I've seen a few times lately people discussing what the government's role ought to be in energy, specifically as relates to solar power. So I thought I'd take a stab at opening up some discussion on things the political proponents of solar power probably aren't telling their constituents.
So we start this conversation at what solar power currently is from an economic standpoint. Right now, solar power is very expensive way to supply power to consumers. Just to put solar on your roof, you're looking at the price of a car in most states, and that's with subsidies. That means that to equip your current house with solar power most people are going to be effectively taking out another car loan, except that if you move you may or may not recoup your costs.
Now as many fans of solar will mention, the cost of solar is going down and the technology is getting better and both of those are true. However, this is a heavily subsidized industry which has the government subsidizing both the cost to the consumer, which just means it is spread out in higher taxes, and the cost of research and development which can be measured in millions and billions to companies in capital, tax breaks, and other incentives given on a state level. Despite all this, many of these companies have gone bankrupt or left the US.
The other thing that many solar energy fans will mention is the rising cost of more traditional energy sources, which is also true. However, what they aren't mentioning is the ever increasing costs put on these companies by the government in restrictions in maintenance and new power plants and in taxes for carbon. What this means for the consumer is that not only are you paying high amounts of money to pay for an industry that otherwise wouldn't exist and you are having your costs of power directly go up from the artificially higher costs imposed on the power plants by the government.
So to review thus far, the costs of research is passed on to tax payers, the portion of the solar panels your neighbor buys that are picked up by the government are also passed on to tax payers, the costs of failed companies that took tax breaks and other incentives from your state (which are different than those at the federal level) and have nothing to show are pass on to the tax payers, and all the while the cost of traditional energy sources are being artificially raised through taxes and regulations against power companies who pass the bill on to their consumers.
Now I don't say all this to make the case that energy companies deserve our sympathies because they really don't. Most states have granted certain power companies monopolies over specific areas. The rationale behind this is that the cost of infrastructure is too high for it to be possible for normal competition to exist. So what this means for the consumer is that the places where there is a government backed power company there is no market based competition from the power company. In fact, the only person that the power company actually has to listen to is the government, because as the consumer, let's face it you really don't have a choice. That is, until solar comes along.
So now we are in a very interesting situation. We have a government back power monopolies that are now competing with government back solar programs.
Many of the bills floating around are something to the effect of adding even more subsidies to solar power, or they are ones that force the power companies to buy back extra power for the consumer. Are either of these scenarios likely to help the average Joe who can't afford solar panels or lives in an apartment, no.
The only real solution here is to recreate, which is realistically more just allowing to manifest, the market. A bill that allowed you to sell your power to your neighbor or whoever would create competition that would force power companies to provide a better and cheaper service to prevent customers from leaving the grid. The current legislation in question is wishing to force power companies to buy back the power from you at a government specified rate. What this means is that if the rate is worth it for you to send it back to the power company then the power company takes a loss in both the maintenance of the grid to which you use when it is cloudy and you need extra power, and which you use to force them into buying your power. Because there is no direct to consumer negotiation of power, this means that the power company can no longer recoup it's losses from sustaining the grid through selling you power and for each person that converts part of their power to solar and for each person who sells back power the company takes a loss.
So now what? Those losses are going to get paid back to the company in a few possible ways. The most likely are going to be a government negotiated higher cost to everyone who still uses their power, tax subsidies for the power company for each person who uses solar, and/or special fees levied to solar users. So what if you can't afford solar, well for all but one of those you are going to see your energy costs go up faster if more people switch to solar power.
But isn't it better that people just go ahead and get on solar power anyway? Well, not really. The market is pretty good at giving people the lowest price for the best service and if solar was feasible then there would exist companies that didn't survive solely on the government's dole and consumers would be purchasing solar without the need for subsidies as well as many companies, which will have the money before the average consumer to invest in solar, would be doing so as well. Since those aren't already happening and you instead have companies folding despite all the government assistance, what you really have is a government sponsored scheme to force solar energy into a market in which it could never compete at the expense of higher energy costs for everyone, since let's face it, everyone is computing the supposed savings of solar based on the overly taxed and artificially inflated cost of coal.
So what is likely to happen if the costs of energy keep going up and solar doesn't really work out all that well. Naturally, the government will step in doing what it always does, which is to subsidize the low income earner's cost of energy to make up for the simple fact that it was the reason the cost is prohibitively high in the first place, which only puts even more cost of the rest of society. Now this may seem like it's far fetched, but consider the other places that government has gotten involved with the market only to make prices go up. Railroad, or even more interesting would be the NYC subway. More recently you have the costs of health care which say a sharp rise after Medicare and Medicaid were created. Continuing into the future you had Clinton who signed laws to change lending rates and practices to those who were considered high risk by banks which lead to a bubbling rise in housing prices which was followed by the housing bust which tanked the stock market. Even more recently than that you have the carbon credit system that is imposed on auto manufacturers which only raises their costs which are passed to consumers, which you can't say is exactly going to help our failing auto industry. Or there is the cost of education in the US which is only going up but our performance is going down. The cost of education each year is about $8k per child. Pretty much every time the government gets involved, all that happens is higher costs and higher taxes.