Wednesday, August 08, 2012

Why Taxpayer Subsidies of Solar Are Diabolical

From a "rare guest post" on Steven Landsburg's The Big Questions blog by David Bergeron, president and founder of solar-powered refrigerator company Sundanzer:

"Here is the real problem: Subsidies make solar appear viable today, so where is the motivation for an entrepreneur to risk money, or even focus on developing real energy alternatives when solar is “almost” there? How can an inventor justify striving with the effort it takes to really develop something great when he is competing against a straw man technology which can provide power at almost the same cost of traditional power sources today? But of course it really doesn’t.

The answer is he can’t justify the effort, so the next great thing is not developing, at least not with the sense of urgency it should be. Why enter a contest when you are competing against someone with an unfair advantage? You may be the faster swimmer, but your competitor is using flippers.

Solar subsidies are a placebo which is giving the general public a sense of security about our energy future and is robbing the motivation of those entrepreneurs that could actually address our energy problems. Subsidies are much worse that just wasteful, they’re diabolical. They lull us into thinking we have almost solved the problem and they hinder us from seeking the real solutions."

HT: Jon Murphy

57 Comments:

At 8/08/2012 8:49 AM, Blogger VangelV said...

I agree. The government needs to be much smaller so that it can't steal wages and savings from the productive class to reward others.

 
At 8/08/2012 9:06 AM, Blogger Scott Drum said...

We subsidize millions of people to not work and to have children they can't support. It seems only consistent to subsidize technologies that do not produce economically as well.

 
At 8/08/2012 9:09 AM, Blogger Rufus II said...

The goal is to get to $1.00/Watt, installed, for a utility-sized system by 2020. This is probably a bit more important than a solar-powered icebox.

 
At 8/08/2012 9:20 AM, Blogger Rufus II said...

$1.00 / (4W x 365 x 40) = 1.7 cents/KWhr

Of course, fifty or sixty years is just as likely as 40.

Seems to me like a reasonably good goal to invest a few dollars into.

 
At 8/08/2012 9:27 AM, Blogger juandos said...

"This is probably a bit more important than a solar-powered icebox"...

I would say that the solar powered icebox is far more important and timely in today's world than some collection of goofy looking eyesores covering buildings, houses, and stretches of property attempting to crank out electricity at a buck a watt...

Far more practical...

 
At 8/08/2012 9:35 AM, Blogger VangelV said...

Seems to me like a reasonably good goal to invest a few dollars into.

If you think so then risk your own money, not that of your fellow citizens who already have to pay for so many other useless things.

 
At 8/08/2012 9:38 AM, Blogger Rufus II said...

I have to invest to insure your killer nuke plants; you can invest in my solar.

 
At 8/08/2012 9:42 AM, Blogger Rufus II said...

My tax money goes to fight wars for mideast oil, even though I'd rather get my fuel from MidWest Farmers.

 
At 8/08/2012 9:43 AM, Blogger Jon Murphy said...

I have to invest to insure your killer nuke plants; you can invest in my solar.

That seems like an argument against government investment/subsidies in energy, rather than for it.

After all, nuclear power was once the energy of the future.

 
At 8/08/2012 9:43 AM, Blogger Rufus II said...

Sometimes we just don't get our "druthers."

 
At 8/08/2012 9:47 AM, Blogger Rufus II said...

Ah, I'm not really anti-nuclear, Jon. Those plants have given us a lot of pretty reliable, reasonably clean electricity for a while.

The real point is, government takes the lead in all sorts of things; and, not necessarily to the "detriment" of the citizenry.

 
At 8/08/2012 9:48 AM, Blogger VangelV said...

I have to invest to insure your killer nuke plants; you can invest in my solar.

No you don't. I can build my nuke plants in Mexico and sell their power in California if it is willing to pay my rates. Or you can allow a market in which private insurers will step in to make sure that all actual damages are paid for. As I said, it is easy to build nuclear plants that do not produce much waste or pose any material danger to the public. You don't see them because the government has gone a long way to make certain that they never gain a foothold.

 
At 8/08/2012 9:49 AM, Blogger VangelV said...

My tax money goes to fight wars for mideast oil, even though I'd rather get my fuel from MidWest Farmers.

Your taxes should certainly not be used in Obama's offensive wars in the middle east. You should pay the market price for oil and the market price for agricultural commodities.

 
At 8/08/2012 9:51 AM, Blogger VangelV said...

After all, nuclear power was once the energy of the future.

