President Obama sees nothing wrong with “spreadin’ the wealth around a little,” and he’s also famously a fan of green energy. He might want to look into reconciling those viewpoints, as Brian Potts explains:
Well-meaning—but ill-conceived—federal, state and local tax incentives for rooftop solar give back between 30% and 40% of the installation costs to the owner as a tax credit. But more problematic are hidden rate subsidies, the most significant of which is called net metering, which is available in 44 states. Net metering allows solar-system owners to offset on a one-for-one basis the energy they receive from the electric grid with the solar power they generate on their roof.
While this might sound logical, it isn’t. An average California resident with solar, for example, generally pays about 17 cents per kilowatt-hour for electric service when the home’s solar panels aren’t operating. When they are operating, however, net metering requires the utility to pay that solar customer the same 17 cents per kilowatt-hour. But the solar customer still needs the grid to back up his intermittent solar panels, and the utility could have purchased that same solar power from a utility-scale solar power plant for about five cents per kilowatt-hour.
This 12-cents-per-kwh cost difference amounts to a wealth transfer from average electric customers to customers with rooftop solar systems (who also often have higher incomes).
Melissa and I looked into solar for our house, which enjoys 300 days of Colorado sunshine each year, and some excellent southern exposure. But the financials just didn’t make sense without the subsidies, and we couldn’t count on those remaining in place. So that’s on hold for the unforeseeable future — like when conversion rates go way up and panel prices come way down.
So if solar doesn’t make sense, why are so many homeowners doing it? For starters, the subsidies. But there’s also a vanity element, the “You can see right up on my roof from quite a distant just how green and morally superior I am!” factor. And getting other people to pay for it? Brilliant! The real topper though is getting other people who can’t afford it themselves to pay for yours.
Wonder why our middle class is dwindling? This program, and a thousand others just like it.
Call it “trickle up economics.”