Issues & Insights
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U.S. Air Force photo by J. Brian Garmon

Note To Congress: Do Not Try To Rescue The Solar Industry

The country is experiencing the worst economic shock since the Great Depression, with millions out of work and whole industries on the knife’s edge. If there is any good economic news in the blizzard of worrisome data it is that the nation’s economic fundamentals are sound and that once the states implement in earnest their recovery plans, many if not most industries will stir back to life and return over time to some variant of normalcy.

But one industry that cannot survive the pandemic and recovery without the continuation — and likely increase — of massive government subsidies is the solar industry. 

The combination of an oil glut and COVID-19 has slammed the oil and gas industry, but it has been downright disastrous for solar. The U.S. solar industry could lose up to half of its 250,000-strong workforce in the coming weeks, said its main industry trade group, the Solar Industries Energy Association. “Preliminary estimates from multiple third-party analysts indicate that COVID-19 will have a significant negative impact on overall solar market activity in 2020.”

According to Bloomberg New Energy Finance, the volume of solar projects is expected to fall 30 percent or more in 2020, while Wood Mackenzie Power & Renewables forecasts that the solar market will nose dive 18 percent this year.

The industry has been propped and coddled into profitability by government. It receives a generous investment tax credit, adopted by Congress in 2006, that provides a rebate of 30 percent on the cost of all new solar projects. The credit is set to be phased out for residential projects over a period of several years and eventually lowered to 10 percent for commercial projects. Many states also provide similar solar tax credits.

As a result of the pandemic, the industry trade group is seeking to delay the phaseout of the tax credit (more subsidies) and is looking for congressional intervention to “double down on economy-wide solutions that help solar businesses stay afloat” (lots more subsidies) including a push for Congress “to develop new programs that incentivize new infrastructure development.” Translation: even way more subsidies.

There is little doubt that American industrial might will rise again in the recovery phase, thanks to inexpensive and clean variants of fossil fuels. Most all the factories that will rev back to life will do so powered by fossil fuels that are plentiful and far cleaner than they have ever been.

The Heritage Foundation’s Stephen Moore notes that the U.S. is reducing its carbon emissions into the atmosphere “at a faster pace than virtually any other country in the world. This is because natural gas is not just cheap. It is one of the cleanest ways to produce scalable and dependable electric power for a nation of 329 million people.”

For all the sound and fury of solar and wind advocates, “with more than $100 billion spent already, less than 10 percent of our energy comes from the wind and the sun, with most of the other 90 percent coming from good old-fashioned fossil fuels,” he notes.

Subsidies have only provided consumers with a skewed sense of the value from solar and allowed renewables advocates to claim the “green” coat of arms, that belongs just as much to natural gas. “Without billions of dollars of cash subsidies and tax breaks for the ‘renewable’ energy sector, along with mandates requiring utilities to buy the power at any cost, wind and solar energy would be hopelessly expensive in most areas of the country,” Moore concludes.

As Congress ponders further stimulus for the economy, lawmakers would be wise to hold fast and refrain from turning up the taxpayer spigot for solar. 

Matthew Kandrach is president of Consumer Action for a Strong Economy, a free-market oriented consumer advocacy organization.

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  • Well, I’m of two opinions on this. We installed a solar system (grid tie) and have produced about 50 Mw since then. Yes, we used the tax credit but I think we have had good return for our money even though our electric company pays us a pittance for what we put on the grid. We have also seen a significant reduction in our electric bill. Maybe we need a solar credit, maybe not. Maybe we need to stick to the present scheduled reduction. I don’t think we need an extension. Yes, we have plentiful natural gas and there is an oil glut but, once we are back to normal, consumption will go up. But, once I have installed a battery bank, I will be nearly grid dependent. My savings will be on the close order of $1500 per annum. That is money I can put back into circulation. Will that be worth it?

    • How much did the system cost? And how much did the government rebate you?

      Without that data, we won’t know if you got a good return or not.

  • Solar and wind are not profitable. You have to factor in the fossil fuel generating plants required to back them up and the increased cost of turning on and off that plant which increases maintenance costs and causes more CO2 emissions than if you just ran the fossil fuel plant 24/7.

  • The author is correct, let the market decide and not the government handouts.

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