Big Renewable-Energy Subsidies Backfire

Even the most generous subsidies will look like a pittance in retrospect.  Everybody put your “$500/barrel oil goggles” on and your perspective might change a bit.  With renewable energy percentages pathetically low in this country, I see no reason to stop subsidizing.

If states and municipalities are concerned about “losing” billions of dollars, maybe they ought to take advantage of the fact that solar and wind are actually very low risk investments with an incredible ROI (unless you think grid prices will stay flat for 40 years).  The status quo is to subsidize private investments in renewable energy—the government thereby forfeits any return on the money they dole out—and then they complain about losing money.  If they used that money to actually purchase and retain ownership of renewable energy installations, they could sell the power at or below market rates with PPAs, covering operation, maintenance and administration costs.  It could be net revenue neutral or even slightly revenue positive to fund future development.  Just look at the bond method that Berkeley has introduced—property owners request solar installations, the city finances the full cost of the systems with low-interest bonds and the property owners slowly pay back that money plus administration costs and bond interest through small property tax increases.  Whether or not these methods get solar and wind to grid parity remains to be seen but you can be damn sure it’s cheaper than millions of people financing and installing renewables separately.

There is no lack of money or lack of need for government subsidies.  There is however, a lack of imagination and foresight.

The fossil fuel industries do not want renewable energy to be more
than a minor player, perhaps taking up some of the growth in energy
demand but not cutting into fossil fuels themselves.  That is why they
squirm about the cost of subsidies when renewable energy grows too
much.  The following quote by Pernick in Jennifer Kho’s article shows the insincerity of this anti-subsidy argument:

> “Natural gas, oil and nuclear power all rely, to some extent, on
> subsidies and incentives. The oil industry doesn’t have to apply for
> subsidies every year.”

But Jennifer writes in her next sentence:

> “That argument might not be enough to keep the government cash
> coming.”

Jennifer says here more than she probably intended: the whole bullaboo
is not about rationally arguing the economics of renewable energy, but
about finding a pretext to maintain subsidies, sales and profits for
fossil fuel industries.  Also the word “backfire” in the title is
telling.  It was never the purpose of renewable energy subsidies to
seriously promote renewable energy.  It was only tolerated as a
smokescreen, and when the subsidies are indeed successful this is
perceived as “backfiring.”

And the problems which Jennifer cites from Germany are not that
renewable energy is bad for the economy, it isn’t, but the “backlash”
in Germany: Fossil fuel industries have the gall to complain even in
Germany, the poster child of successful renewable energy policies,
about the cost.  If anything, Germany and the rest of the EU
need a carbon tariff on imports from countries with cheap and dirty
energy, but of course the WTO will not allow that, therefore this
is unmentionable.

It is true that one has to be careful how subsidies should be
formulated; this is the truth in Jennifer’s article which makes the
distortions and inconsistencies easier to swallow.

The subsidies should die now. And it has absolutely NOTHING to do with fossil fuels in any shape or form. The fact is the solar companies are now profitable. The subsidies are being used for sales, marketing and installation which is what the subsidies were never intended for.

Furthermore, if you look carefully at the fine print on where the subsidy comes from (California $3bn program) you will see that even the poor and renters are paying into the funding pool. They will never have solar nor were they ever asked if they would like to opt out because they were renters or under a income threshold. The most egregious part is that a wealthy homeowner uses the subsidies, increases the resale value on his home and then works to zero his monthly bill because of net metering. The knock on effect here is that the wealthy are taking from the disadvantaged in many forms. When the wealthy homeowner zeros his utility bill with PG&E that doesn’t really reduce the capital costs and maintenance costs to maintain the utility—the utility just is bringing less revenue now which also “backfires” on the disadvantaged because their rates will go up to make up for the shortfall in revenue to the utility.

The subsidies are being gamed by the solar industry when all we need is a cursory review of the 10k/q of companies like SPWR which are quite profitable.

If we end the subsidies, the solar companies will be forced to compete as their brethren in the semiconductor industry (Intel, AMD, nvidia etc) are forced to do. This in turn would cause the price per installed watt to collapse creating true scale—without subsidy. This in turn would quickly “Darwinize” other energy production technologies such as nuclear, coal etc.

The solar revolution is being purposely held back by a bunch of get rich quick types that refuse to get off the subsidy crack pipe. A real scandalous and sleazy shame…

The solar business is the furthest thing from a shame. I owned an installation firm in NJ for 4 years and found it akin to running a business on quicksand because it is a nacent industry. In a mature industry you can find trained people, in solar you had to home grow each engineer, BDO, manager, worker etc. For permits and approvals, it was a crap shoot if the town was familiar with the technology and open to learn or an renewable energy obstacle enemy.
In regard to equipment, the availability was random and pricing spiked everytime another contry passed a solar tarrif.
But the most destabalizing factor was the State Agency that paid for the subsidies. This perfect storm of instability made it impossible to form economies of scale or cost cutting measures.
So there is no shame here, just an industry trying to get off the ground. Grid-Tied PV is 11 years old. NJ should form some stability for the industry. The truth is the adjustment should have been increasing the amount of Solar in the Renewable Portfolio Standards, not destabablizing the industry due to their own political problems.