There’s Nothing Conservative or Independent About the Current Rooftop Solar Industry

Rooftop solar is one of the greatest technologies one can invest in these days. The cost of the rooftop units are coming down; it allows individuals to move toward self-sustainability; It reduces our dependence on foreign oil; and it even allows individuals to go entirely off grid and operate independent of utility companies.

So why would I make a statement about rooftop solar not being conservative?

Don’t get me wrong. If I had the means, I’d take my entire home and business off the grid for the reasons I listed above.

It comes down to one word – Independence.

A few years ago, I jumped on the anti-utility bandwagon over net metering and the push to reduce the retail rate. I had to suspend common sense and all those years of economic education to make the argument. I didn’t have the whole picture and the mountains of research to back up that claim.

315344_AZHomesSolarPanelsThe rooftop solar industry is dependent on taxpayers – especially taxpayers who don’t have rooftop solar units installed on their rooftops. That’s consumers like me who cannot afford to lease a product and service that relies on subsidies from consumers like me. To clarify, rooftop solar is still too expensive that average consumers have to sign a lease over a long-term period in order to make it affordable.

[If you’re gonna invest in technology that gives you independence, pay cash. It really is a liberating experience not owing anyone money – including rooftop solar companies!]

The rooftop solar industry is also part of broader political agenda by those typically on the left and in environmental movement who seek to eliminate all non-renewable forms of energy production. This comes at a tremendous cost – especially to consumers.

Integral to this political agenda, policy makers and rooftop solar executives have created a climate in order to make an expensive industry appeal to average consumers. It comes down to manipulating the market and creating artificial incentives in order to attract more consumers to its product.

Imagine if the top executives of Mercedes, Jaguar and Rolls Royce sent their lobbyists to Washington to obtain taxpayer subsidies so they could attract you into a lease of one of their vehicles? You sign a lease to get into their car. They get a break through some tax loophole and the cost of taking care of our roadways is passed on to the individual who can only afford to drive a 10-year-old used car.

The reality is that many solar companies cannot even operate as a viable business without some form of government subsidy. It’s a clear example of corporate cronyism that puts taxpayers at risk or worse, leaves them footing the bill when the company goes bankrupt – as we’ve already seen several times.

[pullquote align=”left” cite=”” link=”” color=”” class=”” size=””]The reality is that many solar companies cannot even operate as a viable business without some form of government subsidy.[/pullquote]

The rooftop solar has been benefiting from these market manipulations through the policy of net metering. They tell you that you can sell your solar-generated electricity back to the utility companies and pay less for your overall electricity. On a self-interest level, that’s great. But what they don’t tell you is that you’re selling back that electricity (actually, you’re receiving a credit) at an inflated rate and someone else is paying for it – a redistribution of utility costs.

Rooftop solar companies don’t own the grid and they don’t pay for the cost and maintenance of the grid. And because utility companies are paying above-market inflated rates, the cost of maintaining the grid is being shifted over to those without solar technology.

In effect, the rooftop solar industry has created a whole new level of dependency. They’ve made leasing consumers dependent on them. They’ve become dependent on net metering policy and utility companies have become dependent on non-solar customers. And when a solar company pulls its plant out of a state like what recently happened in Nevada, they leave a whole lot of people without jobs. There’s nothing sustainable about the overall climate and policy in which the rooftop solar industry operates.

In a perfect world, everyone would be able to afford solar technology without signing a long-term lease contract with the rooftop solar industry. We wouldn’t have to rely entirely on the grid and utility companies wouldn’t have to worry about covering the cost of maintenance in order to provide a reliable source of electricity.

To move toward that perfect world, we can start by eliminating the policies that pick and choose winners and losers through subsidizing and manipulating the energy marketplace.

That’s where real independence can begin and energy independence can thrive.

The Economics and Politics of Solar Net Metering

It’s been some time since I’ve written on the topic of solar energy and the utility industry. This area has always interested me given my background in nuclear power, energy services and Arizona politics. In recent years, my curiosity with the off-grid lifestyle and homesteading has also fueled that interest.

Originally, I wrote from the perspective that the big utility monopolies were taking advantage of ratepayers by pushing for changes in net metering that would result in hurting the rooftop solar industry. It was the classic David vs Goliath narrative.

That was incorrect.

What further economic and policy research revealed was that the solar industry was actually being heavily subsidized by ratepayers via cost shifting from solar customers to non-solar customers. In other words, the full and long-term cost of energy was being redistributed from the solar haves to the solar have-nots.

Rooftop solar is still fairly expensive to the average consumer. It can cost tens of thousands of dollars in up front cost to purchase a full system for your home. Cost is one of the main reasons why the vast majority of consumers opt for a lease arrangement

Rooftop solar companies and policy makers figured out early on that they needed to create an incentive for consumers to move toward expensive solar. Thus, net metering was established.

