The Solar Industry Cashes In On Government Subsidies

(REUTERS/Jason Reed)

Chris Millis North Carolina State Representative
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Imagine for a moment you are a North Carolina hog farmer, and you live adjacent to a gentleman who raises chickens, and that the meat produced from both costs the same per pound.

But the federal government has adopted a policy, to promote a healthier population, that its citizens should eat more chicken and less pork – so it creates a 30 percent tax credit on costs incurred by the poultry producer.

The state also thinks it’s a great idea, and implements its own 35 percent tax credit for poultry farmers. It mandates that 12 ½ percent of all meat produced in the Tar Heel State must be fowl (not foul), with at least .2 percent of the production required to be chicken.

Upping the ante, North Carolina lawmakers also think it’s a good idea to grant farmers an ability to sell Poultry Production Credits (PPCs) to the farmers who raise too many pigs, in excess of a cap a government regulatory regime has set. Finally, the state establishes a tariff for the hog farmer’s use of its roads, in which he must pay for its costs. The chicken farmer, on the other hand, gets a rebate for his use of the byways because after all, he’s delivering “better” meat for the overall health of the citizenry.

You might think this scenario is so absurd it couldn’t possibly be true, and you’d be right – as long as we’re talking about animal farms.

But the reality is this is quite analogous to government policy as it regulates the electricity industry. The percentages, mandates, penalties and incentives cited in the example above equate to how renewable power – especially solar – has been favored over more traditional forms (like coal, natural gas and nuclear) to generate electricity in North Carolina. Many other states have at least some, if not all, of the same type of policies.

A report released earlier this month by the Consumer Energy Alliance (CEA) compiled and calculated the subsidies (incentives, tax credits, rebates, and sellable certificates) for the production of solar energy (the “chickens”) through the end of 2015 – specifically the rapidly growing rooftop solar market.

The findings are staggering. CEA analyzed the subsidies for 15 states representing a wide variety of policies and geography. Of those, eight of the states were found to deliver aggregate incentives (when combined with a 30 percent federal tax credit) that exceed the total cost of installing a photovoltaic solar facility.

One of those was my home state of North Carolina. CEA’s study found the accumulation of government subsidies amounted to 119 percent of the cost for solar unit owners. In other words, the compensation from various tax credits, rebates, etc., is a 19 percent profit for those who have installed panels on their properties. Much of this subsidy is “earned” before the units generate even a single kilowatt of power!

The absurdity is even greater in some other states, when combined with the 30 percent federal tax credit. Subsidies in Nevada, Louisiana, Arizona, and Connecticut also add up to more than the costs of solar installations in those states. In Massachusetts and New Jersey, the subsidies exceed 180 percent of solar facility costs – and in California, it’s 208 percent!

It’s no wonder, then, that the six top states for solar capacity installed are also represented on CEA’s highest subsidy list. California is number one, followed in order by Arizona, North Carolina, New Jersey, Nevada and Massachusetts, according to the Solar Energy Industries Association.

Some argue that the “quality” of the electricity generated by these solar facilities is superior to the power generated by coal, natural gas and nuclear, and therefore justifies the amount of subsidies they receive, because it is allegedly cleaner. Unfortunately that is a myth, because when the weather is cloudy (or nocturnal!), the sun is obscured and is a nonexistent energy source. When that happens, coal and natural gas generators must work harder to make up for the ups and downs forced on the grid from solar, therefore polluting more. And that doesn’t even consider the need to dispose of toxic, chemical-ridden solar panels when they reach the end of their (limited) useful lives.

For these reasons and others, many of my colleagues in the North Carolina General Assembly and I eliminated our state-level tax credit for solar installations. Unfortunately many other of our harmful and costly electricity policies are still in place.

There is nothing inherently wrong with various sources of electricity. But it is simply irresponsible and inequitable policy for governments to subsidize one form of energy over another.

You could say some of the “chickens” of excessive government favoritism by the solar industry came home to roost.

Chris Millis represents the 16th District in the North Carolina House of Representatives.