Solar Subsidization's Dark Side

   -- By James Christopher Desmond (

Renewable Energy World ran
this column titled: “Solar Stunner: America is a $1.9 Billion Exporter of Solar Products.”  I commented, cited this web-book, supplied photos of my own 10KW solar array, and thus explained that subsidizing Solar PV is a fool's errand -- that we are exporting an unacceptable number of American tax dollars in a multi-national race to the bottom, rather than producing free-market-competitive Solar PV products.

Other readers responded, insisting that subsidies make sense.  Here's an example:

samHgrG1: I belong to the camp that profoundly disagrees with FreeMarketeer's premise of libertine de-subsidization. . . . Your 10kW system looks sharp! and you did well to find a contractor that could install it for $3.5/W! Did you ask the guys on the roof what their hourly was? I know licensed journeymen don't torque a termination for less than $50/hr. up here in Oregon.

And here’s my reply:

First, some facts --

(1) I held a barn-raising and installed my grid-tied system myself (I have only basic-homeowner skills), but paid a very smart friend $3000 to help me, primarily by installing the inverters and doing the wiring hook-ups.  Two local electricians showed up and worked for free, just to cop the experience creds.  Another neighbor, a retired nuclear power plant engineer, inspected it, as did the local utility’s top guy (the utility came out to run a billing-insert article on the array).  They highly complimented the result.  Here, by the way, is a
Do It Yourself Solar site.

(2) This was done in a no-zoning, no-code Georgia county, so I was spared the $2500 or so in “permitting” costs that Nanny Gov’t typically imposes on Solar PV-ers (as high as $5000-$6000 in NYC).  I also got the system at MAGE's "installer" price, and can't say enough good things about that company.  As is my practice, I used best quality aluminum and stainless steel Balance of System hardware and thus erected, as I did the prototype home supporting my array, at or above all national building/electrical codes.

(3) I have publicly challenged anyone to cite a lower-cost 10KW, grid-tied, residential installation.  No one has.  And my system’s performing as its solar panel manufacturer (MAGE) promised, making/saving me no less than $100/month at $.07/KWH reverse meter credit
and spared $.13/KWH usage costs.  My 9/4/11 power bill is, cumulatively for this calendar year, negative $674.36.  So, my payback is, somewhat optimistically, about $1200/year, but that's assuming no repair costs (the two SMA brand inverters pack only a 10-year warranty, but as you can see they're mounted indoors) -- hence, elsewhere on this site I've used $1000/year in my computations.

(4) Anyway, do the math on that: $35,000 cash price = 29.2-year payback cycle ($35,000/$1200) on a 30-year warranty.  Make economic sense? Of course not.  That leaves the $14,000 subsidized (65% off due to tax credits) price, which fetches an 11.66-year payback cycle -- again assuming that my two (total cost $5000) inverters last that long.

My question: Do you know anyone who’d invest on either return cycle?  Lend on it?  I don't.  And this is the cheapest code-quality installation you’ll find anywhere.  And remember, you’d easily add $7,000 to the price for a “professional” installation, plus $2500 permitting costs in a high-regulatory state.  Relatedly, the Oct/Nov. 2011 Home Power magazine's "Grid Parity" article at pp. 62 features a "typical" N.J. 10KW array costing "$5/watt" -- hence, $50,000 -- and, pathetically, "projects" a net $367 "gain" after 25 years.  No sane homeowner would invest $50,000 to net $367 after 25 years.

Even at my deal-crushing best efforts (no one beats me in finding the lowest price on anything, my friends revere my skills on that score), the end product is simply too costly.  No one wants it.  So, politicians and bureaucrats, as played by the Corporate Solar Welfare Queens through their bribologists (lobbyists) and well-meaning greenies, "subsidy-bribe" us (me) to buy it.  This from the very same government that's lost $60 Billion of our dollars, much of it given to the enemy, in Afghanistan alone.

Now you know why private investors won't invest or lend on this mass-consumer product. And this year's investment disasters (see below) remind us of basic economic realities. The simple truth is that grid-tied residential Solar PV costs too much.  No one wants it at its fair market price.  It thus is simply not ready for the mass-consumer, free market.

Solar fanboys intoxicated by the thought that any solar’s good solar, no matter what the price nor how high the subsidy (hence, its cost to all of us), inanely cite to mass infrastructure (highway system, internet, etc.) as "successful" subsidy examples.  Of course, those are simply not mass-consumer products like smart phones, i-Pads, PCs (etc.) -- which flourished, under some Moore’s law variant, in an unsubsidized free market (yes, sure, school systems and governments bought a lot of PCs and what-not, but PCs and products like them simply could not have fantastically flourished as they did if they were nearly 100% subsidized like Solar PV is).