You’ve probably heard about selling your solar energy back to the grid or spinning your meter backwards. This is an arrangement in which a customer who is generating electricity from their solar panels is sending any excess electricity back to the grid for distribution to other energy users. This practice reduces the energy cost to the solar customer by creating a credit. Utility companies have been crediting consumers at a retail rate rather than a wholesale rate. That retail rate is above the true market value of electricity and is actually a cost to utility companies which have to operate and maintain the grid. Those costs are ultimately shifted over to non-solar users who pick up the tab for not having solar.

Here’s a video put out by a electric cooperative that helps explains the cost shifting.

As you can guess, this was driven by policy makers who wanted to create an incentive for consumers to transition to cleaner solar energy generation and away from a dependency of fossil fuels – a laudable goal.

But there’s also a political motive in driving consumers to solar. As part of the leasing arrangement, some rooftop solar companies sell the excess energy back to the utility companies at the higher retail rate and pocket the difference above the wholesale rate and why shouldn’t they?

The rooftop solar industry found a way to “rent seek” and use public policy to protect the practice – even at a cost to the broader energy market

This reminds me of another moment in Arizona history when the Arizona legislature passed a law creating a tax credit for those who purchased or converted their vehicles to run on alternative fuels. Almost overnight, an industry of alt-fuel conversion companies sprung up in Arizona. Thousands sought conversions and these companies benefited from the special law. What was supposed to cost Arizona taxpayers $10 Millions ended up costing $200 Million. It was a major public policy failure that demonstrated the law of unintended consequences at the cost of Arizona taxpayers.

Here in Arizona over the last two years, the rooftop solar industry and utility companies have been engaged in a heated battle over the economics of solar energy and net metering policy. Ultimately, the Arizona Corporation Commission decides on any changes to policy which may include an adjustment in the rate that ratepayers sell back their solar electricity to the grid.

Rooftop solar companies like SolarCity have insisted that any reduction in the net metering rate will take the incentive away from consumers to go solar therefore hurting the Arizona rooftop solar industry. APS argues that non-solar ratepayers are paying the cost to maintain the entire grid while solar-users are being subsidized.

Corporation Commissioners have tried to broker a compromise with industry leaders. Meantime, the politics of this battle continue to play out as challenger candidates threaten to replace current commissioners and special interest groups promise to engage in the 2016 election.

The problem with net metering may all be resolved by this summer as other proposals emerge. One indication of a solution may be seen over the next few weeks as one smaller Arizona utility offers an alternative to how it bills residential ratepayers. That alternative is called “demand charges” and I’ll explain in a later post how it provides a workaround to the problem of net metering.

Net Metering Tax Credits Discriminate

Recent legislation providing solar tax credits for residential homeowners has allowed billionaires, corporations, and Wall Street financiers to profit at the expense of working class Americans.  Solar corporations leasing panels to home owners, rather than selling, have reaped the financial benefit of solar tax credits intended for home owners to the tune of hundreds of millions.  These tax credits to solar companies have boosted dividends for their shareholders at taxpayers’ expense, while panel-leasing home owners get no immediate financial benefit.

meterWorse.  Solar tax credits discriminate against lower income communities.  Group housing, where many lower income families reside, cannot install residential solar panels, and are therefore not eligible from the get-go for these special tax credits.

Arizona is subsidizing the solar industry with $1.2 billion on residential solar, and not a dime goes to the state’s lowest income sectors – yet, another reason not to have discriminatory solar tax credits.

Further, after residential panels are installed at huge costs to taxpayers, the system of net metering goes to work, also discriminating against the working class.  Owners of solar panels can buy power from the grid as needed, or ship surplus power back to the grid when they produce more than they use.  Under net metering, solar panel owners, however, avoid paying for the service and repairs to maintain the grid.  These costs to maintain the grid are then shifted to non-solar users, placing a higher financial burden on this group, resulting in a disproportionate share of the burden falling on the aforementioned lower income sectors.

In Arizona, taxpayer subsidized solar panel ownership has led to the adding of “environmental programs cost adjustment factor” and renewable energy fees on utility bills, raising financial burdens for all non-solar users, lower income families included.  For example, the city of Scottsdale has a median family income of over $92,000.  Just in the past 5 years, they have had over 1,200 solar installations, which are eligible for state and federal subsidies.  In contrast, an area in south Phoenix with 29,000 residents and an average income of $41,000 has only 45 residential solar installations.  This is just an example, but the statistics are undeniable:  Taxpayer subsidies go to wealthier communities by a factor of 26 times more than lower income communities.

