For the past couple of weeks there has been an ad playing on the radio by one of the companies that sell, lease or install solar panels. That ad asks the question as to whether solar power is now so competitive that it is making the utility companies nervous.
Let me help them with the answer. No! Solar power is not competitive and, in fact, would not be commercially viable except for massive subsidies by the government at virtually every turn of the screw. The same can be said of the wind energy industry.
Supporters of wind and solar energy are quick to point to “subsidies” received by the oil and gas industry as justification for the massive government subsidies received by their industries. The trouble is there is no comparison in size, method, or taxpayer risk in those subsidies. The oil and gas industries receive accelerated depreciation treatment for acquisition and development of oil and gas properties. The wind and solar industry receive subsidies through – well, just about everything. A February 8, 2014 article by Larry Bell in Forbes estimated that the level of subsidies to the wind and solar industries is about fifty times greater (per megawatt hour of electricity) than that available to the coal industry and twenty times greater than available to the oil and gas industry.
You can be critical of special tax treatments for any industry, including the oil and gas industry – I am. But the subsidies for the solar and wind industries are so pervasive and so large that, in this instance, they greatly distort the energy market inducing consumers to make either non-economical purchases or mandatory purchases (hidden taxes). Let’s deal with the former first.
I purchased solar panels for my house about four years ago. I paid less than thirty percent of the actual cost and installation. I received both state and federal tax rebates and deductions. The local utility was required by the public utility commission to provide a significant cash rebate that was assigned to the company providing the panels – that cash rebate is recovered by the utility through an increase in rates for other consumers. The utility companies are required to “purchase” the excess (unused) electricity I produce from my solar panels. And I received a “volume” cash rebate from the provider that is covered by their own series of government tax credits, deductions, loans and grants. But for that massive array of compulsory (mandatory tax and ratepayer) subsidies I would never have purchased the solar panels. With the totality of subsidies, I will recover my investment in about seven years. Without the subsidies the cost recovery period would exceed the expected life of the solar panels and, therefore, would have been non-economical.
Should those excessive subsidies be criticized? Absolutely. Should I be criticized for taking advantage of those subsidies? Probably, but this is yet another instance in which dimwitted liberals, lacking any thought, have yet again benefited the very class of people they routinely rail against – wealthy, white, male conservatives. I’m still laughing, but with a fake distraught look on my face. In fact, now that I have joined that wing of liberals represented by President Barack Obama (see last week’s column) I realize that these types of government largesse were made specifically for people like me. (Even with subsidies most working class people would be hard pressed to make the initial investment for solar panels.)
In addition to the type of subsidies described above, other direct identifiable subsides for the wind and solar industries include:
- Federal loan guarantees that seem to flow primarily to those manufacturers whose investors were significant contributors to Mr. Obama’s election and re-election campaigns. One only has to remember the $535 Million default by Solyndra to recognize the massive government subsidies.
- State loan guarantees, tax abatements, and tax credits that vary from state to state but are almost universally available to the wind and solar industries. In Oregon, the primary beneficiaries have been the wind energy industry which, when their subsidies were threatened in the last legislative session declared that the future construction would collapse without them.
- State and federal tax credits and deductions for products that choose renewable energy over fossil fuels. These include everything from golf carts to luxury automobiles proving once again that one of the primary beneficiaries of empty headed policies are the very class of people liberals love to hate – wealthy, white, male conservatives.
But there are other government subsidies that are not as visible but yet impose significant costs on taxpayers and ratepayers to the benefit of the wind and solar industries. The most insidious one is that imposed by the public utility commissions. Historically the public utility commissions have acted to minimize the price of services delivered to utility ratepayers (customers). Utilities, by law are entitled to recover their reasonable expenses in producing services plus a reasonable rate of return on their capital investment. Public utility commissions have used a whole variety of accounting artifices to reduce those costs and the rate of returns. The most common forms include imposition of lengthy depreciation schedules, disallowance of cost and/or imputation of income for inter-affiliate transactions, imposition of hypothetical capital structures and wholesale disallowance of categories of costs actually incurred. All of these brought together are used to reduce the price of service to consumers.
All of that goes out the window however when the politically correct allure of “renewable” energy presents itself. Now, these same miserly public utility commissions mandate that local utilities acquire a percentage of their power from “renewable” resources. The Oregon Public Utility Commission, with the assistance of the Democrat dominated legislature, requires large utilities to acquire twenty-five percent of their electricity from renewable resources by 2025. The cost of production and therefore the price to these utilities exceed significantly the cost of traditional production (hydro, coal and natural gas). These higher cost renewable resources are required to be used even though there are more than sufficient traditional resources available. These higher costs are blended into the lower costs of traditional resources and the ratepayers are denied a choice as to whether they want power from “renewable” resources. Today in Oregon, the cost per kilowatt hour of electricity is artificially inflated by this mandatory purchase of uneconomical “renewable” energy.
Massive wind farms and solar farms are now constructed to meet these artificially imposed requirements. Most of these wind and solar farms receive substantial state and federal subsidies to induce their construction. Quite frankly, renewable energy gets the consumer (taxpayer) coming and going.
The other invisible subsidies occur in government projects. At the intersection of Interstate 5 and 205 is a huge solar panel array designed to provide lighting for that interchange. It is only one of many such government projects paid for by city, county, regional and state government as well as the university systems. All paid for by taxpayer money. Not a single one can be demonstrated to recover its costs within the useful life of the solar panels. In this instance they are not installed as a result of tax subsidies (as were the ones on my house), rather they were installed simply because it is taxpayer money for which no one is ever held accountable.
So pervasive are the governmental subsidies for wind and solar energy that even the company producing the bogus advertisement mentioned above ends its ad by urging consumers to purchase so that they can get all of the tax deductions and credits they are “entitled to.”
What a country.