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The U.S. solar industry is rightly celebrating results for 2016, its biggest installation year in history. But a provocative report from energy-policy experts at Stanford University notes that China, not the United States, will increasingly dominate the worldwide solar industry—particularly in manufacturing, but also in underlying R&D.

The study, The New Solar System, is definitely written from a U.S. policy perspective. But even as it focuses on the U.S.-China relationship, the report also makes the point that solar is becoming increasingly decentralized geographically. And the authors suggest that the United States, and perhaps other countries as well, should approach that increasingly globalizing solar market not by attempting to defeat China, but by “leveraging” it, and focusing their investment on solar R&D and deployment rather than manufacturing.

Opposing conventional wisdom

Even amid the rapid expansion of solar technology and capacity in recent years, the growth of the solar industry in China, particularly in the manufacturing sector, has been remarkable. The Stanford report’s authors note that in 2016, China accounted for 52 percent of global polysilicon manufacturing capacity, 81 percent of silicon solar wafer capacity, 59 percent of silicon solar cell capacity, and 70 percent crystalline solar module capacity. Those numbers dwarf the figures for the United States, which contributes 11 percent of global polysilicon capacity but 1 percent or less of global capacity in the other segments.

The report also emphasizes that, contrary to conventional wisdom, China innovates continually and significantly in solar—particularly in manufacturing technology, but also, increasingly, in basic R&D. One particular milestone cited in the study is the experience of Trina Energy, which recently achieved a world efficiency record for multicrystalline silicon solar cells (an accomplishment duly noted by the U.S. National Renewable Energy Laboratory).

The New Solar System also seeks to burst other perceived myths about the Chinese solar industry. It suggests that, while many view the Chinese solar industry as an emerging financial bubble, in fact solar companies in China are “reforming their capital structures to make them more economically efficient.” And it holds that tariffs from the United States and the European Union, far from economically crippling or holding back Chinese solar, have merely forced the Chinese industry to become “leaner and stronger.”

Clearly, those tariffs have not succeeded in the avowed goal of making the United States a global manufacturing powerhouse in solar. Indeed, the report notes that retaliatory tariffs from China have actually eaten away at the former lead the U.S. enjoyed in one key segment, polycrystalline silicon manufacturing.

Not just for the “granola crowd”

Much of this runs counter to the apparent thinking of the current U.S. administration. Both on the campaign trail and in the White House, the U.S. president, Donald Trump, has shown at least a public appetite for tariffs as a trade weapon against China in particular, has staked much of his political future on vows to bring basic manufacturing jobs back to the United States, and has tended to support fossil-fuel production rather than renewable energy.

But The New Solar System argues that the solar industry has become big enough to require a coordinated federal policy of its own. “Solar isn’t just for the granola crowd anymore,” wrote two of the study’s authors, Jeffrey Ball and Dan Reicher, in an opinion article in the New York Times. “It’s a global industry, and it’s poised to make a real environmental difference.” Moreover, the study suggests, there is little chance of beating China in the solar manufacturing game, where the country owns an almost overwhelming lead.

Seeking comparative advantage

Instead, the report suggests, U.S. solar policy would be better served leveraging the economic concept of “comparative advantage,” an idea as old as the writings of Adam Smith and David Ricardo.  Rather than chasing the chimera of overcoming China’s manufacturing dominance, where it cannot hope to win, U.S. policy should instead focus its solar investment on research and development of new solar technology, where it can make a clear and important contribution. The study even encourages the development of research partnerships between the U.S. and China, to advance the critical overall goal of bringing solar costs down.

Such a focus may run counter to populist promises to boost domestic manufacturing jobs. But a substantial increase in such jobs, the study’s authors note, is unlikely to come from solar, both in light of China’s dominance and because solar manufacturing is “an increasingly automated process.” Boosting investments in solar R&D, they argue, is likely to contribute far more to the U.S. economy in the long run.

The authors of The New Solar System appear to recognize that their conclusions could prove vulnerable to charges of wishful thinking. And they acknowledge the “very real tensions” between China and the United States—tensions that have played out in increasingly strident rhetoric, tariffs, and intellectual-property disputes. But the “notion of comparative advantage is no rose-colored vision of borderless global harmony,” they argue. “It is the increasing reality of the cutthroat international solar market today.”