Big
Solar’s Subsidy Bubble
Companies
cash in on tax credits and ‘net-metering’ schemes.
REVIEW & OUTLOOK
WALL STREET JOURNAL
AUGUST 30, 2015
WALL STREET JOURNAL
AUGUST 30, 2015
The Department of
Energy’s Inspector General revealed last week that the legendary solar-panel
manufacturer Solyndra—a poster baby of the Obama stimulus—lied to the feds to
get a $535 million loan guarantee before going bust in 2011. Solyndra is a
cautionary tale, but the Obama Administration is still throwing caution to the
sun.
The IG report, which
follows a four-year investigation by the IG and FBI, describes how Solyndra
engaged in a “pattern of false and misleading assertions,” including inflating
the value of corporate contracts and sales, to win a giant loan guarantee in
2009.
All evidence suggests
that DOE was a willing victim. The IG notes that DOE loan officers felt
“tremendous pressure” from the White House and Congress to rush through
loan-guarantee applications. In their haste DOE officials failed “to ask
specific questions, and require specific assurances” and overlooked major red
flags.
***
The larger problem is
that the White House is more concerned with boosting the politically favored
solar industry than protecting taxpayer dollars. More troubling, the solar
industry may be growing too big to fail, and the Administration is assisting
another taxpayer solar scam.
The President warned
last week at the National Clean Energy Summit in Las Vegas that Republicans
want to make “massive cuts to investments” in “successful, job-creating clean
energy programs.” Thanks to government “investments,” he noted, the solar
industry employs twice as many American workers as coal and has added jobs 10
times faster than the rest of the economy. This is as much an indictment of the
Administration’s economic policies as a tribute to solar, and the bigger story
is that the government-inflated solar bubble could pop if subsidies shrink.
Solar installations
increased 30% last year thanks partly to cheaper photovoltaic panels, but also
a rush to cash in on the 30% federal investment tax credit that expires next
year. The largest tax credit beneficiaries are big businesses like Wal-Mart WMT 0.75 % and
Google, GOOG 1.41 % solar-leasing
companies and their investors. The financiers of SolarCity, SCTY 4.17 % which
installs and leases rooftop panels, include Goldman Sachs, GS 0.83 % Citigroup C 0.67 % and
J.P. Morgan Chase JPM 1.06 % —the guys Mr. Obama loves
to hate.
As the President dryly
remarked, these businesses are “not doing this just out of altruism.” The real
reason: Solar leases are a high-yield political investment.
Here’s how this
dubious business works. Solar-leasing companies install rooftop systems (which
often cost tens of thousands of dollars) at no upfront consumer cost.
Homeowners rent the panels for 20 years at rates that typically escalate over
time but are initially cheaper than power from the grid. Investors get to
pocket the myriad state and federal subsidies while homeowners are promised
hundreds of dollars annually in savings on their electric bills.
Sounds fantastic. The
catch is that the teaser rates could shoot up if government subsidies are
scaled back.
A dozen Members of
Congress last year wrote to the Federal Trade Commission expressing concern
that solar-leasing companies were utilizing “deceptive marketing strategies
that overstate the savings” and “understating the risks.” Four Democrats from
solar-rich states voiced similar complaints in a letter to the Consumer
Financial Protection Bureau.
Maybe the biggest risk
to solar profits is that many states are considering revising their
net-metering policies, which are a key profit driver for the solar industry.
These policies require utilities to purchase extra energy generated by
residential and commercial solar installations—above and beyond what is used on
their premises—at the retail power rate. This is often twice the
wholesale price.
The reason for the disparity
is that the retail rate includes transmission, delivery and grid maintenance
costs. Solar customers who depend on the grid to obtain power at night and sell
their excess generation during the day skirt these costs. In doing so they
shift the costs of supporting the grid to other customers who must then pay
more.
Even President Obama
acknowledged that “there are some legitimate issues around how does a new
distributed system work, and folks have some costs and how do we deal with
those things.” But then he lambasted “massive lobbying efforts backed by fossil
fuel interests, or conservative think tanks, or the Koch brothers” to rework
net-metering policies.
Nevada this month
became a flashpoint in this subsidy fight. The state caps the share of customers
who can enroll in net-metering at 3%. In the spring the legislature passed a
law requiring the Public Utilities Commission to form new rate regulations that
reflect “just and reasonable rates and charges” for solar customers by the end
of this year when the cap was expected to be hit.
The law set off a mad
dash by solar companies to sign up and grandfather in customers under the
current rates. As a result the state reached the cap this month. The solar
industry’s top lobbyist Bryan Miller—who was the Department of Energy’s senior
counsel while Solyndra was cashing in—threatened thousands of job cuts if the
current net-metering rates weren’t extended. Vivint Solar, VSLR 0.74 % the U.S.’s second biggest
panel installer, suspended operations in the state. All of this shows how
dependent companies are on the regulatory subsidy.
Last week the utility
commission bowed to political pressure by temporarily extending current rates
so the leasing companies can continue enrolling new customers. What does it say
that the President is using his bully pulpit to abet an industry that is essentially
fleecing the American public?
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