PACE in The Hill: Shining Light on Solar Subsidies

In an op-ed published on Tuesday by The Hill, PACE Executive Director Lance Brown discusses the government policies that make the solar industry possible and why those policies hurt consumers in the long run.

As John Adams once said, “facts are stubborn things.” That’s especially true for the solar industry these days, which is having increasing difficulty dealing with – or even acknowledging – the basic facts of its business model.

Big Solar has come under fire from various fronts, with a spate of studies raising troubling and well-deserved questions about consumer fraud, ballooning tax subsidies, and pricing policies that promote economic inequality as much as they do renewable energy.

Solar scam artists in the West, for example, are being investigated for consumer fraud after allegedly targeting senior citizens with too-good-to-be true deals and scare tactics. A white paper by the Citizens Alliance for Responsible Energy, in fact, finds that homeowners around the country who have “gone solar” have encountered warranty problems, maintenance issues, and even fire safety concerns.

Of course, blaming any industry for the actions of a few bad actors out for a quick buck isn’t always fair. The problem is that Big Solar’s problems don’t stop with a few bad apples; the public policy environment that props up solar energy has become a bad barrel.

Look no further than the policy of net metering for solar power, which allows owners of solar rooftops to sell excess electricity back to a utility at the full retail price. In other words, power providers must purchase excess solar from homeowners at the same price they charge their retail customers, even though the utilities can’t control when the power is available or how much of it there will be. Meanwhile, those same utilities are required to provide power when the sun isn’t shining, but in most cases can’t levy a charge for the luxury of using the public grid as a battery. Economically, such a pricing scheme distorts every principle of the free market.

Utilities aren’t the only victims of net metering policies, though. A recent Harvard Electricity Policy Group study aptly describes net metering’s trifecta of failures.  “Retail net metering overvalues both the energy and capacity of DG, imposes cross-subsidies on non-solar residential customers and is socially regressive because it effectively transfers wealth from less affluent to more affluent consumers,” the study finds. In other words, net metering shifts grid costs from wealthier customers to poorer customers, or as one California critic quipped, not “Robin Hood” but “robbin’ the hood.”

Most damning of all, the Harvard Electricity Policy Group found that distributed solar may not even deliver the environmental benefits promised. “It is absolutely clear that when net metering is deployed, it is simply not a cost-effective means for reducing carbon emissions,” and under certain circumstances, “solar DG might do more harm than good.”

Other studies have described in granular terms the reality of cost-shifting from the less affluent to the rich under net metering policies. In California, the average median income of net metering customers is 68 percent higher than the average household income in the Golden State. In Arizona, a 10 percent jump in solar distributed generation in 2014 is only worsening the cost shifting in that state. A recent study in Louisiana requested by the state’s public service commission found a cost shift of more than $2 million per year currently, with the potential to climb to more than $30 million annually by 2020 if left unchecked. Most affected are low-income customers. In fact, the study conducted by the Acadian Group revealed that Louisiana net metering customers have incomes on average 35 percent higher than non-solar customers, who could be left paying as much as $809 million in grid costs that solar customers aren’t covering.

The Louisiana report went on to conclude that the costs of the state’s net metering scheme, at $89 million today and estimated to rise to as much as $488 million, far outweigh the benefits. Faced with a budget deficit of more than a billion dollars, as well as the reality of shelling out $42 million annually for direct solar subsidies, Louisiana Gov. Bobby Jindal has made elimination of the state’s solar tax credit a key part of his budget-balancing effort.

Combined, these studies paint an ugly picture of inequality spawned by net metering and the high costs of the huge subsidies necessary to keep the solar industry viable. A lively debate would be expected, although the initial reaction of Big Solar has largely been to attack the messengers, as opposed to dispute the facts. Rather than discuss cost shifting from net metering, a phenomenon that is supported by economic analysis as well as by common sense, the data deniers in Big Solar simply want to shift the conversation. Who could blame them? Unfortunately, moving ahead with smart policies that are good for everyone requires confronting the facts, as stubborn as they may be, not obscuring them. Let’s hope Big Solar sees the light.