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This can either be seen as an argument for a "free-market" approach, or alternatively the state gives the initial boost to help establish industrial critical mass and then market forces can operate.

Or, it can be seen as a negation of the "free-market" frame: the state and the market were both present throughout. The part I would have bolded was this:

The ability of manufacturers to drop their prices by 50%, and still make a positive operating margin, was due to the reductions in costs achieved over the previous four years, driven by scale and advances in wafer, cell and module manufacturing processes

The cost reductions due to scale were the result of large volumes, thanks to the framework set by the state (the stable markets and the feed-in tariffs). The technology development was due to competition between producers on this separated market.

The uneven market price reduction you describe is more indicative of haphazard state policy than any transition from some state-dominated to a market-dominated regime. Contrary to what the article claims, the Spanish incentive regime didn't end, it was only changed with massive and differential rate reductions, crashing the market and resulting in an oversupply situation on the world market. The article also omits to mention degression, that is the (usually annual) reduction of feed-in tariffs, a field where Germany and Spain followed a different philosophy: Germany had pre-set degression rates in a law, Spain had rates re-set every year by government decree.

The Spanish feed-in law produced a bubble because it was high enough to make residential rooftop profitable but offered the same rate for large on-ground plants with few restrictions on siting, thus the latter sub-market drew venture capital with high profits. It was right to burst this bubble, but it would have been better to create an orderly transition with multiple smaller rate reductions rather than one big one.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Jul 31st, 2012 at 07:17:03 AM EST
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