Solar Power Leaks Tax Dollars

Solar Power Leaks Tax Dollars
Bob Clark

August 15, 2008

Rooftop solar electric systems are prohibitively costly to manufacture and install with or without government subsidies.  As reported in the Oregonian, page E1, August 8, 2008, a 2000 watt solar system costs about $21,000 including installation.  Under existing tax credit financing structures, the buyer of these installations pay around $7,500 while taxpayers pay the remaining $13,500.  The owner of these installations, for instance homeowners, are said to save $176 per year as a return on their investment.  Translation:  even after 25 years, the buyer will have lost $3,100, even as taxpayers lose $13,500 per unit installed.  These losses do not include the opportunity cost of funds.

Both the Oregonian and the Oregon Department of Energy tout the carbon dioxide emission reductions stemming from the substitution of these solar power systems for existing conventional power systems.  This argument is a red herring for several reasons.  One, Energy Trust of Oregon documents show conservation is a far richer target for carbon dioxide emission reductions than solar power.  The average amortized cost of conservation is in the range of 1 to 2 cents per kilowatt hour (KWH).  By comparison, the amortized cost of the rooftop solar power systems highlighted by the Oregonian is in excess of 50 cents per KWH when including tax credits.  There is also no consideration for the energy required to produce, deliver, and mount the rooftop solar systems, nor the associated carbon dioxide emissions caused by these activities.  Moreover, solar power also needs backup power systems usually requiring fossil fuel combustion for generation.  Finally, I hearken back to a quote appearing in the Oregonian, March 16, 2008, from a senior resource analyst at the Northwest Power and Conservation Council who said [solar power], “It’s window dressing.”

This left me wondering how much is the state of Oregon spending on solar power systems like the ones described by the Oregonian.  After consulting with the Oregon Department of Energy and reading Energy Trust of Oregon documents, my rough guess is state taxpayers are paying about $10 million per year for these solar power systems.  Such an amount doesn’t make me “blow a gasket.”  After all, some community novelty-like spending has an entertainment and/or experimentation value.  Still, this amount is a caution flag because the Oregon Department of Energy and other authorities are looking to expand spending on photovoltaic power systems beyond the year 2009.  This seems like an obvious poor prioritization of government spending.  Government should not be subsidizing novelty like items like these solar power systems while government supported treatment centers for the mentally ill, for instance, are shuttered, and other basic services like bridge repair go neglected.

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