Those fanboys thus muddy and bog-down the debate by improperly mixing apples and oranges.

Meanwhile, their perpetually subsidized market scheme has now brought us, this year alone, over one half billion dollars in actual/anticipated U.S. taxpayer losses (Evergreen, Solyndra and Spectrawatt), more or less presumed unrecoverable by this analyst.  Even the FBI's interested

Folks, this is basic stuff:
Private investors/consumers evaluate and then reject a fatally flawed product; photo-opp-hungry politicians then use our money to buy it anyway. Such lunacy is repeated on the same flawed economic and ecologic payoff promises.  Here's an example, as additionally corroborated here and here.  Ditto in other “renewable” sectors.  Here’s a $100+ million taxpayer hit just 15 miles from my own array. More here and here. This stupidity is further magnified by the fact that we Americans are literally subsidizing foreign "green" jobs, including Chinese wind turbines. To quote a commentator in an analogous sphere, "It’s just transferring private madness to public madness."

And state-side, absurdities like these “subsidy farms” thus pocket our money but never post, much less account for, net economic/ecologic results. The U.K. saw their analogue in its massive wind-power subsidy program, where some actually built wind turbines in no-wind zones to -- you guessed it -- "farm the subsidies."

All very predictable.

It gets worse.  Utilities don't even want Solar PV power because it's too variable/unreliable.  Earnest but misguided greenies nevertheless got legislation passed forcing them to buy it.  Utilities, in turn, put up no fight because, as monopolies, they just pass that added cost onto ratepayers in the ultimate taxation-without-representation, stealth-tax scam (yes, I'm hypocritically profiting from both that and the tax-credit subsidies all of us are funding; more on this here).  Ditto for FITS and RPS -- unfunded mandates ("you shall buy that green-energy at money-losing prices!"), which are stealth taxes by any other name.

No one wants variable power because you don't want it -- you want your alarm clock to awaken you in the morning.  And there is no cost-feasible energy storage system in sight, so it's pointless to massively invest in a product no one wants nor is willing to buy unless subsidy-bribed -- and for a result no rational utility manager would ever find attractive (California, now $26 Billion in debt, is simply forcing its utilities to buy/subsidize solar via FITS and RPS standards; its citizens are now validating the maxim that "wealth goes to where it's welcome and flees from where it's not" -- from 1990 - 2007 “some 3.4 million more Americans moved from California to one of the other 49 states than moved to California from another state.”).

Worse, the "hybrid" solution Solar Subsidizers promote have not paid off.  Those schemes try to "fix" Solar PV's variability problem by blending, for example, gas-turbine based plants with solar or wind arrays to assure a steady, base load of power.  Can anyone point to a successful hybrid?  All I've found are economic and ecologic failures -- systems producing no net carbon-reduction result.  Just one example:

"The graph clearly shows that wind energy on its own is not capable of providing a reliable supply of electricity. Coal-and gas-fired power stations are required to smooth out the fluctuations in wind power output and need to be ramped up and down constantly as wind power output fluctuates. This shortens their service life and causes them to consume more fuel-in much the same way as a car in city traffic. The higher specific fuel consumption produces higher emission levels, thereby negating some of the environmental benefit of wind power."

(Emphasis added).

And consider this fellow's hopeful article on using smart grids to solve the problem, as he identifies here:

Right now, when the wind completely dies in larger areas of wind power generation, such as the West Texas plains, the transmission system supplying electricity to cities, including Austin and Dallas, suffers a "mad scramble," according to Liang Min, of the US Electric Power Research Institute (EPRI). In fact, according to Chuck Wells from OSISoft, such power hiccups are currently so disruptive, that 45% more fossil fuel is needed to back up regional energy grids having large-scale wind and solar generation versus regional grids that rely only on fossil fuels.

(Emphasis added).

I challenge anyone to show me just one example of a Solar PV hybrid that's overcome that variability (hence, economically unattractive power product) obstacle.  I can only find one
that claims it will do so, but of course it's heavily subsidized, publishes no cost data, and lately the history of solar subsidization ain't very pretty (see above examples).  It is the only example this industry group (at its 8/24/11 Savannah, GA conference) recently cited to justify continued subsidies, yet that group won't upload its presentation despite my request from the audience (it's head promised to do so; I'm still waiting, and I believe it was simply bullshitting the crowd -- hey, its a Corporate Solar Welfare Queen front group, so what else would we expect?).

another hybrid (this type blending geothermal) that sounds hopeful, with a politician of course hawking more subsidies within the same article.  But again, no basic cost data is availed.  To that end, I've publicly challenged a Solar Fanboy Fantasist (who attended that conference) to prove his claimed variability solution but he's yet to respond (no surprise there; fanboys promote propaganda, not facts, to fuel their fantasizations).

