~ 62% Direct Subsidization for Some Solar and Other Renewable Energy Projects for Businesses is Unfair to Taxpayers

~ 62% Total Direct Subsidization for Some Solar and other Renewable Energy Projects for Businesses is Unfair to Taxpayers

While subsidization of renewable energy offers a great means of making renewable energy affordable for both residents and businesses, there is a limit to what is fair. Currently, there is a 30% federal tax credit and state renewable energy credits that avg. between 5 and 10% of total cost that payback slowly over time. For some very lucky recipients there is also the Rural Energy for America Program (REAP) administered by the USDA that provides loan guarantees up to 75% and grants up to 25% of a project for businesses in rural areas – which can be defined as being in a city of population less than 50,000 in one of the designated areas. I know of two businesses in Athens, Ohio that successfully got the grant. The article referenced below is for a renovated hotel getting outfitted with solar panels and a couple of EV charging stations. Some businesses also get the 25% grant for installing geothermal systems. The federal credit for geothermal systems, however, is only at 10%, so the total there would be 35% plus any state credits – so likely at 40-45%. Geothermal is generally a better investment than solar, thus the lower federal incentive.

Basically, in the economics for the WV hotel, one might roughly estimate that about $185,000 of the total system costs of about $300,000, or about 62%, were paid (or in the case of state incentives, will be paid through time) by tax credits and grants – with taxpayer-funded money. While this is a great deal for the business owners and frankly a shrewd business decision, it is also unfair, generally speaking. With the numbers stated in the article – even with 62% subsidization it will take nearly 12 years for the part funded by the owners to break even. After that they should profit nicely, as long as the inverter holds out, the panel efficiencies don’t come down too much, or break. Other benefits of solar and geothermal systems include linger roof life and higher re-sale value of the home or business. There is also the business perk of being green – basically it is free advertising as well – as if to say – buy from us, we support renewable energy, we walk the walk. Meanwhile the taxpayers who funded most of the system are left in the dark. 

REAP vs. HEAP

In contrast, there are subsidies for people who have trouble paying for traditional forms of energy. The Home Energy Assistance Program (HEAP) is one where people under a certain income level can get assistance with their heating costs. The difference is that these programs benefit the poor while the solar subsidies benefit the wealthy, or those lucky enough to have a business in a place that can get the extra USDA REAP grant. Thus, we HEAP pennies for the poor to survive while some shrewd and hip green businesses REAP tens of thousands of dollars in grants to get further rewarded for their green awesomeness. I am pretty sure HEAP won’t pay 62% of one of these poor families’ heating and/or electric costs. One might call these excessive renewable subsidies – green entitlement programs. Now, I like renewable energy and I have a residential solar system that I like as well. I think the standard fed and state incentives are fair but even with them it is not a great investment. Incidentally, when people talk about fossil fuel subsidies they actually typically include things like the HEAP program which is actually a subsidy for the poor to keep warm and not a subsidy for fossil fuels. Roof space, roof orientation, and shading matter for solar. They can improve or damage the investment numbers. Basically, I think the USDA REAP program is a bit excessive and such money would be better put to help poor people who really need it rather than wealthy people who want to get wealthier and also improve their green reputations – have their cake and eat it. On the whole, rooftop solar, shallow geothermal, purchasing renewable energy from the grid to increase RPSs, buying EVs, and more – offer small but significant advantages to those that can afford them while they do nothing for those who cannot. When these purchases actually do achieve parity with traditional energy purchases (which may in reality be far into the future without subsidies) then things may be different but poor people usually don’t buy new things and used Prius’s go for higher than used gasoline cars. Those who get HEAP have to re-apply every year and many just don’t do it out of laziness and the stigma against being needy.

         

References:

Rural Energy for America Program Renewable Energy Systems & Energy Efficiency Improvement Loans & Grants, at USDA website – rd.usda.gov

Renovated Hotel Opens, Touting Largest Solar Array in WV – article by Maria Pisciotta, West Virginia State Journal, March 22, 2016, posted at statejournal.com