It still is. The problem is that the industry is the most over-regulated of all and as such is not allowed to adapt as it would in an unregulated marketplace under the rule of law.

 
At 8/08/2012 9:56 AM, Blogger juandos said...

"My tax money goes to fight wars for mideast oil, even though I'd rather get my fuel from MidWest Farmers"...

Oh yeah rufus straight from the bowels of Media Matters...

Well my extorted tax dollars goes towards America's socialist war against business and I would rather have that money back to buy something from business instead...

 
At 8/08/2012 9:59 AM, Blogger VangelV said...

The real point is, government takes the lead in all sorts of things; and, not necessarily to the "detriment" of the citizenry.

In nuclear the government chose uranium and shunned cleaner and better thorium systems.

 
At 8/08/2012 10:47 AM, Blogger geoih said...

Quote from Rufus II: "The real point is, government takes the lead in all sorts of things; and, not necessarily to the "detriment" of the citizenry."

Sounds like the same logic that leads to things like the public schools, socialized medicine, the TSA, and carpet bombing.

 
At 8/08/2012 10:47 AM, Blogger geoih said...

Quote from Rufus II: "The real point is, government takes the lead in all sorts of things; and, not necessarily to the "detriment" of the citizenry."

Sounds like the same logic that leads to things like the public schools, socialized medicine, the TSA, and carpet bombing.

 
At 8/08/2012 10:48 AM, Blogger morganovich said...

rufus-

you seem to be missing the whole point here.

the government never subsidized power from nuke plants nor forced utilities to buy power from them at above market rates.

they sold power into the gird just like anyone else.

solar does not. it gets huge subsidies and forced patronage from utilities that are required to pay above market rates.

that's not money spent developing a tech, that's money spent on bad tech that distorts a market.

imagine if cars had been sold that way. you are REQUIRED to buy a gremiln or the pinto get's a $20k per car subsidy.

who is going to develop new cars in the face of that?

sure, you can make a better car than a pinto, but if a pinto costs me $1000 and you have to compete at actual market prices and try to charge $20k, why would you even bother trying to get into the business or improve your products?

the saturn and the honda would never have come into being.

that's precisely what solar is doing.

developing a technology is one thing, but forcing people to use it before it's ready is another entirely.

the former is what companies and universities are for, the latter is what happens when you apply the coercive force of government and wrecks a market.

 
At 8/08/2012 10:49 AM, Blogger Jon Murphy said...

Ah, I'm not really anti-nuclear, Jon. Those plants have given us a lot of pretty reliable, reasonably clean electricity for a while.

Ah, I see. Sorry for misunderstanding.

The real point is, government takes the lead in all sorts of things; and, not necessarily to the "detriment" of the citizenry.

I can agree with that. I don't want you to think I am anti-solar (I am not. Love the stuff). My point is, even though the government is well meaning and the plans may create benefits, maybe even net benefits, it inherently cannot maximize net benefits, except by accident.

I am not one of those conspiracy nuts who think the government is out to get you. I have no problem with cops (most of them are good guys) and politicians honestly do what they think is best.

But even with the most well intentioned policies, the government cannot possibly possess all the knowledge needed to allocate resources in the way that net benefits are maximized (total benefits minus total costs). This is one thing the market can do best. Although the market may not constantly allocate resources at top efficiency, it can do it better than any other institution.

I digressed a little. Let me sum up my point, and it will likely be the final thing i have to say on this topic (today, anyway):

Solar power sure has its benefits. it may be the power of the future (I think it is; have some money invested in a few promising start-ups). Currently, the price tag is rather high. I am all for developing alternative fuel sources. I am an environmentalist and conversationalist who would love to see fossil fuels go by the wayside. But let's not force ourselves into poverty by spending lots of tax dollars on bad investments. Rather, let's let research develop naturally and turn our tax dollars elsewhere where they can do more good. Hell, we could even lower tax rates (if one was so inclined), allowing entrepreneurs and citizens to have more cash in their pockets, which could be invested or saved. Tax dollars are precious. Let's not waste them.

 
At 8/08/2012 11:05 AM, Blogger Buddy R Pacifico said...

Federal low cost / guaranteed loans to solar projects totaled $250,000,000 in June.

 
At 8/08/2012 12:27 PM, Blogger Rufus II said...

Look at it this way, Jon: Basically, what we're doing now IS just a giant research and development project.