Regressive solar tax credits should end immediately.  Why have we chosen one industry over another?  And worse, we’ve chosen a discriminatory industry that keeps lower income communities down by unfairly forcing them to pay for others solar installation and operation.  Under any sun, these policies are just plain wrong.

Joe Galli

Former Executive Director – North Scottsdale Chamber of Commerce

Net Metering: A Win-Win For Everyone

I was quite surprised by the spirited and even vociferous response to last week’s post regarding the issue of net metering and solar energy competition in Arizona. It even captured the attention of several members of the Arizona Corporation Commissioner who made their objections indirectly know to me and those following the debate over APS’ effort to bring about an end to net metering. From conservative, liberal and independent ideologues, the online comments, posts, emails and calls were remarkably supportive of consumer choice.

In case you missed it, subsidies to the solar industry are ending in Arizona over the next few months. For taxpayers, that’s a good thing. But I would also argue the ACC policymaking doesn’t go far enough. Republicans should be just as vehement about ending other energy subsidies, regardless of the source, which will ultimately usher in a thriving and more competitive energy market.

Many, like me, are trying to understand why a state rich in abundant sunshine is finding resistance in securing energy choice among those who were elected on a platform of competition and choice?

Republicans have long held that choice, diversity and competition in the energy marketplace moves us toward energy independence, wise stewardship of the environment and consumer freedom and sustainability. Choice in education is a prime example of this very philosophy that has brought student achievement and parental involvement. Why would we not apply the same logic toward energy policy?

In fact, here is what the 2012 Republican Party Platform – updated last August – says about the Republican vision on energy:

Unlike the current Administration, we will not pick winners and losers in the energy marketplace. Instead, we will let the free market and the public’s preferences determine the industry outcomes. In assessing the various sources of potential energy, Republicans advocate an all-of-the-above diversified approach, taking advantage of all our American God-given resources. That is the best way to advance North American energy independence. 

We encourage the cost-effective development of renewable energy, but the taxpayers should not serve as venture capitalists for risky endeavors. It is important to create a pathway toward a market-based approach for renewable energy sources and to aggressively develop alternative sources for electricity generation such as wind, hydro, solar, biomass, geothermal, and tidal energy. Partnerships between traditional energy industries and emerging renewable industries can be a central component in meeting the nation’s long-term needs. Alternative forms of energy are part of our action agenda to power the homes and workplaces of the nation.

As a result of the feedback of last week’s opinion piece, I feel it necessary to expand and even advocate for a recalibration on an inconsistent Republican policy makers hold on this topic.

Yes, the GOP has been a steadfast and principled advocate for free market policies – especially when it comes to stopping the spread of the healthcare industrial complex known as Obamacare or the vast left-wing manipulation of public education. We argue with passion that we need more health care choices. We argue for charter schools and tuition tax credits.

So why then would we allow the elimination of consumer-based choice in the form of alternative energy options by policy makers in league with the monopolistic maneuvers of utility corporations?

Please don’t misunderstand me when it comes to the whole issue of corporate welfare and subsidies to certain pockets of the energy marketplace. I fully oppose government poking its nose in the role of picking winners and losers, eliminating consumer choice all at the expense of taxpayers.

That’s why I argue the point of protecting net metering – a policy that allows consumers to produce their own energy with the excess amount to be supplied back to “the grid” a win-win for everyone.

Some time within the next 90 days, APS is expected to push the Arizona Corporation Commission to eliminate this practice thus taking away the primary mechanism and incentive for taxpaying consumers to pursue energy sustainability and efficiency. This makes no sense at all other than re-erecting a barrier of protection for utility monopolies.

Will opinions like this continue to provoke fierce debate between those vying to consume, provide and blur the distinction between both roles? That’s guaranteed. But let’s remember one thing. Our state Constitution was written to protect the rights of Arizonans. With the right Republican leadership in place, energy choice, independence and consistency can thrive in Arizona.

Let the debate continue!

Congressman Flake Amends Agriculture Spending Bill to Limit Farm Subsidies to Wealthy Individuals

Government Cannot Afford to Give Subsidies to Individuals Making More Than $250,000 a Year

Washington, D.C. – Republican Congressman Jeff Flake, who represents Arizona’s Sixth District, today successfully amended the agriculture appropriations bill to prohibit Title I farm subsidy payments for individuals with an adjusted gross income (AGI) of greater than $250,000 annually.

“The federal government cannot afford to hand out subsidies to people who clearly earn enough income to stand on their own,” said Flake. “Giving federal farm subsidies to wealthy individuals is simply indefensible.”

Congressman Flake successfully added similar language to the FY2012 agriculture appropriations bill, but the language was stripped on the House Floor.

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