A Free-Market Energy Blog

Solar Subsidies: Misdirecting Industry and Consumers

By David Bergeron -- December 15, 2011

“Solar subsidies are a placebo which is giving the general public a sense of security about our energy future and is robbing the motivation of those entrepreneurs that could actually address our energy problems.”

“In the near term, perhaps our bigger concern than climate change is anthropogenic energy policy.”

In a recent Economist on-line debate, the affirmative motion “This house believes that subsidizing renewable energy is a good way to wean the world off fossil fuels” was surprisingly defeated.

In his closing remarks, the moderator softened his strident opposition to the negative case, even admitting that “subsidizing renewable energy, is wasteful and perhaps inadequate [to address
climate-change concerns].”

Beyond the Climate Debate

The debate, indeed, reopened the question whether anthropogenic greenhouse-gas forcing was a serious planetary environmental concern. But such focus short-changed what I think is the more important question for the Economist. Not only are the renewable-energy subsidies (such as for solar) wasteful and potentially insufficient, they are outright diabolical if indeed there is a looming environmental crisis.

I am not evaluating whether anthropogenic global warming is real and potentially cataclysmic; I’m arguing that if there is a valid concern about the enhanced greenhouse gas effect, not only will the subsidies not solve the problem, but may very well prevent or postpone a legitimate solutions.

Grid Solar: Radically Uneconomic, Intermittent

I’ve written before about why on-grid solar power is absurdly uneconomic and has almost no hope of becoming a viable alternative to current generation technology–or even competitive with other more viable renewable technologies. I’m asking the reader to accept this position for the sake of understanding the potential implication of my claim.

I think it is safe to say that public opinion towards solar is very positive, and there are many in the field claiming that on-grid solar is at or near grid parity.  But it only appears this way because of massive governmental subsidies/ratepayer surcharges for installing and using solar PV.  In reality, it is hopelessly inefficient from an economic sense to be a fix for our CO2 concerns.

The Real Problem of Subsidies

Here is the real problem:  Subsidies make solar appear viable today, so where is the motivation for an entrepreneur to risk money, or even focus on developing real energy alternatives when solar is “almost” there?  How can an inventor justify striving with the effort it takes to really develop something great when he is competing against a straw man technology which can provide power at almost the same cost of traditional power sources today?  But of course it really doesn’t.

The answer is he can’t justify the effort, so the next great thing is not developing, at least not with the sense of urgency it should be.  Why enter a contest when you are competing against someone with an unfair advantage?  You may be the faster swimmer, but your competitor is using flippers.

Solar subsidies are a placebo which is giving the general public a sense of security about our energy future and is robbing the motivation of those entrepreneurs that could actually address our energy problems.  Subsidies are much worse that just wasteful, they’re diabolical. They lull us into thinking we have almost solved the problem and they hinder us from seeking the real solutions.

An Analogy to Leprosy

“Necessity is the mother of invention,” and it’s fairly easy to see this is often the case.  Need is a great motivator.  We need to feel the pain of our situation to really be challenge and change it.

Leprosy maims it’s victims by robbing them of their sense of pain.  The leper can put his hand on a hot surface and not feel the heat.  He can twist an angle and will keep walking.

In the same way, on-grid solar subsidies will allow a homeowner to continue using much more electricity than he can afford (or the planet can sustain) and he will not know it.  If he felt the pain of the real cost, he would use less power.

But he does not feel it, since subsidies hide the pain, like leprosy.


Subsidies defeat market forces on both sides of the equation.  They reduce potential supply by hindering entrepreneurs from developing new energy supplies, and they increase demand by artificially keeping the price of energy down. There could hardly be a more cleverly disguised means of exasperating a potential climate issue.

If solar PV does not develop into a viable alternative, which I believe it won’t for many decades, not only will we have wasted billions of dollars; far worse, we would have defeated normal protective market forces which would have better prepared us for a potential necessary change in energy use.

In the near term, perhaps our bigger concern than climate change is anthropogenic energy policy.


  1. Jon Boone  

    Right on, David. Thanks for writing this. The commodification of dysfunction so that the craven can exploit the ignorant and gullible at public expense has reached apogee with the push for renewables. Unfortunately, people are feeling the pain, in many ways: increased utility bills, less reliable electricity, and a federal treasury under assault, which, among other consequences, greatly contributes to the crushing national debt.


  2. nofreewind  

    Here is an article which I can’t verify the accuracy of, but it makes an interesting point. For the solar farms where I have calculated the cents per kwhr using the construction cost and rated output, I usually get about 40 cents/kwhr give or take 5 cents. This article of newsclips
    seems to say that solar was never more expensive than it is now!


  3. dbergeron  

    Hello nofreewind,

    The article from the 80’s which equates $6-$9/W solar with 15-20 cents cannot possibly be talking about solar electric (PV). But if it were, $6-$9/Watt was too low for installed PV then. And even if it were $6-$9/W, that still does not equate to 15-20 cents/kWh.

    The bottom line is PV was much more expensive then. Today utility scale installations are as low as $3.50/W and equate to 15-18 cent/kWh depending on the discount rate one uses in the calculation. But since PV is intermittent, it must compete with the marginal operatign cost of traditinoal plants, which is 2-6 cent/kWh. It’s still about 5 times too expensive today.

    It is strange they were claiming it was only 3x too expensive 25 years ago!


  4. Lionell Griffith  

    Nothing like faking things that are seen and ignoring all the unpleasant unintended and unseen consequences of the faking. A good case could be made that all the Government support for the technology to capture solar energy is the cause of the fact the story about it has not changed in any substantial way over the past 30 years. It is a technology that is going to solve our energy problems sometime, somehow, somewhere, and some when in the not yet realized future. Yet it never happens. The payoff for NOT making it happen is simply too good for some to pass up.

    Meanwhile, back at the ranch, our pockets are being picked and our lives constrained by people who produce no value, never have, and never will. It is being done in the name of saving the (insert favorite cause here) which cannot be saved and does not need to be saved. We continue to fall for the same old scam and have done so since the first hunting and gathering tribe was formed. Makes no difference if it is a Witch Doctor, a Climate Scientist, or Government Bureaucrat. It’s all the same.

    As the bumper sticker says: “If you are not outraged, you have not been paying attention.”


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