There's an enormous disparity between what a couple of guys in white lab coats can do, and what a couple of real, live entrepreneurs trying to get rich in a real market can do.

People have been messing around with solar for fifty years, but, only after various governments started giving out subsidies, and developing the market did the costs really start falling. And, man, they have fallen like crazy.

We're looking at panels for approx. $0.70/Watt, today, vs over 10 times that just a couple of years ago. First Solar is projecting $0.54/Watt next year.

Next, you'll see "installations" start to become competitive. I think they'll hit their $1.00/Watt "Sunshot" target.

 
At 8/08/2012 1:32 PM, Blogger juandos said...

"People have been messing around with solar for fifty years, but, only after various governments started giving out subsidies, and developing the market did the costs really start falling. And, man, they have fallen like crazy"...

Hmmm, so its no big deal that 80% of DOE Green Energy Loans Went to Obama Backers isn't problematic?

 
At 8/08/2012 1:36 PM, Blogger Ron H. said...

"Seems to me like a reasonably good goal to invest a few dollars into."

So, how much have you personally invested in this good goal, or do you prefer just investing money stolen from me?

 
At 8/08/2012 1:40 PM, Blogger Ron H. said...

"I have to invest to insure your killer nuke plants; you can invest in my solar."

That makes sense - as long as *everybody* is poking themselves in the eye it's fair, and no one should complain.

 
At 8/08/2012 1:49 PM, Blogger Jon Murphy said...

Look at it this way, Jon: Basically, what we're doing now IS just a giant research and development project.

Well, I can understand that point.

Thank you, Rufus. I always enjoy your comments, even if I disagree.

 
At 8/08/2012 1:50 PM, Blogger Ron H. said...

"The real point is, government takes the lead in all sorts of things; and, not necessarily to the "detriment" of the citizenry."

Besides the obvious point that it's not the role of government to "take the lead in all sorts of things" using other people's money, it's now unclear whether you are *for* or *against* subsidies to nuke power.

 
At 8/08/2012 2:06 PM, Blogger Rufus II said...

I'm agnostic to them.

Nukes aren't as great as some want me to believe, But they're not as bad as their critics declare

(although, I really, really disagree with the part about them being over-regulated. Really, really, really, really, really disagree wit dat.)

 
At 8/08/2012 2:12 PM, Blogger Rufus II said...

Juandos, let's say we were in the Renewable Energy bidness in 2007. Who would We have contributed to? McCain?

 
At 8/08/2012 2:37 PM, Blogger morganovich said...

rufus-

" Juandos, let's say we were in the Renewable Energy bidness in 2007. Who would We have contributed to? McCain?"

that seems like a bit of a finessing of the issue.

perhaps you would not donate at all.

but, when offered a chance to trade a few kilobucks in donations for many megabucks of investment, from a patronage oriented federal government, well, it's an attractive investment for a company (though not for taxpayer).

 
At 8/08/2012 2:38 PM, Blogger Ron H. said...

"People have been messing around with solar for fifty years, but, only after various governments started giving out subsidies, and developing the market did the costs really start falling. And, man, they have fallen like crazy."

Duh. Who would have thought...but...what happens when the subsidies stop, or can they ever stop?

"We're looking at panels for approx. $0.70/Watt, today, vs over 10 times that just a couple of years ago. First Solar is projecting $0.54/Watt next year."

Oh, and you forgot to mention that *despite* such tremendous success, and continued subsidies, First Solar lost money in 2011, it's stock dropping 76%, and that due to loss of subsidies in Europe, FSLR has closed its German facility, shrunk it's Malaysian operation, and will lay off 30% of it's workforce this year.

So much for "good paying green jobs".

FSLR has now chosen to abandon efforts in the subsidized market, and will refocus its efforts on the utilities market, where mandates for renewable energy make success almost impossible to avoid.

What a fine example you chose.

Did it ever occur to you that if people have been "messing around" with solar power for over 50 years, and there STILL isn't an economically competitive product, that maybe - just maybe - solar isn't a viable idea for large scale energy production?

 
At 8/08/2012 2:44 PM, Blogger juandos said...

"Juandos, let's say we were in the Renewable Energy bidness in 2007. Who would We have contributed to? McCain?"...

Well now rufus you do pose an interesting question there amigo and I don't know...

Still I do remember McCain's involvement in the Keating 5 or 7 so I would not put it past him...

McCain has on occassion in the past made noises to the effect that he too was a believer in AGW which in my mind at least calls into question either his intelligence and or his integrity...

