A Free-Market Energy Blog

Hillary’s Solar Future Has a Bad Past

By Robert Bradley Jr. -- September 28, 2016

“President Bill Clinton in 1997 announced the Department of Energy’s Million Solar Roofs Initiative as part of the buildup to the international negotiation on climate change held in Kyoto, Japan. The goal’s date was 2010. Yet after 40 years of government plans and incentives, the U.S. is not halfway to Bill’s one-million goal.”

“If solar was really cheap, dependable, and competitive, Hillary would not need to be touting solar as the energy future — or espouse special government favor either. Let-the-market-decide would be enough.”

The centerpiece of Hillary Clinton’s energy plan for Election 2016 is to boost the nation’s installed solar capacity seven-fold between the time she takes office and the end of 2020 (four years). Going from 20 gigawatts to 140 gigawatts would involve a half-billion solar panels on twenty-five million roofs.

Why is a politician proposing a Federal Energy Plan, anyway? Why not let consumers decide in a competitive market? The answer is that shifting from conventional electricity to solar is far too expensive without a raft of special subsidies — and more to come per Hillary.

Her initiative is in the service of climate alarmism (despite the temperature “pause” that is nearing 19 years) and keeping natural gas, coal, and oil in the ground. “We can make a transition over time from a fossil fuel economy, predominantly, to a clean renewable energy economy, predominantly,” she said upon unveiling her proposal.

Recycled Energy Policy

What is advertised as new is really old. Jimmy Carter’s National Energy Plan of 1977 proposed to prohibit “discrimination by electric utilities against solar and other renewable energy sources,” and recommended a variety of solar tax credits. We were running out of oil and gas, the political establishment assured us.

Twenty years later, President Bill Clinton announced the Department of Energy’s Million Solar Roofs Initiative as part of the buildup to the international negotiation on climate change held in Kyoto, Japan. The goal’s date was 2010.

President Obama and California Governor Jerry Brown have kept the solar-subsidy bonfires going most recently.

Yet after 40 years of government plans and incentives, the U.S. is not halfway to Bill’s one-million goal. The bad economics of the technology, coupled with visual pollution and other homeowner turnoffs, are responsible. It is not from a lack of effort by crony capitalists who have repeatedly taken the government lure,  from Enron to Solyndra.

Enron’s Solarex (1994)

A few years before Million Solar Roofs, the New York Times excitedly reported that photovoltaic “rates competitive with those of energy generated from oil, gas and coal” was finally at hand. It involved a $150 million, 100-megawatt central-station facility in northern Nevada proposed by Enron Corp.

Enron’s project promised solar power at an unheard of $0.055 per kWh, well below the national average retail rate of $0.08 per kWh and less than the average price paid by the federal government for its electricity.

“Grand promises in the late 1970’s about the potential of virtually pollution-free, endlessly renewable energy sources like solar energy faded into an embarrassed hush,” Allen Myerson wrote. “But several of the nation’s leading solar power experts say Enron’s optimistic goal is probably reachable.”

As always, the optimism was predicated on large cost drops and mass production. “[D]uring the last decade, the cost of solar power generation has quietly declined by two-thirds,” the Times explained. “Far from depending on some wondrous breakthrough, the experts say, Enron can offer commercially competitive solar power by inexpensively mass-producing solar panels, and then employing thousands of them in the Nevada desert.”

But then came the kicker. “Enron has asked the Government to buy or guarantee a market for its power, with annual increases of 3 percent, for 30 years,” he wrote. “It also depends on leasing Government land, receiving Federal tax benefits for renewable energy and financing construction with tax-free industrial development bonds.”

The project was also contingent on a partner building an adjacent factory to manufacture the solar panels en masse.

Enron’s project, projected to power a population of 100,000 (never mind intermittency), scheduled to open in 1996, was never started. It was energy-by-press-release, a factor in the company’s demise seven years later.

Ancient, Not Infant, Industry

Solar certainly cannot use the infant industry argument for its special taxpayer treatment.

