Arizona Solar Job Losses = Arizona Productivity Gains

2011 was a tough year for US and European solar panel manufactures. The following companies declared bankruptcy or closed their solar divisions; BP Solar, Evergreen Solar, Solar Millennium, Solon SE, Solyndra, SpectraWatt, and Stirling Energy Systems. Pressure from low cost Chinese panel makers has forced many long-time solar manufacturers to exit the field, and many employed in the field have lost their solar jobs as a result.
These job losses are no doubt causing hardship and we all hope they can quickly find new work in the free market. But there is a silver lining to the story. The positive side is that the new work they find can actually provide goods and services we need to make life better. Unfortunately what they had been doing had little economic value since the financial return of on-grid solar is only marginal. Overall, the cost of on-grid solar is still about 4-5 times too high to be viable as a free market energy alternative for on-grid applications. So this activity had an economic utility of about 20% of a real free market activity.
In the free market, labor, materials, land and capital are combined to create things worth more than the sum of the inputs. But with on-grid solar we invest $1 in inputs and produce a device worth only about 20-25 cents. In a way, you might say solar jobs are only 20% of a real job. This whole activity has been a drain on the economy and taxpayers. But once these people return to the real work force, making needed goods, we will all have more; real wages will increase and/or prices of the goods and services we want will decrease. It really is a win-win for us all. And the sooner this happens, the sooner the economy will be more productive.
I just hope the transition is short and without much anguish. The drama and pain is no fault of the workers, it is the fault of those in the solar industry that created this bubble via subsidies for this non-viable market segment called "On-grid solar." They have been and continue to plunder money from taxpayers and ratepayers to sustain this unsustainable industry.
  • On-grid solar:
  • does not reduce oil imports,
  • does not create real jobs,
  • destroys free market jobs,
  • is not cost effective at reducing C02,
  • will not significantly reduce the need to build new generation equipment, and
  • stifles entrepreneurs from developing real energy solutions.
Solar should develop under free market forces and government should regulate pollution and tax externalities.
It might not be obvious why these solar jobs, which have low economic value, are not helpful to the economy. For many, a job is a job, so why does it make a difference what is actually accomplished. Sometimes the complex nature of the economy makes it difficult to clearly see the effects of policies, so consider this simplified analogy.
Imagine a small island of 100 inhabitants. Assume they were all productive in producing food, building homes, making clothing, etc. Now assume the island government takes 10 workers away from their usual jobs and makes them dig holes. The overall productive output of the island will drop. This means that there will be less goods and services available. There are still 100 inhabitants, but now only 90 are productively working. So everyone has less. Either prices increase or wages decrease, but the result is the same. Everyone can now afford less of what they could afford before the 10 workers were ‘misdirected.’
This is similar to what is happening with solar subsidies. As money is taxed away and spent on solar, free markets contract and the solar industry expands. The result is that workers are displaced from normal productive free market activities to marginally productive subsidized activities so overall useful output drops.
The economic loss of subsidies for solar jobs might be justified if solar actually viably contributed to reducing pollution or providing energy independence, but those arguments are flawed.
But the island example does not capture the full penalty of the situation. Compelling the economy to manufacture non-economic PV panels is not only a waste of labor, but a waste of other valuable raw materials such as copper, aluminum, steel, land, and even finite working capital.
So now reconsider the island situation, but instead of just digging holes (wasting labor) the misdirected laborers were building homes, which are then bull dozed down. So they are also consuming raw materials such as wood, concrete, copper, etc and then wasting them. Wasting these materials drives up their price in the balance of the island market place. Wood, concrete, copper, etc is now more expensive because this activity is wasting those materials in non-economic projects.
So not only does the island have less productive workers, but raw materials needed for other goods are now more scarce and expensive.
So when you hear that some solar company has closed its doors and 1000 employees have been laid-off, it is more accurate to view it as 1000 people which had been sidelined are now available again in the real economy to produce goods and services. Further, the raw materials and other valuable resources used (wasted) in making the solar panels for the on-grid market are now more available and less expensive.
Stopping this non-productive activity is a win-win for everyone, except for the short term pain of those who must find new work and whose recently developed skills are not potentially useful in the real market.
A WORD TO OTHERS WHO WORK IN THIS ARTIFICIAL SOLAR JOB MARKET: You might keep an eye out for another opportunity. Hopefully the subsidies for this uneconomic activity will end soon and you can join the rest of us in the free market work force. We will all have more goods and services when you do. Please join us as soon as you can!