Still that's not the problem today is it?

 
At 8/08/2012 2:46 PM, Blogger Ron H. said...

"Juandos, let's say we were in the Renewable Energy bidness in 2007. Who would We have contributed to? McCain?"

You're not being clear. Is this a defense of crony capitalism, an acknowledgement that it's human nature to be self-serving, or what?

It doesn't appear to support your argument that subsidies are necessary, and that it's OK for government to decide energy policy, only that such uneconomic activities exist.

 
At 8/08/2012 2:52 PM, Blogger Ron H. said...

juandos

"McCain has on occassion in the past made noises to the effect that he too was a believer in AGW which in my mind at least calls into question either his intelligence and or his integrity..."

My bet would be on questionable integrity.

Politicians say whatever they feel will get them votes, and you can tell they're lying because their lips are moving.

I no longer question politicians intelligence, as that's rarely the real issue. Even stupid ones have smart advisers who can find them the correct answers if they really want them.

 
At 8/08/2012 3:44 PM, Blogger Rufus II said...

My answer was in context to Juandos' link.

 
At 8/08/2012 4:26 PM, Blogger marmico said...

Hmmm, so its no big deal that 80% of DOE Green Energy Loans Went to Obama Backers isn't problematic?

Fact check.

 
At 8/08/2012 6:35 PM, Blogger Ron H. said...

marmico

"Fact check"

No one is referring to Romney here. Did you actually read the Heritage article? Your Fact check reference does nothing to refute the claim, and in fact, makes it sound as though the problem is worse than claimed.

"…In the 1705 government-backed-loan program [alone], for example, $16.4 billion of the $20.5 billion in loans granted as of Sept. 15 went to companies either run by or primarily owned by Obama financial backers—individuals who were bundlers, members of Obama’s National Finance Committee, or large donors to the Democratic Party. The grant and guaranteed-loan recipients were early backers of Obama before he ran for president, people who continued to give to his campaigns and exclusively to the Democratic Party in the years leading up to 2008. Their political largesse is probably the best investment they ever made in alternative energy. It brought them returns many times over.

…The Government Accountability Office has been highly critical of the way guaranteed loans and grants were doled out by the Department of Energy, complaining that the process appears “arbitrary” and lacks transparency. In March 2011, for example, the GAO examined the first 18 loans that were approved and found that none were properly documented. It also noted that officials “did not always record the results of analysis” of these applications. A loan program for electric cars, for example, “lacks performance measures.” No notes were kept during the review process, so it is difficult to determine how loan decisions were made. The GAO further declared that the Department of Energy “had treated applicants inconsistently in the application review process, favoring some applicants and disadvantaging others.” The Department of Energy’s inspector general, Gregory Friedman, … has testified that contracts have been steered to “friends and family.”

 
At 8/08/2012 6:38 PM, Blogger Ron H. said...

"My answer was in context to
Juandos' link.
"

Well, perhaps that was your intent, but you may have missed the mark. Are you excusing political cronyism?

 
At 8/08/2012 7:15 PM, Blogger marmico said...

Fact check reference does nothing to refute the claim

Oops, wrong link.

The fact check refutation. (near the bottom)

 
At 8/08/2012 7:41 PM, Blogger Ron H. said...

"The fact check refutation. (near the bottom)"

That's better. So, the *fact* isn't in question only the amount.

Personally I don't listen to political ads as they are all pretty much fact-free appeals to emotion.

 
At 8/08/2012 8:19 PM, Blogger marmico said...

So, the *fact* isn't in question only the amount

Presumably, some of the loans were awarded to GOP backers. Allison's independent review pegs the subsidies (losses) at about $3 billion which leveraged $40 billion in private investment.

 
At 8/08/2012 9:13 PM, Blogger Rick Parker said...

It won’t make any difference if solar cells are $5.00 a kw or $.50 a kw, solar still won’t work. At $.50 a kw 10 kilos of panels cost $5,000 but a 10 kwh solar installation still cost about $60,000.00. Labor and all the other materials that make up the system eat up most of the cost and they aren’t going down in price. The best 10 kwh solar system made, running in the most ideal location, say Phoenix is about 19% efficient so it only produces 16,644 kwh. At a market rate of $.12 a kwh that equals $1997.28 of power annually.

Assuming you can borrow the $60k you need to install it for the 25 year life of the system your monthly payment would be $317.00 or $3800.00 annually, twice as much as your system actually produced. It wouldn’t matter if the panels were free, it wouldn’t matter if they paid the consumer $1.00 a kw, the system would have to installed and operated for under $30k total for 25 years to even match conventional power and that isn’t happening now or ever.