Solar collection technology has been a topic of scientific research since at least the 17th century. The “photoelectric effect” was discovered by Edward Becquerel in 1839. The Sun Power Company in 1911 demonstrated the technology in Philadelphia wherein 10,000 feet of collector surface powered a steam-powered water pump.

All along the way, solar enthusiasts have claimed the coming parity of solar with conventional energies. Energy guru Daniel Yergin said in 1979: “The range of energy possibilities grouped under the heading ‘solar’ could meet one-fifth of U.S. energy needs within two decades.” Eight years later, the head of the Solar Energy Industries Association referenced a “consensus” that “after the year 2000, somewhere between 10 and 20 percent of our energy could come from solar technologies, quite easily.”

In 2011, Energy Secretary Stephen Chu opined: “Before maybe the end of this decade, I see wind and solar being cost-competitive without subsidy with new fossil fuel.” Ironically, just months after Chu’s bold prediction, the government-backed solar firm Solyndra declared bankruptcy, leaving taxpayers on the hook for $536 million.

Dilute, Intermittent Energy

The sun is a free energy input, but turning dilute energy into useful work is very expensive because of the huge up-front infrastructure required. This was recognized in 1878 by technologist John Ericsson: “[T]he fact is . . . that although the heat is obtained for nothing, so extensive, costly, and complex is the concentration apparatus that solar steam is many times more costly than steam produced by burning coal.”

How expensive is solar? The Energy Information Administration (EIA) estimates that the cost of solar power will improve to $125 per megawatt hour in 2020. Compare this to the cost of an operational coal plant of $38.40. Installed nuclear power generates power for around $29.60. Gas capacity is in between these two figures. Such existing capacity needs no help from solar.

According to an estimate by the Manhattan Institute’s Diana Furchtgott-Roth, if the nation’s electricity from natural gas (about 40% of our electricity) were entirely replaced with solar power today, utility bills would spike by roughly 25 percent.

Product Inferiority

Solar proponents have excitedly reported increasing sales and falling costs of their technologies. “Since the implementation of the ITC in 2006, the cost to install solar has dropped by more than 73%,” proclaims one trade group. Residential costs, it is added, have fallen by 45% in the last five years with contracts today as low as $50 per megawatt hour.

There are two problems with this bluster. First, solar could be cheaper (it is most certainly not) and still rejected by consumers. Solar power is intermittent; nights and cloudy days idle the expensive infrastructure. Without very expensive battery storage to provide continuous power, the lights would go on and off. Appliances would be taxed. Nighttime would require candles and flashlights.

Consider this analogy: would you buy a cheaper car that had a trick motor? Or a more expensive car that was capable of continuous drive? Solar fails on not only a cost but also on a quality basis.

Subsidies: Just Count Them

According to the latest Annual U.S. Solar Market Trends Report, there are a dizzying array of subsidies for solar:

  • The federal Investment Tax Credit.
    • The ITC allows an individual to claim a tax credit of 30 percent of the residential or commercial costs of installing solar panels. The ITC applies to both residential and commercial installations.
  • The U.S. Treasury Grant in Lieu of Tax Credits (aka the 1603 Treasury Grant Program).
    • Congress enacted this program in early 2009 as part of the American Recovery and Reinvestment Act. The program offers grants instead of tax credits. In 2013, the federal government handed over a combined total of $1.8 billion to almost 1,000 solar projects
  • Federal Loan Guarantees.
    • The U.S. Department of Energy offers loans for renewable energy projects. In 2013, the department spent $7.2 billion through this program.
  • State Renewable Portfolio Standards.
    • RPSs vary by state, but they typically mandate that utility companies produce a certain percentage of electricity from qualifying renewable energy. Twenty-two states and the District of Columbia have an RPS or Distributed Generation requirement.
  • State and Utility Rebates.
    • States offer financial incentives for solar installations.

These subsidies have only increased in recent years. In 2013, Congress requested the EIA to total the federal taxpayer giveaway. The results were astounding. From 2010 to 2013, federal electricity-related subsidies increased by 38 percent — from $11.7 billion to $16.1 billion. Over the same period, subsidies for electricity-related renewable energy surged 54 percent — from $8.6 billion to $13.2 billion.

