How Solar Subsidies Wastes Money, Increases Electricity Prices and Hurts the Poor

The CT Mirror has a story today  on Connecticut's solar subsidy program, "Controversy flares in new solar program for homeowners." In our rush to pat ourselves on the back for being green, what we ignore is solar subsidies wastes money, increases electricity prices and hurts the poor.

The gist of the story is solar subsidies aren't big enough and don't last long enough. That is, the pigs at the trough want more and more and more. From their perspective it is entirely fair for the average ratepayer to pay more for electricity in order to subsidize their business.

The math just doesn't work. Connecticut ratepayers pay about 18.26 cents per kilo watt hour for residential electricity. (see page 6). The relevant metric in solar is "levelized costs" which is the equivalent cost per kilo watt hour for a solar system over the life of the system. Levelized costs will vary based on the cost of the solar system, the installation costs, the efficiency of the system and the amount of sun the system can collect. In Connecticut the levelized costs for a solar system is about 30 cents per kilowatt hour. In order to make a solar system competitive what the government has to do is make sure everyone doesn't get a fair shot, everyone doesn't do their fair share, and everyone doesn't play by the same rules, to coin a phrase.

The system is rigged in Connecticut in three ways. First there is "The Combined Public Benefits Charge represents a combination of three charges formerly known as: "Conservation and Load Mgmt Charge, Renewable Energy Investment Charge, and Systems Benefits Charge."That is, we pay a direct fee to subsidize solar energy, it's about 3% of our electric bill. Second the state mandates the amount of electricity that must be generated by renewable energy. This results in less investment for natural gas and other traditional power sources, which are lower cost than solar and wind. Third, the state gives direct subsidies to solar producers and residential customers to install solar.

We end up then with higher costs, to subsidize a politically connected group of businesses to install solar systems mostly on homes of high net worth residents (the average costs of a residential solar system tops $40,000) and the poor get hurt most since electricity is a bigger part of their budget.

CCEA Outlook Combines Bad Writing and Bad Economics

We were puzzled by the CT Mirror story, "State projects could play key role in accelerating economic recovery in 2012," because it put forth a rather inane concept that a state could accelerate economic growth by taking money out of one pocket and putting it into another pocket. Since the State must balance its budget, all spending must be funded by increased spending or increased borrowing. And since borrowing must be paid back, and with interest, taxes will go up to fund that. Robbing Peter to pay Paul is not a legitimate economic theory.


The story was based on a report, "Outperforming the Nation: Is it Sustainable?" by CCEA, the Connecticut Center for Economic Analysis. We strive to be civil in this column, but there's no way to be polite about this report. The writing is awful. It's worse than awful.

The title page states, "This CCEA Outlook explores policies for ensuring the State of Connecticut’s recovery continues to outpace the Nation’s." There is this sentence, "Though still early in development of the Biosciences Connecticut complex, the major research building that will house Jackson Laboratories on the Farmington campus, and construction of the New Britain-Hartford busway, each will clearly strengthen the state’s economic performance significantly, by nearly 1% in 2012 and 1.15% in 2013." Chart 3 is labeled, "Employment Growth Eschewing and Including Low Interest Rates." And on it goes.

Awful writing. Awful economics.

Where the CT Delegation Stands on HHS Ruling Against Catholic Church

If anyone can find Jim Himes' opinion on the policy that will force Catholic run hospitals and charitable organizations to offer services that violate the Church's teaching, please let us know.

In late January, the Department of Health and Human Services (HHS), as part of the Affordable Care Act, also known as ObamaCare, ruled employers must offer contraceptive services to their employees as part of their health care plans. The Catholic Church objected, stating it was against Church doctrine for Church-run organizations like hospitals and charities, to offer contraceptive services to employees. The White House offered a compromise on February 10th, that is best summarized by Greg Mankiw, "Semantics at the Highest Level."

Where does the Connecticut Congressional delegation stand?
CT-1 John Larson applauds the compromise, but was silent on the initial ruling.
CT-2 Joe Courtney also applauds the new ruling, but was also silent on the initial ruling.
CT-3 Rosa De Lauro "will work to ensure that this policy is implemented in a fair and equal way that does not compromise women’s access to preventive health services regardless of their employer," and was also in favor of the initial ruling.

CT-4 Jim Himes is silent on the issue. However, Mr. Himes was kind enough to let us know he dove into Long Island Sound with the Mayor of Bridgeport.

CT-5 Christopher Murphy was also silent on the issue.

Senator Joe Lieberman was against the ruling, see his February 8th twitter "Government should not compel religious organization’s to provide services contrary to their beliefs," and he "applauds compromise offer, will review the details on implementation."

Senator Richard Blumenthal came out in favor of the compromise but was silent on the initial ruling.


John Cochrane has the most insightful, non-sectarian view on this issue, "The Real Trouble with the Birth Control Mandate," which is why HHS should mandate insurance plan cover a specific service, like birth control?

Unfortunately the debate is framed as one over religious freedom. The real debate, as Cochrane points out, is the freedom of all of us to organize our lives as we see fit.

Bipartisan Soapbox: Lunacy

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