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Should N.C. subsidize solar industry? NO

NO: Those who can’t afford installations subsidize them

By Francis X. De Luca
Special to the Observer

Trains are notoriously hard to slow down – even when we need them to. North Carolina’s solar subsidies, some of the most generous in the nation, are sort of like a runaway train that just keeps moving forward. Maybe now is the time to tap the brakes.

With the intention of promoting greater solar usage, North Carolina created an aggressive system of subsidies that is quickly becoming detrimental to the long-term interest of our state. This framework of subsidies artificially suppresses the costs of solar technology and drastically favors one form of energy generation over another – at the expense of North Carolina consumers and businesses.

These subsidies, combined with the requirements of North Carolina Senate Bill 3 (Renewable Energy and Energy Efficiency Portfolio Standard) enacted in 2007, have helped fuel the explosion of solar installations. Senate Bill 3 requires power companies to use a “renewable energy source” for a greater share of their energy production. Next year that will mean 6 percent of electricity production must come from renewable sources and 12 percent by 2021. The power companies are allowed to pass on the higher costs of renewable energy to customers – in other words, you and me. That means we are paying twice for this energy, once with higher taxes to subsidize solar installations and again when we pay higher electricity rates for the more expensive solar power.

Our state currently has a total capacity of roughly 600 megawatts from mostly commercial solar farms. The development of solar power is not a bad thing in its own right. The trouble lies in how the operators of each of these solar ventures are compensated. Currently, projects with capacities no greater than 5 megawatts can be paid what’s known as a “standard offer” by the traditional utility. This means that utility companies are forced to pay solar farms’ inflated rates as mandated by the state, with no ability to negotiate.

Predictably, such an advantage in the marketplace has solar companies chomping at the bit to cash in. In fact, additional solar projects waiting in the wings would more than quadruple our current capacity. Perhaps the current 600 megawatts of power at artificially inflated prices only affects the average person’s power bill a little, but what about 2,400? Where does it end?

On the residential side, solar users are benefiting at the expense of those without the means to pay for this expensive technology. Those who can afford to buy and install the latest equipment are also able to sell their excess generation – sometimes referred to as “net metering” – back to the utility at an inflated price. They still enjoy access to the electric grid that distributes and transmits the energy, while being compensated for their excess power at a price that does not take into consideration any of the costs of maintaining the electric grid.

Those without solar panels are left to make up the difference. Worse yet, this system of subsidies is only available to those who own their own homes and can afford to install solar systems. Renters and lower-income consumers are locked out of subsidies and, to add insult to injury, are asked to pay for it.

Think of a cable company being forced to buy your home videos at a set price, but only if they are produced with a device that costs as much as a car. Oh yes, and the government will subsidize your purchase of that new recording device. Those with the money to buy this expensive recording device are delighted to let everyone else pay higher cable bills as the cable company pays them for their videos.

Given the circumstances, it is no surprise that North Carolina’s utilities commission is examining the costs that utilities pay for this energy. Without judicious action by the commission, our electricity providers will be forced to make decisions limiting their ability to provide consumers the most reliable and cost-effective power.

Spending other people’s money is fun, but North Carolina can’t keep spiraling down this road of government largesse and state-mandated inequality.

Undoubtedly, North Carolinians value energy options that are reliable, energy-efficient and affordable. But our elected leaders and regulators must be aware of the consequences that come with artificially favoring one technology over another. Let’s encourage and support our policymakers to do what is right and fair for all electricity consumers in our state. North Carolina deserves a reasonable and equitable approach to energy planning. It’s time to put the brakes on this runaway solar subsidy train.

Francis X. De Luca is president of the Civitas Institute.
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