Meanwhile, the subsidy farm model keeps marching right along, impervious to the variability flaw.  Just announced: $90 million for a measly 100 jobs, with local ratepayers forced to pay, under a 20-year purchase contract, at a rate not specified -- no surprise there, I'm betting it's subsidy-inflated and fails to incorporate base-load hybridizing costs; Colorado is a 20% RPS state.

The Fatal Variability Flaw is further (and poignantly) illuminated in this excerpt from David Bereron's blog, which itself is based on the U.S. Gov’t’s own data, as explained here:

If you plan to power a city with PV, it is not sufficient to simply build a large PV array, because PV only produces power during the day.  At night and during cloudy weather, a back-up power source is needed since there is no practical way to store the PV energy today.  The city must also build a conventional coal or gas plant.  So the real cost of the PV is not just its cost, but also the cost of the back-up plant.  Coal and natural gas plants do not need back-up like PV does.  So what is the real value of the PV?  It is only in the fuel avoidance value of the electricity it produces.  PV is not competing against the cost of coal or natural gas plants; it is competing against the fuel component of the cost of these plants, which is 2-4.5 cents.  Here in Tucson, we use coal and the fuel avoidance value is less than 3 cents.   For PV to actually be cost effective today, it would need to have a projected [Levelized Cost Of Electricity (LCOE)] of about 3 cents.   Since it is about 21 cents today, it has a long way to go before it makes sense for the citizens of this city, despite industry and political propaganda.

To further demonstrate how nonsensical this technology is, even if manufacturers discovered a way tomorrow to make PV panels for free, the cost of the mounting structure, wiring, labor, inverters, and maintenance would still result in a LCOE of about 10 cents/kWh.  This far exceeds the necessary cost goal of 2-4.5 cents/kWh to make PV a viable alternative to burning natural gas and coal.  So even with free PV panels, the total systems are still 3 times too expensive to be viable.   The economic case for grid-tied PV is indeed quite hopeless, and the sooner we stop the misguided subsidies the sooner we can focus on actually solving our energy and environmental concerns.  Installing grid-tied PV is not just a loss of money, but a waste of copper, aluminum, labor, land, and capital.  We are neither ahead nor green. This wasteful activity is unsustainable, mining the materials used in these unnecessary systems is damaging the environment, and the entire endeavor is a burden to the economy.  There is hardly a clearer case of special interest run amok, besides perhaps ethanol subsidies.

I partially disagree with his conclusion, and I have the benefit of my own, "real-time" numbers to at least validate private, residential grid-tied systems once "Joe Six Pack" can buy/install them at $10,000 (hence, $1/watt) -- the "Sunshot" goal.  I thus believe that the smartest solution is to de-subsidize all energy sectors and encourage free market competition for my (the average citizen’s) dollar, toward my own solar PV model, which is premised on residential grid-tied Solar PV.  My web-book supplies ways to help this (e.g., let's just decide that, just as we accept higher deaths by allowing econo-cars instead of forcing Hummer-class crashworthiness on "Joe," we should also undo the permitting layer and accept some higher risk for the DIY market, of which I'm living proof that it can work; that alone knocks $2500-$5000 off the top of a 10KW array).

My model's bottom line: Let me invest to make my own power, more or less zero out if not “net-positive” my consumption, and put money in my pocket, not those picked by politicians and their bureaucrats.  Fueled by self-interest (insert Gordon Gekko's "Greed Is Good" speech here), I and "Joe" will invest in a 10KW array (services a family of four) for $9995 off Home Depot's "Solar Aisle."

To that end, I'm perfectly content to let the Chinese citizenry pay for that result via their government's massive subsidies (hence, the resulting discount on their solar panels is coming out of their pocket, not mine), and hey, we can always (poetic justice) steal their cost-reducing designs at the end (what they've always done to us) if we insist on making our own solar panels.  The Chinese will at least get us to that critical-mass market take-off point (where Joe buys millions of systems) and thus trigger collateral-employment spin-off dollars here (installation labor can't be outsourced, domestic Balance of System suppliers will thrive). 

And assuming an entirely reasonable $.07/KWH reverse meter credit and $.13/KWH spared retail electricity cost (what I don't pay while my array's functioning and I'm running my dishwasher, etc.), that payback cycle is about 8.33 years ($9995/$1200), or just over the longest car (7-year) note that you'll find out there (what "Joe" is used to paying).  My country neighbors (including the bubbas who produce "shine" and "weed") will then quickly jump on this E-Z profit system (I can attest that it's no more difficult to construct than a good still, or marijuana grow-room; and hey, it's legal, and similarly untaxed).

