Green Socialism for the Rich

See Green Socialism for the Rich at AEI by Jay Weiser.

"Russell Gold’s “Solar gains traction, thanks to subsidies,” (WSJ, March 31) lists a budget-busting array of residential solar energy subsidies, but actually understates their perverseness. Mr. Shiels and Ms. Kiely, the couple profiled in the article, have a “sprawling ranch house” in Glendale, Arizona (average daily high temperature June-August : 103 degrees), with an annual electric bill that has topped $5,000. Two government incentives for owning such an expensive-to-cool house: income tax deductions for mortgage interest and property taxes.

Having subsidized excessive electricity consumption, the government decides the problem is that it’s the wrong kind of electricity consumption, so Shiels and Kiely eliminate their annual electricity bill by installing $80,000 of solar panels, of which all but $27,200 is paid by subsidies. Assuming a $5,000 annual electric bill and a 30-year useful life claimed by advocates, that’s about a 5 percent return on investment to produce power at twice the cost of fossil fuels — a poor return on a capital improvement. (AEI’s Kenneth Green observes in the article that subsidizing solar makes no economic sense.) This estimate is generous: as Cal State-Dominguez Hills Chemistry Professor Emeritus Oliver Seely notes, performance drops unless the panels are properly positioned to catch the sun, regularly washed, and protected from the encroaching shade of growing trees. Few homeowners will be this fastidious. Even with good maintenance, performance drops over decades.

Worse, the Glendale utility’s solar subsidies are funded by an average $4.05 charge on all customers’ bills. So lower-income customers, who, unlike the subsidy-sucking couple, don’t have $27,200 out-of-pocket cash to buy solar panels, pay higher electricity rates. This is green socialism for the rich.

Jay Weiser is Associate Professor of Law & Real Estate, Zicklin School of Business, Baruch College."