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Gray Watson
Alternative energy subsidies need to be considered in a larger economic context
In the recent post titled "The hole in the rooftop solar craze" the author tries to make a economic argument for why subsidizing alternative energy is a bad idea. But I would suggest that one has to be careful jumping to "obvious" conclusions when reading these kinds of analysis, which on the face appear reasonable but are extremely myopic and misunderstand or intentionally misstate how subsidy and change have always occurred. Right off the bat his allegations that utilities can buy power so much cheaper are inaccurate. If I put solar on my house, PG&E pays me about 4 cents per unit versus charging me about 30 cents. They are still making money, though admittedly their centralize utility model is under siege by all user generated power technologies, whether solar, wind, centralized or dispersed.
Yes, it is true that the solar industry has enjoyed some subsidy. And subsidy inherently costs money (that is why it is called a subsidy) because its purpose is to help establish a new industry. And as has always happened, new industries start out less efficient than they evolve to become. But one could rightly argue that it was rooftop solar in the 1970s that began all of this and led to the development of the technology that is just now being applied to large scaled commercial solar farms. And the rapidly decreasing cost of solar panels for those facilities was only possible because the Chinese have subsidized the production of solar panels to the point that its price per kilowatt is now about 5% of what it was 25 years ago. And it was government subsidy that build our national highway system and our phone system and our power grid, all of which benefit every aspect of business and made the Internet possible. And it was government subsidy that build the Internet (nope, it was not Al Gore :) that so many people now take for granted and are able to monetize for their own personal financial benefit... and I don't hear anyone complaining about that cost. And even military spending since WWII has been the basis of uncountable product development, research and break throughs that went on to become consumer benefits, the cost of which dwarfs the pittance spend on solar, are one of our biggest government subsidies to this day.
However, what is more obviously missing from the gentleman's equation is that fact that the G-7 countries subsidize fossil fuels to the tune of about $1 trillion dollars a year in taxpayer money (tax credits, depletion allowances, trade tariffs, etc.). The subsidies for the entire alternative energy sector pale in comparison. In fact we subsidize sugar production by 10 times the amount we subsidize solar (for no benefit whatsoever, unless Type 2 diabetes is considered desirable) and we still allow gold mining companies to lease federal land for next to nothing and do not require any clean up by the mining entity afterwards... that's all taxpayer costs, based on laws passed in the late 1800's still on the books.
So this kind of article, though it sounds well reasoned is pretty much a nonsensical side show in the scheme of things. The market is already now matured enough (thanks to supportive public policy and subsidy) to be moving toward much more cost effective methods. Still, if I put some panels on my house and my energy bill goes to 10% of what it was, I consider that a good deal. And the no money down financing being offered by all solar companies (a 25 year lease of the equipment) is not taxpayer funds, it's private investment that sells discounted cash flows and government tax credit (about 10% of the lease amount) on Wall Street.
Finally, how do we do this equation without putting a price on clean water and clean air and human health? Conventional energy production (coal and oil, both of which are heavily subsidized from drilling to transport to sales) is still the greatest contributor to acid rain and particulate air pollution.
When I ran Environmental Media Fund we helped fund a film called Burning the Future, about coal mining in West Virginia. I recommend seeing it. The woman who starred in it subsequently won the Goldman Prize, the Nobel Prize of the Environmental World, given every year by the William Goldman Foundation of SF.
http://www.burningthefuture.org/show.asp?content_id=14089
So my point is that solar and renewable energy are a very good thing and are actually at a tipping point. Cheap, clean energy for homeowners and small businesses, available mostly because financial markets are involved is a good thing, and the world's biggest insurers and reinsurers (Warren Buffett) are now pricing in the cost of carbon emissions the way they price in asbestos and nicotine liabilities. That is forcing business and government to change how they produce, purchase and use energy and keep their insurance costs down.
And I would suggest that anyone who believes we can follows these kinds of narrow economic analysis should then also agree that they will not take either social security or Medicare, when they come of age, but instead give the money back and pay for private health insurance. And they will also stop writing off their mortgage interest charges and local taxes when they file their tax returns. After all, those are the biggest subsidies to individuals we have.
So perhaps it's just worth considering in the big picture.