Oil isn’t the only energy source whose industry has been on the skids lately. Stock prices of a number of solar industries started 2016 off in dismal form, with one solar stock index plummeting 16 percent in the first two weeks of January. Those woes continued last week as the stock price of America’s biggest solar company hit its lowest level since March 2013. As Richard Martin writes for the MIT Technology Review, investors are clearly concerned about the heavy reliance the American solar industry has on support from subsidies:
This week shares of U.S. solar leader SolarCity tumbled to a new low, while several other solar companies also took a pounding. Last month Nevada introduced sharp cutbacks in its program for net metering—the fees paid to homeowners with rooftop solar installations for excess power they send back to the grid. California and Hawaii, two of the biggest solar markets, have introduced changes to their net metering schemes as well. Across the country, as many as 20 other states are considering such changes, which would dramatically alter the economics of rooftop solar.
The uncertainty has cast the solar providers’ business models into doubt. Without net metering payments, residential solar “makes no financial sense for a consumer,” SolarCity CEO Lyndon Rive recently admitted to the New York Times. […]
Without subsidies, the [solar] picture looks a lot bleaker. If each state added a $50 per month fixed charge to solar owners’ bills—a change that many big utilities are fighting for—solar would be at grid parity in only two states. Critics of government subsidies for renewable energy have called the solar boom “an artifical market” that will evaporate the minute government handouts dry up.
This isn’t a controversial opinion, either. Solar companies themselves fight tooth and nail for extensions of the tax credits that have allowed them to gain traction in certain markets because they know that their industry isn’t capable of competing with other energy options on its own merit.
Martin thinks the future is still bright for U.S. solar, but people have been saying that for decades. Our current method of incentivizing renewable energy—following Germany’s lead and subsidizing the current generation of wind and solar technologies on offer—carries with it an important opportunity cost (on top of the more tangible cost taxpayers end up paying): valuable government dollars and political capital, two commodities environmentalists have to know are awfully scarce, are being diverted away from the research and development of breakthroughs capable of muscling out dirtier alternatives without being propped up.