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The High Cost of Rooftop Solar Subsidies

October 5, 2016
By Arduin, Laffer & Moore Econometrics

Seeking to address climate change, the federal and a number of state governments have pushed renewable energy subsidies including subsidies for roof-top solar power taking capital away from more efficient forms of energy production.

Seeking to address climate change, the federal government and a number of state governments have pushed renewable energy subsidies including incentivizing the use of technologies that harness solar energy, such as solar photovoltaic technology, which converts sunlight into electricity. Despite significant incentives and subsidies, solar energy continues to remain a high-cost energy option and makes up just one percent of U.S. and global electricity generation. Absent government support, solar power would likely enjoy only boutique uses.

State net metering programs implemented to encourage solar power use, threaten electrical grid system reliability by imposing additional operating stresses on grids that were built to supply a one-way power flow from centralized generators to users, while distributed solar power requires a decentralized, two-way power flow. Current electrical grids were not built to handle this type of power delivery. In addition, the retail price paid under states’ net metering schemes is much higher than the price grid operators would reasonably pay to obtain electric power in the wholesale power market, wasting scarce resources.