It is widely understood that the expansion of solar industries depends heavily on government subsidies to offset manufacturing and installation costs. Germany is the perfect example, with a fairly poor solar resource when compared to other countries, and yet it is the world’s strongest solar power economy due solely to its subsidies.

Skeptics will say that solar energy can’t become cost-competitive without government subsidies, a fact which will be hard to deny until economies of scale and technological innovation brings the price of solar energy down. However, those skeptics don’t mention that no energy sector existing today was developed without subsidies – and compared to what is received by the fossil fuel sectors, the public financial support given to solar is meagre. One of the more prevalent arguments against solar is that taxpayer money is being spent on incorporating solar into the electricity grid and that’s not true capitalism, is it?

A report by the Environmental Law Institute which reviewed U.S. government subsidies between 2002 and 2008 found that $72 billion in support was given to the well-established fossil fuel industry, which has been receiving public support for decades, while $29 billion was given to renewables, almost half of which was towards corn-based ethanol production. If solar received the same kind of subsidies as fossil fuels, solar power would actually be cheaper than conventional power.

So the playing field is an upward slope for solar when comparing to other energy sources, but subsidies are causing problems even within the solar industry. China, to be specific, is finding itself in the midst of an impending tariff case due to its own government’s support. Chinese photovoltaics companies have been alleged of “dumping” their solar panels, meaning that because they received such heavy government subsidies they have been able to sell their panels at below-value prices. The result of this case could be that the U.S. International Trade Commission will place import tariffs (of up to 100%) on solar panels imported from China, which would undoubtedly result in a price increase for end-users.

Many U.S. politicians are using Solyndra as their go-to argument for the problems with subsidizing the solar industry. Solyndra received $500 million from the government in 2009, and then filed for bankruptcy in 2011. This was clearly a blow to the industry, and many republicans have been milking Solyndra’s bankruptcy for all it’s worth, but who said that the oil industry wasn’t viable when Enron went bankrupt in 2001? Who said that wall street wasn’t viable when a multitude of investment banks went bankrupt in 2008? And let’s not pretend that those companies didn’t receive significant government support. The solar industry is undergoing a very similar transition to the auto-industry in the early 20th century. In the U.S., there were initially hundreds of auto manufacturers, but by the late 1920’s it was dominated by the big three: GM, Ford, and Chrysler. The other companies didn’t fail because the industry was doomed to fail; the industry simply needed to weed out the weakest competitors, and the strongest companies remained (with plenty of government support along the way).

What it comes down to is our future energy supply. Doesn’t it make more sense to look at subsidizing renewables as an investment in the future? Continuing on our current path, we will be dependent on both foreign oil AND foreign renewables. In order to achieve energy independence, governments need to invest in renewables such as solar while the industry is still young, and hopefully one day the solar industry will be as large and economically powerful as the oil industry is today.

-Justin Sacks

(Engineering Physics, MASc, Year 2 at McMaster University)