar photovoltaics for a relatively straightforward reason: there is room for PVs on rooftops, but little or no room on the ground for wind turbines, biomass facilities, and most other forms of renewable energy.41 As a result of Japan's decision in the early 1990s to develop a set of policy initiatives designed to deploy solar PVs on rooftops, the installed PV capacity in Japan has increased steadily, and so has its manufacturing potential. It can be no coincidence that between 1993 and 1998, Kyocera's production rose about 500%, while Sharp's jumped an astonishing 1,400%. Although it is true that Siemen's shipments from its U.S. facility rose during that same period from 12.5 megawatts to 20, the increase was largely to satisfy export demands, especially in Japan. In Europe, solar photovoltaic installation and manufacture have been encouraged through policies designed to stimulate renewable energy generically, unlike the directed programs in Japan. Perhaps because of this broader-brush approach, solar photovoltaics have not climbed so dramatically in Europe. Still, shipments from European-based factories roughly kept pace with growth in the United States: between 1988 and 1998, shipments from the U.S. rose 484%, while those from Europe increased 449%. Critics of government subsidies will argue that these shifts demonstrate the obvious: without government support, renewable energy technologies—especially solar photovoltaics—cannot compete on a cost basis in grid-connected applications. Supporters of subsidies can reply that subsidies have facilitated improvements that have allowed photovoltaics to penetrate larger and larger niche markets, and that grid-connected applications are almost within reach. In essence, these are arguments about whether government programs should be deployed at all, not whether they work. There can be no question that they do. In the case of PVs, they moved technology from space to the ground, then from a rarity to a relatively commonplace commodity. |
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Renewable Energy Policy Outside the United States |
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