The Great Solar Upheaval

Spain, one of the global leaders in government-incentivized development of alternative energy, decided to stop subsidizing solar installations. The move exacerbated an already chaotic solar industry worldwide, and has policy wonks debating what the decision means for government incentives for renewable energy in general.

Dow Jones columnist Jamie Miyazaki sees a "bloodbath" in the solar industry that stems from a perfect storm of low cost Asian suppliers, polysilicon supply shortages, and the Spanish policy shift.

She opines that, to survive, companies will need to vertically integrate or outsource, but that cash-rich companies could swoop in and make relatively inexpensive acquisitions from among the carnage once this all plays out. Hopefully, the entire episode will result in market prices that are competitive even in the absence of subsidies.

But what of the policy implications? The larger question of "should governments continue to subsidize solar and other forms of alternative energy?" looms large.

Proponents of government subsidies look at the Spain case sudy and note that government assistance is critical to establishing the necessary infrastructure to capitalize on alternative energy. However, after that infrastructure is in place, subsidies become less important.

Detractors argue that governments are creating bubbles that ultimately will burst, to the detriment of the larger economy.

The Wall Street Journal takes a deeper dive into the policy side of the solar upheaval:

"The U.S. is experimenting with different ways to promote clean energy, including tax incentives and direct federal subsidies to defray installation costs, and mandates for utilities to get a certain amount of their power from renewable energy.

California and New Jersey, which lead the U.S. in solar power, are among states that have used subsidies similar to the ones in Spain to make solar power more attractive. Two House Democrats, Jay Inslee of Washington and Bill Delahunt of Massachusetts, are drafting legislation that would create European-style tariffs for solar power.

The industry's fundamental problem is that, without subsidies, it's still not economically viable."

Spain's Solar-Power Collapse Dims Subsidy Model [Wall Street Journal]