The only difference between solar and a pyramid scheme is that no one is forced to participate in a pyramid scheme.

 
At 8/08/2012 10:41 PM, Blogger Ron H. said...

"Presumably, some of the loans were awarded to GOP backers. Allison's independent review pegs the subsidies (losses) at about $3 billion which leveraged $40 billion in private investment."

I don't think the issue is so much a matter of political party, as it is the awarding of favors for campaign contributions and support.

Why are government officials promising that I will make good on loans if the borrowers defaults?

 
At 8/08/2012 10:45 PM, Blogger Ron H. said...

Rick Parker:

"The only difference between solar and a pyramid scheme is that no one is forced to participate in a pyramid scheme."

I don't know about that, I have FICA "contributions" ripped out of my paycheck every week. :)

 
At 8/09/2012 3:43 AM, Blogger Benjamin said...

Diabolical? And then federally mandated and subsidized ethanol must be...a Satanic Cabal!

 
At 8/09/2012 11:49 AM, Blogger juandos said...

"Allison's independent review pegs the subsidies (losses) at about $3 billion which leveraged $40 billion in private investment"....

This Allison, Herb Allison marmico?!?!

 
At 8/09/2012 12:00 PM, OpenID aab7a418-e243-11e1-beca-000bcdca4d7a said...

The US Constitution was written specifically to have tariffs at its core. What the British could not accomplish by invasion, they were accomplishing by trade war under the Articles of Confederation. If you are not a "protectionist" and protect your industry, you soon will not have any or good jobs either. Duh, Americans. Why do you think you have so little industry? Chinese so much smarter than you.

 
At 8/09/2012 12:27 PM, Blogger juandos said...

The always questionable "Fact check" marmico?!?!

This Fact Check of the Annenberg Public Policy Center?!?!

Well, what heck?

Why not?

 
At 8/10/2012 9:55 AM, Blogger Aztrek said...

No problems here! I live in the Netherlands, just bought new a 3.2kWp system for 4000 euros without any susidies. That's almost 3kW of power per year. Everage kWh price here is 0.22 , so after 6.5 years my system will giving me free energy. This is without solar or any other subsidies!

 
At 8/10/2012 10:30 PM, Blogger Hydra said...

Well yes. Or it can multiply the number of near contenders who can afford to compete.

Consider quarterbacks. A lot of very good quarterbacks have spent years on the bench. Basically insurance for the team. The team knows they can do the job, maybe even excel. Yet they sit on the bench because of the star system, prior market penetrs tion, and the team marketing strategy.

The government attempts to level the playing field, and sometimes fails. The question is whether the NET difference justifies the star system.

Total Cost = Production Cost + External Cost+ Government Cost.

Some of you have said this equation is stupid, but I have not yet seen a proof that it fails.

 
At 8/10/2012 10:31 PM, Blogger Hydra said...

Solar powered ice boxes are very old technology.

 
At 8/10/2012 10:45 PM, Blogger Hydra said...

It might be hard for Obama to find any green energy investment opportunities among those who are not his backers.

 
At 8/10/2012 10:48 PM, Blogger Hydra said...

Hey would I read a heritage article? They are so predictable that having read the headline I can write the rest in my head in a millisecond: we know where this goes .

 
At 8/11/2012 2:23 AM, Blogger Ron H. said...

"Total Cost = Production Cost + External Cost+ Government Cost."


"Some of you have said this equation is stupid, but I have not yet seen a proof that it fails."

It is stupid because it fails every time, as you can't accurately measure external costs, nor government costs, so the total cost is meaningless.

 
At 8/11/2012 1:43 PM, Blogger VangelV said...

It is stupid because it fails every time, as you can't accurately measure external costs, nor government costs, so the total cost is meaningless.

You mean they can't just make up numbers to support their narrative and justify violating your property rights? You obviously don't understand the social democratic system.

 
At 8/11/2012 1:56 PM, Blogger Ron H. said...

"You mean they can't just make up numbers to support their narrative and justify violating your property rights? You obviously don't understand the social democratic system."

Apparently I don't, but there are several commentators who seem eager to enlighten me. :)

 
At 8/24/2012 1:00 PM, Blogger Green Apple Energy USA said...

Couldn't agree more...

-Sharone Tal
Solar NJ

 

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