Solar Industry Claims Its So Successful That It Needs Corporate Welfare to Survive

November 12, 2009

I’m not sure if it’s an industry press release or a news article, but Ucilia Wang of Greentech Media writes about the solar industry’s efforts to get targeted tax credits and subsidies:

The Solar Manufacturing Jobs Creation Act, introduced by Sens. Debbie Stabenow, D-Mich. and Robert Menendez, D-N.J., would give manufacturers access to a cash grant program created by the stimulus package this year to help finance solar power installations.

Makers of components such as silicon wafers, solar cells and evacuated tubes for solar water heaters already are eligible to receive a 30 percent manufacturing tax credit for building new factories or expanding existing ones.

I haven’t written about solar subsidies but I have written about wind subsidies, and the arguments are much the same:

In March, I had the good fortune to see 20 impressive windmills just off the Danish coast. Looking out over the water at such a sight, it is easy to understand the attractiveness of wind power. It’s renewable, no-carbon, and no-pollution, and is probably the best use of a wind-swept expanse of water that is still close to a large city. Also, Reason magazine recently compared the costs of different energy sources and found that the cost of windpower (9.3 cents per kilowatt-hour) is not too far off from the national average of (9.6 cents).

So why subsidize it?

Economists use the term “rent-seeking” whenever makers and sellers of a product ask politicians to pass laws that give them an advantage over their competition. Most of us call it corporate welfare. It is damaging to the overall economy because it changes incentives. Instead of creating the best products for the lowest cost, companies curry favor to get the best deal from federal, state and local officials.

For its own reasons, the wind industry has taken any number of government handouts, including tax credits, funds filtered through other government agencies, and state mandates designed to tilt the market in their favor. That’s a shame, because there’s ample evidence that wind is doing okay without corporate welfare being needed. If the wind industry’s growth is dependent on continued subsidies, that’s another way of saying that further investment is uneconomical.

There are few sectors of our economy with more profit potential than energy innovation. No one today can know what great energy innovations will be made over the next few decades, and no one today can know what investments will be duds and which ones will pay off tremendously. The ones who get it right will probably see an enormous payoff. Energy innovators should take the risks of their investments just as they take the profits, without relying on corporate welfare.

Read the rest here.

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