Fleecing Taxpayers and Ratepayers With Subsidized Solar Power

This week’s “Daily Journal” guest columnist is Dr. Michael Sanera, John Locke Foundation Director of Research and Local Government Studies.

RALEIGH — Cary is the latest in a long list of North Carolina cities to harm taxpayers and electric ratepayers by jumping on the solar bandwagon. Cary Town Council approved a solar project that is outlined in this News & Observer report. The private firm, Asheville-based FLS Energy, is installing solar panels on city-owned property. Cary gets rent, and FLS Energy gets taxpayer and electricity ratepayer subsidies.

Unfortunately, the N&O ignores all of the important issues. Here are just some of the facts missed by the newspaper’s coverage.

The reason that solar is so popular in North Carolina, a state that gets only a middling amount of sunshine (see the National Renewable Energy Laboratory solar maps here), is that the legislature passed Senate Bill 3 back in 2007. S.B. 3 requires that power companies generate 12.5 percent of their electricity from renewable sources, including solar, by 2021, with electricity ratepayers paying for much of the cost of this expensive power.

At the time, the legislature was not concerned with the cost, only responding to the pressure from environmental groups and the good press “renewable energy” programs produce. Fortunately, the Beacon Hill Institute in Boston was concerned with the cost and conducted this economic analysis of S.B. 3 at the John Locke Foundation’s request. It shows that S.B. 3 destroys 3,600 jobs, reduces disposable personal income by nearly $59 million, cuts the state’s gross domestic product by $140 million, and slashes state and local revenues by $43.5 million by 2021.

Getting taxpayers and electricity ratepayers to pay your electric bill

This September 2010 N&O report about the Holly Springs furniture company OFM shows why solar is so popular and why it is such a bad deal for taxpayers and ratepayers.

According to the numbers in the story, we can make a rough calculation of who pays and who benefits. First, OFM gets the taxpayers to pay for half of the cost of the solar equipment. (Half of $1.4 million is $700,000.) Then OFM receives taxpayer-paid tax breaks worth $170,000. Then Progress Energy ratepayers pay OFM 18 cents per kilowatt-hour for electricity produced by the solar panels, and OFM buys power from Progress Energy for 6 cents per kilowatt-hour to run its facility for a net profit of 12 cents per kilowatt-hour. Over 20 years, this is a $1.2 million “profit” from Progress Energy inflicted on ratepayers by the legislature when it passed S.B. 3.

We must remember that OFM must pay for one-half of the cost of the solar panels, but subtracting the $700,000 cost from the total subsidies above ($2.070 million), OFM gets a cool “profit” after that expense of $1.37 million to its bottom line courtesy of taxpayers and Progress Energy ratepayers.
And that is not all. OFM and other businesses that participate in this fleecing of taxpayers and ratepayers get glowing media reports like this Aug. 2 report in dBusinessNews.com.

OFM Celebrates One-Year Anniversary of Solar Farm With Plans to Expand

Holly Springs, N.C. — This month office and school furniture manufacturer, distributor, and wholesaler OFM is celebrating the one-year anniversary of the 250-kilowatt solar farm it installed on the rooftop of its headquarters in Holly Springs, N.C., last August. The company has since been producing more energy than it uses. …

Abel Zalcberg, owner of OFM, recommends solar projects to other businesses. “If they really knew about tax credits and depreciation, if they could subsidize it, the return is tremendous.” After all, he sates: “It’s paying for itself. Nothing really comes out of pocket.”

Apparently, he is only concerned about his company’s bottom line, not the thousands of unemployed and working poor in North Carolina who are paying higher electric bills and higher taxes to enrich his company’s bottom line.

Finally, we should learn from the solar experience in Germany, a country that has used a similar solar subsidy system for a longer period of time. Ken Green, an environmental scientist at the American Enterprise Institute, reports here on a German university study that concludes:

Policy makers should thus scrutinize Germany’s experience, including in the United States, where there are currently nearly 400 federal and state programs in place that provide financial incentives for renewable energy. (Emphasis added.)

Although Germany’s promotion of renewable energies is commonly portrayed in the media as setting a “shining example in providing a harvest for the world” (The Guardian, 2007), we should instead regard the country’s experience as a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benefits. (Emphasis added.)

Green notes: “Germany is finding it hard to continue subsidizing wind and solar power at existing levels. In May, the German parliament cut back the subsidy for domestic rooftop solar photovoltaic systems by 16 percent, with free-standing systems cut by 15 percent.”

Given this evidence from Germany, the legislature should consider repealing S.B. 3, especially given the state’s budgetary problems and the slow job growth. Conducting a “massively expensive” solar program “devoid of economic and environmental benefits” at this critical time for the economy is no way to get North Carolina moving again.