Solar’s Free-market Niche

Solar power has its place far off the electricity grid where there are no plugs. In such remote locales, very expensive electricity beats none. Perhaps a diesel generator will come later (so-called distributed power), but a solar panel with small storage capability is a start.

Off-grid solar is a free-market domain, no cronyism needed. David Bergeron of SunDanzer Development, a company he founded 15 years ago in Arizona, has refused to join the Solar Energy Industries Association until the trade group “gets out of the crony capitalism business and represents the sustainable solar industry, the off-grid market populated by willing buyers and sellers with taxpayers and on-grid consumers left alone.”

Without special government favor, in other words, real market-driven solar companies would not have to compete with the cronies and fly-by-night operators. Moreover, foreign suppliers are the ones reaping the benefits at the expense of U.S. taxpayers, not domestic solar firms. In 2012, China provided 35 percent and Asia 81 percent of our imported photovoltaic modules. Only 12 percent was manufactured domestically.

Solar Cronyism Today

Despite the failure of companies from Enron to Solyndra, NRG Energy pushes solar today. In a letter to investors last year, CEO David Crane predicted that businesses and homes would generate “most of the electricity they consume on the premises.” In other words, the central-station economics of power generation of the last 125 years will magically reverse.

Admit it or not, it is a pure government subsidy play, not an economic venture. And even with subsidies, the news is not good for shareholders. “NRG Energy will continue to focus on its residential solar and renewable energy technology businesses, despite posting losses of $53 million and $163 million in those units respectively in 2014, company executives said in an earnings call Friday.” Continued one news report:

Those losses — and another $981 million in losses in the “corporate” segment, which includes international business and electric vehicle services — were offset by net income of more than $1 billion in NRG Business, the unit that primarily serves businesses and includes the company’s generation assets. Total net income for the company in 2014 was $134 million ($0.23/share), compared to a loss of $386 million in 2013.

So the conventional side of NRG is subsidizing the political side. And Enron-like, NRG touts its growth statistics amid the bad financial news.

According to Kelcy Pegler Jr., president of NRG Home Solar, the company ended 2014 with 13,000 total residential solar customers, 9,000 of which were gained that year. NRG has a goal of adding 22,000 to 27,000 more by the end of 2015.

“It’s our view at NRG that traditional centralized energy service models are significantly at risk,” said Steve McBree, president of NRG Home, the parent of Home Solar. “We believe that the future eventually will belong to demand-driven decentralized models of service that empower individual consumers.”

No wonder that Milton Friedman once complained that the “two greatest enemies of the free enterprise system in my opinion have been on one hand my fellow intellectuals, and on the other hand, the big businessmen.”

Conclusion

If solar was really cheap, dependable, and competitive, Hillary would not need to be touting solar as the energy future — or espouse special government favor either. Let-the-market-decide would be enough.

But government energy policy is about overriding natural consumer preferences. It is about centralization, coercion, and taxpayer burden — and higher prices for ratepayers. Consumer choice in a government-neutral environment is the best policy — and an obvious part of an overall plan to reduce government spending and retire existing federal debt.

Yes, there will always be a new report about how some new solar technology is lowering costs. That hype is decades old. But competitiveness against electricity generated from natural gas, coal, and oil is something quite different.

The historical record with government-dependent solar makes a clear point. New subsidies should not be enacted but existing subsidies ended. Ditto for wind power, ethanol, and other politically correct energies. Cleaning up the tax code should be a bipartisan issue for the 2016 Election.


This post reprints an opinion-page editorial that was originally published a year ago this month (September 15, 2015) at Forbes.com. A recent look at Hillary Clinton’s solar policy has been published by the Institute for Energy Research.

One Comment for “Hillary’s Solar Future Has a Bad Past”


  1. Mark Krebs  

    “But wait;there’s more!” (says DOE and Ron Popiel).

    Here is the latest “new report:”

    Revolution…Now — 2016 Update

    http://energy.gov/eere/downloads/revolutionnow-2016-update

    At this rate it will soon be “too cheap to meter.” So why are we still subsidizing this?

    Reply

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