As I explain here, the resulting tens of millions of such arrays will reap us a net, end-point mass reduction in electricity consumption. This result will harmoniously blend with existing energy-conservation efforts (the goal of which is to reduce consumption) and inject a massive new layer of net new (not gov't-printed) wealth into our economy.  It also will smooth out the inescapable variability (unattractive power) inhering within all renewables (clouds over some arrays but sun over thousands of others within a utility's base will results in a net base-load-smooth power flow).  That will slowly make it more attractive to the open energy market (again, utilities are forced by government, not free-market forces, to buy green power).  Admittedly, all that assumes that utilities will find such power economically attractive at $.07/KWH (my reverse-meter credit rate), and yes, that's a big assumption.

Even at that, if millions of us do what I have done, will the utilities be able to build any fewer brown-power plants?  It's very hard to get utility execs to sit down and talk truthfully about this, and greenies don't help by accusing them of conspiring to abet brown power at the cost of green (evidence, please).  I do know this: there's no denying, especially if battery-storage costs ever fall to a sensible level, that I can now make and consume my own power, thus putting steady, tax-free money in my pocket.  That's what gets "Joe" to shop the Home Depot "solar aisle."  That will foment millions of other residential arrays, and that's bound to reduce substantial electricity consumption off the grid (hence, I cannot fathom anything but a substantial net reduction in the need for constructing more brown-power plants). 

And that is what will alter history.

But none of that will happen if cynical politicians and bureaucrats keep giving our money away to Corporate Solar Welfare Queens who don't even have to invest in any cost-reduction R&D (Obama's "Sunshot" program is paying even for that) and simply raise their prices to cop the subsidy layer (seriously, can my opponents not see this basic human-reaction reality?  MAGE came to Georgia, soaked up the local, state and federal giveaway dollars, and is simply importing foreign panels, re-badging them, and shipping them on to high-subsidy states.  That's American taxpayer dollars are thus supporting foreign jobs, and from a company investing nothing in trying to bring solar-panel prices down -- and why should it?  It's making plenty milking the 3-level subsidy schemes).

What does all that add up to?  Right now, the Solar PV market is radically flawed and misdirected, and my tax dollars are being wasted by politicians and their bureaucrats who pick/prop-up market winners and losers.  That's never worked in the history of mass-consumer (read: not national infrastructure) products and, given the core human dynamic driving free markets, never will. 

Worse, once one government begins subsidizing a producer, competitors get their own governments to subsidize them, until the two pools of taxpayers wind up in a race to the bottom, with money and resources wasted in market bubbles and crashes.  Read this postmortem on a heavily subsidized American solar panel manufacturer's (Evergreen Solar's) fall into bankruptcy, in which Evergreen blamed subsidized Chinese competition: "Solar manufacturers in China have received considerable government and financial support and, together with their low manufacturing costs, have become price leaders within the industry," Evergreen's CEO said.  Evergreen itself was heavily subsidized, as that postmortem points out.  Here's another Solar Welfare Queen that sucked $6 million in taxpayer goodies and also bit the dust, citing foreign competitive pressures (read: the Chinese).  And another ($535 million).

The message is clear: whoever gets more hand-outs wins, rather than whoever is more quality- and price-efficient in producing a product I'll want to buy.  Spain, Portugal and Italy have massively subsidized solar and are all on the brink of sovereign default.
  The net effect is that my tax dollars are subsidizing foreign jobs (the above Chinese wind turbine example, and my own array's panels came from a Chinese, not an American, factory).  Artificially inflated (by foolish U.S. taxpayer subsidies) exports are at best a fools errand, a race to the bottom with China, which to this day is counter-subsidizing (it's just dictated an $.18/KWH Feed-In-Tariff, see Solar Industry at 35 (Sept. 2011).

The message is clear: Free Market Solar.

Post-script: A reply to this was posted the website noted above, and it essentially trotted out the same old, two-wrongs-somehow-make-a-right argument greenies now reflexively invoke: that brown power's subsidized, so it's only fair to subsidize green. 

Of course, that argument is bankrupt on several levels.  Just because brown power corrupted Congress for subsidy goodies does not mean it makes sense, economically or morally, to keep raiding the treasury and adding to our $14 Trillion debt to similarly subsidize green power, especially since we now have a subsidy-disaster trifecta unfolding (the half-billion in Corporate Solar Welfare Queen subsidy failures noted above).  What more evidence do we need that past sins should never be repeated, and that momma was right -- two wrongs never make a right?  How many billions need to be pissed away before the Solar fanboys wake up and realize they're being played by the Corporate Welfare Queens who don't believe in their own product (won't invest their own and their friends' money, so they're trying to take ours through gov't hand-outs, all of which come from our pockets?).  Isn't this basic madness self-evident by now?