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.