A Paucity of Policy

Around the world, there are more and more indicators to be seen of the dramatic effect of government policy on solar power development.  This shouldn’t come as a surprise, since the whole purpose of policy is to further the political philosophy of government;  what’s surprising and unsettling to Americans is the extent to which policy in other countries is driving unprecedented levels of renewable energy deployment, while theirs is mired in minimizing the number of interest groups it offends.

Where Policy Works

Italy, for example, is another country that has adopted a policy of feed-in tariffs to drive solar PV growth, along with Germany, Spain, France, the UK, and many others.  According to renewable energy industry analyst Paul Gipe, Italy’s previous policy of tradable green certificates had been found to be ineffective, and the switch was made in February 2007.  By the end of that year, the country had installed five times more solar PV than in the previous year, and in 2009 installed more than the entire U.S.  By the end of the first quarter of 2010, Italy’s total installed PV capacity exceeded that of the U.S., putting the country second only to Germany in the world for PV market size.

On the other side of the world, China is pursuing its policy of dominating the solar panel production market by making some $17 billion in loans from state-run banks available to its PV manufacturers.  The country’s solar firms shipped some 43% of the world’s panels last year, and the new government money will be enough to double the world’s wafer and cell production capacity, according to Jenny Chase of Bloomberg New Energy Finance in London.

The Chinese success in producing PV panels at low cost, with strategic government assistance, has affected the feed-in tariff policy instrument in Germany, the world’s largest PV market.  The rates paid to customer-generators under the scheme are intended to reflect, among other factors, the full cost of installing solar arrays.  Panel costs are obviously a large part of this figure, and with panel prices falling by as much as 40% the tariff is currently over-generous.  The German government announced this month that it would reduce it by a range of 11% - 16%.

While this decision is causing Germany’s solar industry to focus more on cost-cutting measures than it would like, it’s worth noting that the need for the decision is proof that the policies themselves are working to drive down renewable energy costs and increase capacity.  The German policy led to such massive deployment of distributed solar power there that economies of scale followed.  Now, a foreign competitor has undercut the local industry and driven prices down further, which should lead to even greater levels of deployment.

Where Policy Doesn’t Work

This is not meant to be a sales pitch for feed-in tariffs, effective as they are for generating renewable energy investment.  The point is more that, without constructive and strategically sound policy development at the national level in the U.S., we can never hope to attain the kinds of benefits enjoyed by Chinese industry and German and Italian consumers.  As the U.S. Senate prepares to take the summer off, having failed to introduce an energy/climate bill at a time when most Americans polled* are demanding one, we can mark their report card with a large red ‘F’.

Where Policy Doesn’t Exist

Perhaps the fact that we have never had, in this country, a recognizable and durable energy policy prevents legislators from seeing what can be done when you actually create one.  Or perhaps our Congressional leaders are so steeped in the Tip O’Neill mantra of “All politics is local” that they are functionally incapable of thinking outside their constituencies and creating policy for the country as a whole.  Or have we finally reached the point in American politics where legislation has fallen out of favor, and only ideology remains?

Wherever and whatever we are, we seem to be institutionally incapable of developing and implementing an energy policy that will bring us any kind of economic or environmental benefit.  And as for climate, one wonders if it’s one of those words that senators, rather like the knights who say “Ni!” in that Monthy Python movie, cannot hear without going into apoplexy.

As a nation we are so fond of our form of government that we try, from time to time, to implement versions of it in other states around the world.  Yet what we’re seeing today, from foreign countries with forms of government we habitually disparage, is a predilection for action in policymaking that will work to the benefit of their economies and environment as we fall further and further behind.

This is not rocket science.  It’s policy.  And it’s what congresspersons get paid to do.

Perhaps we should withhold some paychecks.

*Benenson Strategy Group survey, May 2010, Washington Post/ABC News poll, August 2009