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Who Benefits from Soaring Solar Stocks: US or China?

Last week, I wrote about falling solar stocks and their effect on industry and homeowners alike. The essence of that post was that while stocks and revenues are falling overall, the long-term outlook for solar companies is strong given climate and societal trends. Yet the solar market remains young and volatile. A more recent Investopedia article seems to agree and disagree at the same time.

I suppose it is a testament to the volatility of the solar market that two articles, one lamenting the fall and subsequent manufacturing relocation of a U.S. solar giant to China, and one that accentuates a rise in a handful of publicly traded solar firms, can have the same essential message of volatility and positivity.

The Investopedia article, which has a positive tone overall, focuses its attention on several Chinese companies. Even its North American connection, Canadian Solar, is involved heavily in solar manufacturing in China. The article implies that Solarfun Power is also based in Canada, although the company is based in Shanghai. So the real question for me is less about jumping for joy at a few rising stock prices and more about why Chinese solar companies seem to be enjoying stock gains (despite lower revenues overall) while U.S. manufacturers struggle.

Chinese firms are doing relatively well for a few reasons, which I’ll posit here:

  1. The present lack of demand benefits China the most because they offer the cheapest product.
  2. China has a large and growing economy, while the U.S. and Europe are still rising from the ashes of the recession.
  3. Chinese companies have penetration into global markets, but U.S. companies primarily do not (with First Solar a glaring exception).
  4. The Chinese government has made some voracious moves of late to promote solar power.
  5. China combines lower labor costs with a more skilled workforce.

I too remain positive about the future of the American solar industry. The U.S. is expected to compete head-to-head with China in the coming years for so-called solar dominance. Our economy has shown a little growth and I believe clean energy has an inevitable future in our lives and power lines.

But I must return again to that “triple bottom line” I spoke of last week, where the bottom line is not just stock prices or corporate revenues, but also people and environment. China has sacrificed its environment heavily to grow its manufacturing base, and there is no doubt in my mind that many U.S. companies (solar or not) enjoy the more lax regulation in China.

So how do we make the U.S. a leading innovator AND manufacturer of solar technology?

Sure, we may have a future bright with rooftop solar arrays, but do we want all of our panels imported from China? In that case, we not only miss out on high-paying jobs for a manufacturing sector hit hard over the last 30 years, but we also considerably upset a solar panel’s energy balance.

And yes, we can have imported panels put on our roofs at relatively low costs, while focusing our attention and positivity on rising stocks overseas. But for most Americans, stocks are not the real issue. According to a 2002 study, less than 20% of American households owned stock outside of an employee-sponsored plan. Furthermore, when stocks and revenues rise as a result of downsizing or manufacturing shifts, the true heart of the economy - the workers and consumers - suffer even more. Rising stocks are simply not an accurate way to measure economic growth.

Let’s think bigger. Let’s think local. Let’s bring green jobs home and keep them here. That is a complex and difficult task, but one that must be achieved if we are to have a truly sustainable solar industry and an economy that exists on something a bit more substantial than credit.

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