Monitor | To kill a promising new industry, just subsidise it
When it comes to the mainland's massive solar panel assistance, everyone loses, including the domestic producers facing debt defaults
Three years ago, bosses at US company First Solar boasted that their thin film photovoltaic panel factory near Frankfurt am Oder in Germany was the world's most efficient.
With production costs of just 81 US cents for each watt of generating capacity, they claimed they could outcompete any other solar panel company in the world, including manufacturers from China.
Since then First Solar says it has extended its lead as the world's most efficient producer of solar panels, cutting its manufacturing costs to just 68 US cents per watt.
But that improvement wasn't enough to save the Frankfurt plant. First Solar closed the five-year-old factory at the end of last year. The reason: it was unable to compete with solar panel manufacturers from China.
In this case the competitiveness of Chinese companies had nothing to do with the rock bottom wages they pay their workers. Solar panel manufacturing is so heavily automated that variations in labour costs have a negligible impact on overall costs. The assembly lines are staffed by robots rather than humans.
What really matters are differences in capital costs. And there First Solar's Frankfurt factory didn't stand a chance. Between 2007 and 2012 the Chinese government lavished such generous capital subsidies on its solar panel manufacturers that factories elsewhere couldn't hope to compete.
