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Solar Panel Problems

by Elaine Schwartz    •    Sep 2, 2011

We could call it a double pay-off. Subsidized by stimulus spending, Solyndra could create jobs and develop “green” technology. But it did not work out that way.

According to the Washington Post and the NY Times, solar panel maker Solyndra got a $527 million stimulus-related loan from the US Treasury and an Energy Department loan guarantee. With total sales near $250 million at the end of 2010, the firm employed about 1000 people. Now though, they need bankruptcy protection and are stopping production.

Inexplicably, a Department of Energy representative said, “The project that we supported succeeded. The facility was producing the product it said it would produce, and consumers were buying the product.”

Here, an econlife post looks at how government is subsidizing electric car manufacture.

And here is another post on solar panels.

The Economic Lesson

When government subsidizes business, it affects the supply curve. Upward sloping, the supply curve shifts to the right because money from government cheapens the cost of production. As a result, it crosses the downward sloping demand curve at a lower point, and equilibrium price drops.

Even with the subsidy and supply shifting to the right, U.S. made solar panels are more expensive than China’s.

An Economic Question: Do you believe that the US government should subsidize an industry and a technology that it wants to encourage or should it let the market system make the decision?

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