Should the Arizona Corporation Commission require the customers of APS to provide yet another subsidy to solar energy production? That’s the question at the heart of the argument between the utility and it’s net-metering customers.
APS customers who own solar panels are allowed to sell the energy they don’t need back to APS at full market price. When solar power is not available, they use energy off the grid, usually at times of high demand. APS has clearly shown that under this arrangement, “net-metering” customers don’t pay their fair share of the cost of building and maintaining the grid infrastructure.
APS proposes to pay panel owners $50-$100 less per month for the solar power they purchase. Solar panel owners and their allies in the business object, arguing that the implicit subsidy is warranted because of the great societal benefit of solar power.
University of Arizona economics professor Gautam Gowrisankaran argues that alternative energy subsidies would be “good for the economy” because they would “spur technological development to reduce carbon emissions”.
That would be good if it were true because solar has a big technological handicap. It is still one of the most expensive methods known to generate electricity. Every solar enterprise in existence today depends on government subsidies to stay alive.
But it doesn’t seem logical to assume that further subsidies stimulate innovation. In fact, the opposite case makes more sense. So long as we are willing to pour billions of dollars into supporting today’s inadequate technology, the incentive to innovate is less, not more.
Besides, what other technology had to be nursed along for decades by government before it became economically viable? Did automobiles? Airplanes? Computers? Did nuclear or fracking or other energy technologies followed this course?
The special break for net-metering is actually one of the least significant subsidies granted to solar. Solar panel owners receive a 30 percent tax credit on installation. Manufacturers like the failed Solynda and many others have been awarded a smorgasboard of loans and grants. SolarCity is among the companies that, as part of the 2009 Obama stimulus, receive cash in-lieu-of tax credits for installing solar panels in homes and businesses.
Yet solar panel installers and their customers have gone to the mat to protect the special treatment they now receive from APS. They’ve poached some Republican heavyweights to make the case that the solar energy industry is good for the economy. Solar energy provides jobs, they claim.
But that argument doesn’t hold water. All forms of power generation employ people and contribute to the economy. If we didn’t subsidize solar, other energy producers would eagerly fill the void. They would also employ workers, but without requiring a handout.
Rhine Resch, CEO of the Solar Energy Industry Association, advances another argument, that net-metering “really is a property rights issue. Homeowners should have the right to install solar … and sell that electricity.”
Huh? The “right to sell” assumes the right to compel someone else to buy. It’s a desperate argument and basically economic gibberish.
Others argue that all energy sources are subsidized one way or another, so why not solar? That’s unfortunately true, although no other energy industries are propped up to the extent that solar and wind require.
But the better approach would be to end all energy subsidies. The demand for energy is relatively inelastic, and there are multiple sources of supply to compete for the business. It’s an ideal environment for the free market to work.
There is no good reason for government to pick winners and losers other than to moderate externalities, principally air pollution. (Hint: nuclear plants emit no carbon, yet nuclear is relatively disadvantaged by solar subsidies).
It appears that the technology to make solar financially viable isn’t far away. In the meantime, we’re foolish to jeopardize the economic growth we so desperately need by distorting markets and subsidizing noncompetitive technologies. The Corporation commission should let APS sort it out without more “help” from government.
• East Valley resident Tom Patterson (email@example.com) is a retired physician and former state senator.