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Comment by taneq | Hacker News Reader

"Over-producing" isn't really a thing. You're complaining about supply outstripping demand causing prices to fall - that's always going to happen with any mass produced goods.

It sounds like the real issue is that doing R&D in the U.S. is uncompetitively expensive compared to doing the same work in China.

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Germany was once (ten years ago) the top PV panel producer. All it's MFGs, including SolarWorld[1] have gone under because of dumping and flooding the market with cheap PVs. This subverts R&D in panel technology both in Germany and in the US. In addition, some German PVs were hacked[2] and had their IP end up in the hands of CN MFGs, again, that subverts German (and any other MFG) R&D efforts in PV tech. So we may end up with retardation in PV R&D which is not a good outcome.

[1]https://www.cleanenergywire.org/news/last-major-german-solar...

[2]http://time.com/106319/heres-what-chinese-hackers-actually-s...

Isn't this a good thing when it comes to renewables? If the Chinese state pays for the world to become less dependent on coal that should be good? Solar installations are still labour intensive, probably more so than coal plants.

This is one of the very few cases where I don't mind states subsidising. The technology is still well understood by others so that European/US companies could start producing again if China decides to raise prices.

Not really because they cannot sell below cost in perpetuity --that's just a temporary race to the bottom to see who can survive the bloodbath. In the meantime no one is innovating because there is no money to be made and also there is no money to invest by the subsidized companies since they are bleeding money anyway. So the result is innovation gets retarded.

No, what he is complaining about is the fact that a solar install is a durable good--it has a lifetime and must be amortized.

If the install is cheap crap and only lasts 5 years when you need 10 to amortize it, that's a problem. If the cheap crap drives good manufacturers out of business, that's even worse since now you can't recover once you discover it.

Err ... not according to Econ 101. A rational producer in a perfectly competitive market supplies just enough to clear the market. When people distort markets with subsidies, etc. the amount produced is more. This can also be in industries with barriers to entry as a large producer might supply more on purpose to drive existing competitors out of business.

> rational producer

With perfect information.

snort

Always gotta be careful applying 101 knowledge to a real world problem.

Also, this is an unfortunate misinterpretation of even econ 101. Econ 101 says that there is not a fixed demand for most goods. Demand (and supply) have elasticity, which is a measure of their responsiveness to price changes. A rational producer with perfect information does not "clear the market" if that means "supply enough to meet all demand for the good." (If that's not what it means, I really don't know what it does mean.) They supply just to the point where marginal cost of production is equal to the price the next consumer is willing to pay.

And, subsidies are not definitionally distortionary. Sometimes they can be used to correct uncaptured positive externalities.

It's a problem when market prices drop below the cost of manufacture. That can lead to a financial collapse for individual producers, lack of investment in maintaining capacity and a lack of investment in new technology and manufacturing processes. That can lead to sudden reductions in supply and unpredictable price surges which make it very difficult to control the costs of long term projects.

Extreme price swing for panels aren't guaranteeed to happen, it depends on how governments respond in financial support for producers and changes to subsidies, but that's just shifting the costs of all of this on to tax payers.

There is a thing called dumping though, when a country or company intentionally produces more than is optimal in order to decrease prices and drive their competition out of business.

Over-producing isn't a thing in a pure free market, but it's absolutely a thing when government subsidies get involved.

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