Friday, January 21, 2011

Why Green Energy Can't Power Green Jobs

Evergreen Solar announced last week that it was closing its plant in Devens, Mass., laying off 800 workers, and moving production to China.

Evergreen’s factory had received more than $40 million in subsidies, which led many to see the plant closing as lesson in the futility of green energy and industrial policy. But what does Evergreen’s story really teach us about solar energy, public subsidies and the future of American manufacturing?

Evergreen Solar’s story begins in 1994, when three alumni of Mobil’s solar division broke away to form their own company. They started in a 2,500-square-foot lab in Waltham, Mass., which has long housed innovative industry, including America’s first integrated textile mill and the Waltham Watch Company, which pioneered high-quality watches with interchangeable parts. Today, Waltham is a venture-capital hub that succeeds by providing abundant commercial real estate and easy access to the scientific community of greater Boston.

Proximity to cutting-edge ideas was surely an advantage for Evergreen Solar in the early days because its principals worked with Emanuel Sachs, a distinguished mechanical engineer at the Massachusetts Institute of Technology, who invented the “string ribbon” process for making solar cells.

“String ribbon” technology was Evergreen’s big idea; it offers the possibility of far more affordable photovoltaic cells. Evergreen began selling “string ribbon” solar panels in 1997 and moved to a much larger space in Marlboro, Mass., in 2000.

Evergreen proved adept at finding financing and global partners. The company went public in 2000, which provided funds to expand operations and repay the venture capitalists, such as the Utech Fund, which placed an early bet on “string ribbons.”

An early infusion of $5 million also came from Kawasaki in 1999. In 2005, Evergreen and the European solar company Q-Cells came together to construct a production plant in Thalheim, Germany. Given Evergreen’s global reach, it shouldn’t be surprising that it is now producing together with Jiawei Solarchina.

Evergreen Solar’s move to China was supported by a $33 million loan from the Chinese government, and it has suggested that the Chinese production was cheaper because “solar manufacturers in China have received considerable government and financial support.”


But surely China’s skilled, low-wage labor force is a far more important source of its low costs. Japan’s success in the 1980s was also attributed to its activist industrial policy, but subsequent research found that government subsidies backed losers more often than winners.

Joshua Lerner’s superb book “Boulevard of Broken Dreams” (Princeton University Press, 2009) reviews public efforts to support start-ups and entrepreneurship worldwide and reminds us that “for each effective government intervention, there have been dozens, even hundreds, of failures, where public expenditures bore no fruit.”

I suspect few readers will really think that Evergreen Solar was shortchanged by American governments. The National Renewable Energy Laboratory contracted with the company in its early days. More recently, Massachusetts agencies gave tens of millions of dollars to the company.

Conservative critics, such as Michelle Malkin, argue that the Devens closing provides a warning about green energy: “the myth that ’green jobs’ are a boon to the economy keeps getting pierced by failed green jobs boondoggle after failed green jobs boondoggle.” But it was always a mistake to think that clean energy was going to be a jobs bonanza, and we should be investing in green technology whether or not it produces jobs. .

America has had many high-tech breakthroughs over the past half-century, but those innovations have rarely provided abundant employment for the less educated workers who need jobs most. The Devens closing reminds us that even when ideas are “made in America,” production is almost always cheaper in China.

Failed public investments, like the money spent in Devens, reflect both the fact that public officials are rarely skilled venture capitalists and that governments pursue many objectives that lead them away from solid investments. It’s easy to see why any governor would be excited about a green-energy manufacturing plant in a less prosperous area of his or her state. But the same forces that made Devens political catnip meant that it was unlikely to be a long-term success.

Manufacturing solar panels in Devens never played to Massachusetts’ core strength: the creativity that emerges naturally when smart people are clustered together. Forty years ago, greater Boston was suffering from the same deindustrialization that afflicted all older American cities. The region came back, buoyed not by renewed manufacturing plants, but by technological innovation, much of which was connected to the region’s rich research community.

Evergreen Solar’s early years were an example of the synergy between schools and start-ups, and greater Boston’s universities will surely continue to spin off new companies. Professor Sachs, for example, has moved on to 1366 Technologies, a solar company in North Lexington, Mass., financed by a Waltham-based venture-capital fund.

Massachusetts’ edge lies in ideas, not products. Those ideas are best produced in creative clusters, built around cities, where knowledge moves easily from inventor to entrepreneur. The only production that really needs to occur in greater Boston is the early-stage manufacturing that can be an important part of the research process. Mature companies, like Evergreen Solar, naturally move their factories to lower-cost areas.

Energy from the sun that doesn’t require vast carbon emissions or dependence on difficult allies is something devoutly to be wished. The main difficulty with solar energy has always been cost, which is why the falling price of solar panels that seemingly pushed Evergreen to close Devens is actually good news.

As long as solar panels are getting cheaper, we shouldn’t worry about where they are being produced. We should continue financing research on solar technology as long as that research continues to produce cost-cutting breakthroughs, like “string ribbon” technology, but we shouldn’t pretend that cheaper solar energy will end up employing millions of our less-skilled citizens.

For decades, local economic success has come from entrepreneurship and education, not large-scale manufacturing. The Devens closing doesn’t imply that there is anything wrong with clean energy, but it does suggest the difficulties inherent in trying to beat China at cheap manufacturing. In the long run, America will be richer than China only by having smarter citizens, and that requires the skills that come from schools and cities, not dispersed factories.

Edward L. Glaeser is an economics professor at Harvard and the author of the forthcoming book “Triumph of the City.”

SOURCE: http://economix.blogs.nytimes.com/2011/01/18/why-green-energy-cant-power-a-job-engine/?src=busln

2 comments:

gerry said...

The article is very interesting and very true. Solar technology will soon get cheaper and more affordable for everyone. Quality will prevail in the end! I get to experience this here in Germany.

Keep up the great work!!!
Gerry Boiciuc
ecologik.

J Scott Hamilton said...

I believe Evergreen Solar is doing the right things for the right reasons as they adjust to changing global cost structures and technologies. At the time they were pushing the cost boundaries of silicon with their "string ribbon" process, thin film technologies were being perfected but not as commercially viable. Evergreen Solar was greatly assisted by a feed-in tariff structure in Germany that made silicon PV cell production above USD1/watt economically viable.

Now that thin film technology Cadmium Telluride has broken the USD1/watt cost, silicon technologies like Evergreen Solar's needs to find every advantage to become cost competitive. Do not rule out a return to the United States of Evergreen! If the USA economy's cost structure improves, such as with a weaker dollar, it may be possible to produce at production levels again.