Handicapping Energy

Solar panels likely got incrementally more expensive in the US Tuesday when trade officials instituted a new tariff of between 2.9% and 4.73% on solar cells and panels imported from China. Granted, the duties could’ve been far worse (some US producers were hoping for 100%). Meaning this is likely mostly political saber-rattling in what’s been a pretty consistent spat between the US and China over “fairness” in manufacturing and trade practices. But it’s a bit head-scratching to us why solar producers want to engage competition this way—particularly when we live in a world where solar energy has to contend with several energy alternatives.

Much of the alternative energy frenzy seemingly rests upon assumptions we’re going to run out of conventional energy sources in the near future. But fact is the US (and some of our closest neighbors) are sitting on relative energy gold mines. When we start truly developing these vast resources seems mostly a matter of price—if (when?) demand gets too squeezed and prices rise enough, that signals to potential suppliers there are profits to be captured by finding new ways to bring these stores to market. Is it fast or easy? No. But it would be folly to presume if faced with a true impending shortage, the US would have insufficient political will to extract the relatively easier-to-get energy we’re currently not mining. Or that current or future innovations will never be equal to the task of extracting any of the tougher stuff.

From that perspective, it probably doesn’t make much sense, if you’re in the alternative energy business, to handicap yourself with tariffs, subsidies, duties—anything that ultimately artificially increases your prices (and squelches competition, which reduces incentives to innovate, etc., etc.). Particularly since wind power is already seemingly demonstrating that method’s relative ineffectiveness.

Now, fossil fuel energy providers (whether that energy is extracted through conventional means, fracking, etc.) aren’t immune to this temptation to protect—in fact, as competition heats up, it’s entirely possible they seek similar means of fending off competition. It’s a natural inclination.

We’re also not saying natural gas and shale oil definitely win the energy battle and supply the world for years to come. But it does seem likely fossil fuel supplies are ample enough, outside temporary supply shocks (which happen from time to time), to buy time to prepare for the day when oil/gas is too expensive to economically mine anymore.

One thing we do know for certain: The tempo at which the world innovates has done nothing but accelerate (exponentially) throughout history. Markets are incredible encouragers of innovation and have yet to let us down—so in our view, the likelihood the globe ever truly runs out of energy is practically nil. And in the meantime, why would you want to create a world with artificially inflated prices? That seemingly lowers the prospect your method of energy generation is the ultimate winner—regardless of how preferable it may be for political or other reasons.