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Solar Power Isn’t Working (Without Fat Subsidies)

The American Interest

The current generation of commercial solar panels don’t work well enough for people to install them unless they get fat subsidies and tax write-offs.

Maine is far from the Sunshine state—more than 1,200 miles north of it, in fact—but that isn’t stopping the solar industry from agitating for a subsidy regime there to help prop up the fledgling renewable energy resource that involves long-term contracts based on prices set by regulators. Bloomberg reports:

Despite long winters, a famously foggy coastline and relatively few solar panels in operation, Maine is emerging as a pivotal U.S. state for determining how consumers will pay for power generated by the sun.

U.S. solar installations have boomed more than 10-fold in the past five years, driven in part by a policy known as net metering that requires utilities to pay their customers for extra solar energy from rooftop panels. That’s lowered consumers’ monthly bills, and also cuts into revenue for utilities that still must contend with their own fixed costs — spurring conflict between traditional power companies and solar providers.

 Lawmakers in at least 17 states, from New England to the Sun Belt, are now considering changes to the economics of rooftop power, and the industry is watching every debate closely. Maine has proposed replacing net metering with a system that lets utilities sign 20-year contracts with residential solar customers. And instead of paying the retail price, as called for under current policies, utilities would pay rates set by regulators.

The industry seems to believe that solar is a complete non-starter unless utilities are forced to pay extremely unrealistic prices for solar energy produced by households. The trouble is that when these generous subsidy programs generate that kind of interest, the cost quickly rises to become overwhelming. Meanwhile, the original justification for these subsidies was that by stimulating greater consumer demand, there would be a massive increase in production leading to dramatic falls in production costs. Eventually the subsidy regime, the thinking went, could die away.

That last part in particular doesn’t seem to be happening: long-term subsidies appear to be as necessary to the solar industry as ever. Indeed, the fact that subsidized solar is growing in foggy, cold, sun-challenged Maine, while without huge subsidies it is in trouble in sunny Nevada, tells us everything we need to know. This isn’t a business and it isn’t a sign of a great economic shift: it’s an example of how poorly-designed government subsidies divert resources and slow the march of progress. The technology just isn’t there yet—the current generation of commercial solar panels don’t work well enough for people to install them unless they get fat subsidies and tax write-offs.

The public interest—and the climate—would be much better served by shifting resources from subsidies for substandard and inefficient green tech to research into next generation alternative energy sources that can compete on the merits. Support for basic research into technologies whose ultimate payoff will be social as well as financial is one of the places where government intervention makes the most sense. Support of green rentrepreneurs is a waste of time and money and will hurt the economy without helping the planet.

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