No Good Deed Goes Unpunished: The High Cost of Solar
By Mary Theroux • Monday February 20, 2012 2:07 PM PDT • 13 Comments
Residents of Hawaii were dismayed to see this recent front-page headline: “Hawaii Solar Savings Spark Higher Electric Bills.”
Since so many consumers have sought electrical savings from installing solar panels, the state-monopoly electric utility is losing revenue and now needs to make it up in higher rates.
At least Hawaii’s perennially sunny weather will likely mean that the return on investing in solar panels will still pay off for residents, as they mostly only need to buy electricity at night.
The calculus is far different in the cold and dark northern climes of Germany. A recent article in Der Spiegel, “Solar Subsidy Sinkhole: Re-Evaluating Germany’s Blind Faith in the Sun,” points out that the German government has invested more than €100 billion ($132 billion) in solar subsidies over the past 11 years, yet,
For weeks now, the 1.1 million solar power systems in Germany have generated almost no electricity. The days are short, the weather is bad and the sky is overcast.
German citizens get dinged a “green energy surcharge”—an additional €200 ($265) a year for the average family—over and above the cost of their actual electricity use, for which they already pay the second-highest rates in all of Europe. Because German policy is so solar-dependent, when the sun doesn’t shine (a/k/a “winter”), Germany has to import its power from nuclear-power generators in France and the Czech Republic, and even resorted to powering-up an old oil-fired plant in Austria. Not exactly “green.”
As Der Spiegel concludes:
Solar energy has the potential to become the most expensive mistake in German environmental policy.
Not surprisingly, the decision to pursue this policy was based on calculations assuming “conditions that hardly ever exist outside a laboratory.”
A not-unusual situation when it comes to projections for proposed government “investments.”
Ignoring such experience, and apparently neither learning from the fed’s big losses in “renewable” energy, New York State passed the “Power New York Act of 2011,” calling for increased reliance on solar energy. As most of us are aware, New York also habitually suffers from “winter”. Also bad and overcast weather. Yet the cost-benefit analysis commissioned by the very legislators who set these solar energy goals concluded that solar energy is a great option for New York State.
This despite the study’s actual findings. As distilled by the New York Times:
The financial scenarios vary widely. It could cost New York State ratepayers anywhere from $300 million to $9 billion to install solar power between 2013 and 2049. The report said that under the most likely conditions, the cost would be about $3 billion and the installations would increase electric bills by up to 3 percent in any given year. In other words, the costs exceed the benefits.
Needless to say, cost-benefit calculations and investments in solar can and should be made only at the individual level, divorced from subsidies, “rebates,” and other schemes passing costs along to others. Solar can certainly make good economic sense, especially for those of us in sunny locations. If combined with the repeal of state utility monopolies, solar holds even more promise, with the benefits of competition and innovation, such as customers being able to connect to two-way grids allowing them to sell excess energy generated back to their utility provider. Indeed, if one thinks only of the incredible innovations in telecommunications since the repeal of Ma Bell’s government-protected monopoly, the possibilities may be virtually endless.
But if continued along the line of current centrally-planned “renewable energy” schemes, no one should be surprised to see shortages and higher costs in yet another realm of government’s expanded heavy hand.
Tags: Budget and Tax Policy, California, Energy, Environment, Europe, Global Warming, Government subsidies, Monopoly and Antitrust, Regulation, Technology 
Great revealing piece. The ever insightful and perpetually rational Ms. Theroux always knows precisely what she is talking about. Just like Obamacare was promoted as reducing health care costs despite obviously not just raising them but lowering the quality of health care for all, the “green movement” promoted (as taxpayer expense, of course) by the same out-of-control administration has proven to be an equally ill-conceived, mismanaged and wasteful minefield. Come November, let’s hope Big Brother Barack and his band of fellow totalitarians are sent packing.
Mark Charger | Feb 20, 2012 | Reply
Hey, at least the Hawaiians got the benefit of their solar electricity. I learned this particular economic lesson 30 years ago, when a drought in my county had both the government and the water company begging us to conserve water. We conserved too well that the water company started whining that it was failing and had to raise rates. So we ended up getting LESS water AND paying more besides. I’ve never complied with a voluntary reduction in use since that day. “Bend over, here it comes again!”
