OPINION:
There are few things in Washington that last longer than a temporary tax credit or subsidy. They are renewed rather than retired, including the investment tax credit for renewable energy, which has been in place since 2005. These credits were scheduled to expire at the end of 2016 for residential customers and drop to 10 percent for commercial customers, although Congress now looks to be extending them for an additional five years in the omnibus appropriations bill being considered right now on Capitol Hill. Three decades before the tax credits were enacted, renewable energy grants and loans were created.
Despite myriad claims of the benefits of these taxpayer-funded incentives, the Congressional Research Service reported in July 2015 that, “In the case of residential energy efficiency tax benefits, it is not clear how effective such tax credits are at causing additional investment, as opposed to rewarding consumers that would have made investments absent tax incentives.”
And according to a May 5, 2015 Massachusetts Institute of Technology (MIT) Energy Initiative report, “there is no authoritative compilation of total spending to support the deployment of solar technologies — at the national level or for any particular state — let alone a breakdown of total spending across subsidy programs.” The MIT report, which questioned the economic benefits of solar incentives, also found that solar energy only provides 1 percent of electricity generation in America and globally, despite tens of billions of dollars in subsidies.
These findings and others are included in a new report, “The Sun Should Set on Solar Socialism,” which notes that there are growing voices, even within the solar energy industry, calling for an end to these handouts. The report also cites waste and mismanagement in many renewable programs.
The most well-known example of failed solar subsidy policy is Solyndra, which received $535 million in loan guarantees before it went bankrupt. Other boondoggles include Abound Solar Manufacturing and Ivanpah Solar Electric Generating System, both of which received tens of billions in loan guarantees before they went bankrupt.
Federal investigators have uncovered double dipping, overpayments, duplication, and over-inflated costs. In 2011, the Treasury Inspector General for Tax Administration issued a report that found solar and wind ventures could be illegally double-dipping subsidies by claiming cash payments under the 1603 program while continuing to apply for Section 48 tax credits on their investments. To date, the Internal Revenue Service has still not completed a promised investigation of these practices. The Government Accountability Office has identified 65 overlapping renewable energy programs.
On top of these affronts to taxpayers, the vast majority of the benefits of solar tax credits go to high-income households. In particular, these households benefit from the practice of net metering (NEM), through which residential solar customers sell the surplus energy that they generate from rooftop solar panels back to the grid at retail rates. This results in added costs being shifted to the bills of non-solar utility customers, who are not disproportionately wealthy. According to the California Public Utilities Commission found that “customers installing NEM systems since 1999 have an average median household income of $91,210, compared to the median income in California of $54,283.” Finally, members of Congress from both sides of the aisle have called for an investigation into whether some companies are using misleading or deceptive sales techniques to lure consumers into leasing solar panels.
Fortunately for taxpayers, many are beginning to see the light (pun intended), including solar company CEOs. Enphase Energy CEO Paul Nahi suggested in a Feb. 14, 2013, commentary in Forbes that, “For the good of our energy future, subsidies for all energy must eventually end.” In his Jan. 13, 2015 commentary in Clean Technica, Greenwood Energy CEO Camilo Patrignani called for letting the ITC expire at the end of 2018. European Union nations, which have consistently touted the benefits of renewable energy, particularly solar, have begun to recognize that government subsidies are too costly and adversely affect their economies. German Chancellor Angela Merkel’s staff referred to the subsidies as a “massive money pit,” before announcing plans to phase them out.
Despite the difficulty of ending subsidies and credits that gain a constituency (and a lobby) inside the Beltway, Congress has shown some willingness to end supposed “temporary” taxpayer support like the wind production tax credit (although it was resurrected in the omnibus bill). Notwithstanding the latest deal being voted on today, the time has come for the solar industry to face market forces and stand on its own, but in order to achieve that objective, the tax credits must expire sooner rather than later. Hardworking taxpayers shouldn’t continue shelling out billions for potentially wasteful and fraudulent programs that have no clear benefit. Congress should let the sun set on solar socialism.
• Tom Schatz is president of Citizens Against Government Waste.
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