Gamble on the US 

At the “Manhattan Contrarian,” Francis Menton has a simple but bold thesis. He maintains that businesses that need government subsidies to survive are a negative to the economy.

Any country you think of that is following the government subsidy game plan? Remember, unlike the US, China doesn’t allow companies to fail and go through prompt bankruptcies where assets are re-located to more productive uses, maintains Menton.

In China, where avoiding loss of face for the leaders is the highest value, failed businesses get propped up endlessly, dragging the economy down with them.

I guess that we’re just blessed with incompetent geopolitical adversaries, reckons Menton.

During the Trump II administration, the US has gone through, in only 8 months, a sea change in energy policy. Compare Trump’s actions to the Biden administration’s blowout of hundreds of billions of dollars of subsidies and incentives for so-called “renewable” energy sources. Along the way, President Joe Biden also implemented dozens of regulations and restrictions to suppress the production and use of fossil fuels.

“President Trump has now reversed all of that, but with one important distinction,” Menton reminds readers.

… although Trump and Congress have zeroed out nearly all subsidies and tax credits for wind and solar generation and for grid-scale batteries, they have not enacted comparable subsidies and incentives for fossil fuels.

Instead, all sources of energy production now must stand or fall without subsidies, based on their ability to fulfill customer demand and to generate profit. All sources of energy are now on equal footing, and without subsidies.

Let’s now move to China, where billions of dollars in subsidies have flowed for many years into developing the ability to produce the infrastructure for a wind/solar/storage energy system — things like “polysilicon, solar panels, solar cells, wind turbine blades, wind turbine nacelles, and battery cells.”

As a result, China has become completely dominant in the world in manufacturing these and many related items.

Menton refers readers to a WSJ article whose headline reads, “The U.S. Is Forfeiting the Clean-Energy Race to China.” The WSJ authors warn that the international race underway for dominance in “clean energy” is about to be lost to the US. The problem? The U.S. is failing to put up the necessary government subsidies for “clean energy” to vie for the lead.

From the WSJ:

U.S. and China are offering competing visions for the future of energy, representing the next dimension in the showdown between two superpowers vying for global influence and artificial intelligence supremacy. The U.S. renewables retreat goes far beyond the tax bill that is winding down more than $400 billion in estimated subsidies. Federal agencies have tightened rules for new development. The Trump administration recently terminated a multibillion-dollar loan guarantee for a Midwest transmission line, halted a near-complete wind farm off the coast of Rhode Island and canceled $3.7 billion of funding for technologies that could reduce industrial emissions. 

Under the enlightened direction of President Xi, explains Menton, China has opened the money spigot to subsidize “green energy” development. XI Jinping is calling for a revolution in China’s energy system. Xi Jinping wants renewables to be earmarked for special state support as part of Xi’s “Made in China” initiative. The government’s bet is to ease its energy-security challenge as it creates jobs, continues the WSJ:

In a meeting with his economic team in 2014, Chinese leader Xi Jinping called for a “revolution” in the nation’s energy system. Renewables were earmarked for special state support as part of Xi’s “Made in China 2025” initiative. By owning the production chain for equipment such as photovoltaic panels and wind turbines, the government bet it could ease its energy-security challenge while creating jobs. 

Chinese companies continued to erect coal plants, while billions of dollars of subsidies flowed to such companies as JinkoSolar and the battery maker Contemporary Amperex Technology, also known as CATL. Innovation followed. 

From the WSJ: 

By 2023, a solar module produced in China was 65% cheaper than one made in the U.S., according to the energy consultancy Wood Mackenzie. CATL said it spent more than $2.6 billion on research and development last year alone, with a staff of more than 20,000 people. Caroline Wang, an analyst with the Australian think tank Climate Energy Finance, said the resulting renewables buildout has recently left China’s world-leading coal fleet running at less than half capacity.  “They are just leading the world by an absolutely mind-boggling margin,” Wang said. 

In a mindboggling chart provided by the WSJ (sourced to Bloomberg/NEF), market shares of various green energy components illustrate how completely dominant China has become.

Not Even a Close Call

Before placing your bet, consider how Francis Menton is placing his.

The entire idea of an energy system based on wind, solar, and batteries will not work and will fail, probably over the course of the next ten years or so, if not sooner. All … the investment will be lost. All … the employees will be laid off.