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

Everyone Needs Help During COVID – Except The Solar Power Industry

Among all the COVID-19  media content I’ve seen this year, there was one interview I related to above the rest. It was a doctor saying that he could help people with COVID, but he couldn’t cure ignorance.

This might be the most relatable line of 2020 for anyone who works on and around Capitol Hill or even the casual political observer. And, with yet another COVID response bill ready for passage, ignorance is once again on full display. One provision in particular seems to be pushing the levels of absurdity: the left wants to include solar tax credits in the COVID response bill.

Enacted in 2005, the Solar Investment Tax Credit provided an advantage to the emerging solar industry. It was originally slated to sunset in 2015, but it was extended until 2021. Activists are now leading the charge for solar and wind tax credits in the COVID relief bills.

The problem is that the “need” for the tax credit has long since finished. At this point it is just a crony gift to an industry that has investors, manufacturing, innovation, distribution, and scale. In other words, it isn’t an industry in its infancy any longer.

But that isn’t even the biggest issue. The biggest issue is that it has nothing to do with COVID.

A tax credit does nothing for immediate economic relief. Tax credits can change actions, they can help industries, but they aren’t about speed of assistance. Tax credits make one product cheaper than another product, giving them an advantage in the long-run. While not a great public policy in the first place, this slight advantage applied over time has the ability to greatly shift whole industries.

The solar tax credit has now been around for 15 years, which is more than enough time, especially with large investments flooding into the solar industry, it appears that a market shift has occurred. But, whether or not it is time for solar credits to sunset (spoiler: it is time for them to sunset), there can be no argument that solar tax credits are one of the least helpful ways to spend money in order to jumpstart the economy.

And, if the maturity of the industry and the ineffectiveness of tax credits in restarting the economy isn’t enough, solar tax credits are also regressive. They primarily benefit wealthy home owners at the expense of renters. In order to buy solar – and therefore benefit from the tax credit – you need to own a home and be able to afford a home upgrade. And, on the other side – if you don’t own a home your taxes partially offset the spending on these rich people.

Add it all together and it is enough for me to invoke another famous line of 2020, “Scream in Your Heart.”

I understand that some people support solar, and they believe that the solar is better for the environment. Some people think wind is the answer. Others think that nuclear power is the solution to it all. And, others don’t care and are happy to use coal, oil, and natural gas until it runs out.

With and without a pandemic, the free market should be left to make the decision. But, in a pandemic it is even more important that our resources are focused on the most vulnerable in society and the economy. A good tax credit, for any industry, wouldn’t accomplish this. A terrible one like this doesn’t have a prayer. It’s just pure ignorance.

Charles Sauer is president of the Market Institute.

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1 comment

  • Am I missing something here?Why would you not want to incentivize everyone-homeowner,small businesses,farmers,etc to not make their own energy?Now,you could argue that residential solar isn’t that efficient.It means more man hours to deliver a certain amount of power.It also,under net metering,may incentivize the installers to only cover 2/3rd of a roof,as opposed to all the roof.(see differences with feed in tariff systems.)Is it somewhat regressive?Yes,data would suggest it is concentrated in the middle and upper middle of income quintiles.(why not the uppermost?).If we are looking at efficient economic levers,practically every economist would suggest adding a carbon tax.The question is whether it is more efficient to wait,and let the first adopters lead or whether its cheaper to eliminate fossil fuel use now.Waiting in my opinion means that those in the lowest quintiles suffer the most.

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