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Addressing “subsidies”: the necessity for putting solar (& wind & …) tax credit in context

March 26th, 2015 · No Comments

This morning’s twitter feed had this:

Solar prices are plummeting. In area after area, the prices are getting to the point of an ability to compete directly against traditional electricity sources/systems without local (and even, at times, without federal) tax or other financial subsidies. With each year, the financial world’s predictions of when solar will be cost competitive is coming closer and the ‘where’ is expanding. (Simply point, everyone — from Greenpeace to Exxon Mobil — has been too pessimistic about how fast solar would expand globally.) Due to lower equipment prices, innovative business models, and economies of scale (in both hard and soft costs), solar is increasingly a viable option for communities, businesses, and individuals not to prominently ‘show their green values’ with solar on the roof, but to put (or keep) green in their pocketbooks through tangible and continuing savings on their electricity bills.

Solar is a (massive) set of good (to great) news stories about the expanding and accelerating potential for the Clean Energy Revolution to dethrone fossil fuel’s dominance of our energy system(s).

This is occurring, however, despite a wide range of serious impediments to expanding solar deployment and hastening integration into the energy system.  From utilities fearful of threats to their bottom line fighting solar installations (creating alliances between ideological adversaries, as libertarian Tea Party activists (such as Conservatives for Energy Freedom) unite with left-wing environmentalists to advocate for homeowners to be allowed to install and own their own solar panels — such as in North Carolina) to outdated financial structures that penalize systems with higher upfront costs but far lower life-cycle costs and which don’t reward distributed systems for system benefits in utility rate discussions to …

To the most important:  the absence of a fiscal price for “externalities”.  From pollution’s impact on children’s brain development to acidification of the oceans threatening food chains to fossil fuel burning pumping out cancer-causing chemicals to the pesky little issue of climate change impacts, there are very serious and very real costs that are either not put into or only marginally represented in the fiscal equation of energy transactions.  A true representation of the costs associated with burning coal might put the price of a coal-originated kilowatt hour at somewhere to 2-3 times higher than it is actually priced on the market.  While there is no energy option without its ‘costs’, there is a simple reality: fossil fuels have far greater impacts and costs that are treated as “externalities” than is the case with renewables like wind and solar.  Simply put, fossil fuels — writ large — benefit from a privatization of profit and a socialization of cost.

In addition to all the other obstructions and barriers to deployment, solar (and wind and geothermal and tidal and …) have to confront a reality: the market’s financial equation undervalues their benefits and subsidies the incumbents by not addressing very real costs.

As those costs — from health treatment of asthma to ash pond pollution of water ways — are “socialized” into the general community, there is a legitimacy for the general community (e.g., the government) to provide a path to recognize clean(er) energy options’ benefits within the fiscal equation. E.g., in short, to provide a tax credit that will help even the playing field for solar electricity.

Thus, my response to Stephen:

And, obviously, thus this post …

To extend the discussion, there could and should be a better path forward.  Here are several thoughts.

  1. Move toward a Feed-In Tariff structure:
    1. Establish a ten-year guaranteed price for the electricity from a system deployed in a specific year.
      1. Have this on a structured glide-slope downward to reward early/earlier adopters and in recognition that the price to produce the power will decline with each passing year.
      2. Perhaps a 5-10 percent decrease from year to year, with a target of eliminating excess above grid prices within a decade (and adjusting plan with long lead time — perhaps 3 years out — to enable sensible business and financial decision-making).
    2. The distributed clean energy system owners’ would be paid for all their electricity production — and then have to pay for, at normal rates, their electricity usage.
    3. Then the entire consumer base would help pay for more rapid penetration of clean energy systems.
  2. Address market barriers to entry.
  3. Price externalities.

None of these are new here and all have received serious attention and discussion. Until, however, these occur, we should have paths to balance the significant subsidies that fossil fuels receive with support to renewable systems: such as tax credits for solar.

A brief plug: Green Tech Media’s Energy Gang podcasts are well worth having on your listening list. What better way to fill your time on that subway commute to work or to occupy your mind while doing the dishes than listening to substantive and informative discussions on some of the least and most tractable issues in our energy system(s)?

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Tags: solar