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Propped Up
Maine Solar Fight Reveals Subsidy Addiction

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.

We’re all for a shift to renewable energy sources, and also for an end to most forms of subsidies for all forms of energy, fossil and green alike. But more research is what is needed, especially into such critical areas as energy storage.

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  • Blackbeard

    As an engineer specializing in renewable energy I can confidently tell you that rooftop solar in a location as far north as Maine makes no economic sense. And this is the truth of most leftist panaceas: they make no economic sense. Therefore, to hide this fact, the costs of something like rooftop solar have to be “socialized’, i.e., the costs have to be spread out over the general public so that no one can see what is really going on. And that is what is happening here: The folks that install solar get a substantial subsidy and everyone else pays a little more. It’s dumb, but as long as solar is a small part of the overall mix the effect is minor.

    But what happens as renewable penetration starts to become a significant fraction of overall generation as is happening now in some European countries? What happens when it’s all renewable as the Greens promise us will soon be happening here? Where will they hide the subsidies then?

    As Obama promised us, the cost of electricity “will necessarily skyrocket.” Truly a transformational president.

    • Andrew Allison

      Does rooftop solar make economic sense anywhere in the USA?

      • Blackbeard

        That’s a local question. Depends on latitude, sunniness, local electric rates and the state subsidy program. Hawaii is the best spot in the US for residential rooftop solar, Arizona and Southern California are usually pretty good, Texas has plenty of sun but electricity is cheap. Other places need to be evaluated on a case by case basis.

        • Andrew Allison

          Thanks. I should perhaps have written is there anywhere in the USA where solar does not require a subsidy of some sort (tax credits, net metering, etc.)? Even in HI, for example, very generous incentives are thought necessary.

        • Andrew Allison

          Whatever happened to solar hot water, which solves the storage and distribution problem with electricity? Is it significantly less efficient at capturing solar energy, the ancillary plumbing and storage too costly. etc? I had one over 30 years ago, supplementing a gas heater, which as I recall (after the usual subsidies) took between five and 10 years to recover its cost.

          • Blackbeard

            Solar hot water is a lot better than solar electricity in significant part because it’s easy to store hot water until you need it but hard, and expensive, to store electricity. Of course, as always, it depends on what the alternative is. If the altertive is to make hot water with cheap natural gas then solar is hard to justify. If the alternative is electric heating then solar will look lots better.

          • Andrew Allison

            Many thanks. If I may, it seems to me that we should distinguish between the market price of gas and the utility delivered price — I haven’t noticed PG&E applying for a rate decrease despite the collapse in price :<( Do you think that might happen if there were (much) more solar hot water? I'm curious about why there's no talk of this alternative; PV seems to have entirely captured the discussion.

  • Craig Austin

    Taxpayers cash intended for Research and development is used for deployment of ancient technologies (PV solar, wind turbines)

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