Nobel Prize winning economist Paul Krugman recently devoted his column in the New York Times to the wonders of solar energy:
We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.
If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives.
As if on cue, the New York Times proceeded to publish an expose of the massive subsidies given to solar power by the federal government. Entitled “A Gold Rush of Subsidies in Clean Energy Search,” the article documents how taxpayer funding has in many cases all but guaranteed a profit for many solar installations, leading large companies to open solar farms just for the tax write off:
A great deal of attention has been focused on Solyndra, a start-up that received $528 million in federal loans to develop cutting-edge solar technology before it went bankrupt, but nearly 90 percent of the $16 billion in clean-energy loans guaranteed by the federal government since 2009 went to subsidize these lower-risk power plants, which in many cases were backed by big companies with vast resources.
From 2007 to 2010, federal subsidies jumped to $14.7 billion from $5.1 billion, according to a recent study.
“It is like building a hotel, where you know in advance you are going to have 100 percent room occupancy for 25 years,” said Kevin Smith, chief executive of SolarReserve. His Nevada solar project has secured a 25-year power-purchase agreement with the state’s largest utility and a $737 million Energy Department loan guarantee and is on track to receive a $200 million Treasury grant.
Even companies whose business has little to do with energy or finance, like the Internet giant Google, benefit from the public subsidies. Google has invested in several renewable energy projects, including a giant solar plant in the California desert and a wind farm in Oregon, in part to get federal tax breaks that it can use to offset its profits from Web advertising.
The price of solar panels may have dropped over the last few years, but solar power remains more expensive than fossil fuels. That’s not likely to change any time soon. The Energy Information Administration projects that in 2016 the average levelized cost of generating power from solar PV will remain two to three times as expensive as power generated by coal or natural gas, not including subsidies. Solar power represents less than one percent of power generated in the United States, and is only able to hold onto this tiny share of the market thanks to large subsidies from the federal government. According, to the Energy Information Administration, federal subsidies to solar are approximately $.96 per kWh, eight and a half times the average price of electricity in the United States ($.11 per kWh). Federal subsidies to fossil fuels amount to $.0006 per kWh. That hardly sounds like a political system where alternative fuels are denigrated by an all-powerful fossil fuel lobby.
The Times article came out after Krugman’s column, of course, but there has been plenty of reporting in the NYT about problems with solar power before that (see here, < ahref= http://www.nytimes.com/2011/10/26/business/global/uk-cutting-back-fledgling-program-to-encourage-solar-power-development.html?pagewanted=all> here, and here). Even Krugman was forced on his blog to back away from some of the implications of his own column:
I’ve been getting some pushback from people I respect on today’s column…. Some of it involves questioning the cost data, but the main point, I think, is that even if solar power’s price per kwh matches coal-fired, it’s not going to take over the market right away, and maybe not ever. The sun doesn’t shine at night, and often doesn’t shine during the day. Intermittency is a big problem, and I probably should have made that clearer.
– Josiah Neeley