Henry Bowman | Feb 20, 2012 | Reply
Like Germany, the weather in the UK is not exactly Hawaiian. We are currently paying about 14% more for our electricity because of wind-farm and solar subsidies. These go from poor people who may rely on electricity for heating (because they can’t afford or don’t have access to gas-fired central heating) to wealthy people who can afford the (subsidised) investment in solar panels or have enough land to rent (at around US$12000 per turbine per year I believe) it out to the (heavily subsidised) wind power companies.
It’s a brilliant way of taxing the poor to help the rich.
John Harrison | Feb 21, 2012 | Reply
A serious problem with green techniques is they have little to no capacity values and thus do not reduce the installed capacity requirements of conventional fossil and nuclear plants
richard | Feb 21, 2012 | Reply
Also, listen and watch Singer’s tv interview on this site. Makes much sense.
richard | Feb 21, 2012 | Reply
This article is very poorly written. You take two completely different circumstances: people who buy their OWN PV systems in Hawaii vs people in Germany and England where the GOVERNMENT makes a decision to subsidize PV and forcing everyone to pay for it. Did any one check this article for facts...or even common sense?
Chris Eaton | Feb 21, 2012 | Reply
Hi, Chris.
I apologize if you found it difficult to follow. I do not believe I tried to represent that Hawaii, Germany, and New York were the same model (and my piece does not address England; one of the comments does). The point is that there are distortions resulting from a “solar is good” policy agenda, ranging from the Hawaiian case where prices increase because state-monopoly utilities don’t have an incentive to innovate, to Germany and New York which recklessly pursue solar power regardless of its cost-benefit. Both result in the consumer bearing higher costs.
The conclusion is that the extent to which solar is actually a good choice is best determined by individuals operating in a free market, and I recommend policies whereby people are bearing the full cost of their own solar systems (many states have rebates or subsidies masking their true cost), AND competitive, private utilities.
Best wishes,
Mary
Mary Theroux | Feb 21, 2012 | Reply
To me, what is the most compelling and damning point about solar and wind is that the comparison of subsidy per unit energy produced is astronomically in favor of virtually everything else. Using the EIA’s data on table ES5 on page 6 of the PDF, we learn the subsidy per MWh is two orders of magnitude or greater for solar and wind versus any but “refined coal”, a little-used technology. Simply put, there is no way this is scalable or sustainable.
Rob McMillin | Feb 21, 2012 | Reply
We all have the ability to choose what we will spend for and how much. If I choose to conserve energy by turning off all lights at night and turning down my thermostat, I can save on energy costs. I may stub my toe or trip over something if I choose to get up at night and use the bathroom in the dark, I may feel chilly, so I may sleep with heavy covers on the bed. Or I may leave the thermostat up, and leave a nightlight on, for which I pay more. it’s MY choice. If I choose to use solar or wind or water or geothermal, it’s MY responsibility to determine the projected cost, and then I make my choice. I live in a rural area, when the electricity goes out, I use my generator, when the furnace fails, I use my fireplace. When everything fails, I light candles and use flashlights and put on warmer clothing. Neither the gov’t nor the church can MAKE everything work, we must take responsibility for ourselves, our neighbors, and our own choices.
Paul K. Brubaker, Sr. | Feb 22, 2012 | Reply
I admire your attitude, Paul, but unfortunately it is increasingly not our choice: the government is taking our taxes and diverting them to “investments” and subsidies of “green” energy companies and projects, e.g., the failed Solyndra solar company (including generous benefits packages paid to its now unemployed workers), Fisker Karma, GM (Volt), and Tesla car companies, and solar initiatives such as I cite above being undertaken across the country—all funded by (involuntary) tax dollars, and seen also in your paying higher prices for numerous consumer goods and utilities.
I completely agree with you that we need to take responsibility for ourselves—and, individually, voluntarily help those who need our help—but government is making that more and more difficult to do.
With best wishes,
Mary
Mary Theroux | Feb 22, 2012 | Reply