Latest posts by James Taylor (see all)
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Net-metering subsidies for solar power are running up large deficits and proving too costly for Louisiana. It is time for Gov. Bobby Jindal (R) and the state legislature to pull the plug on these subsidies, which merely add to the mountain of federal government favoritism bestowed on the solar power industry.
Louisiana gives the solar power industry a special competitive advantage in the form of “net metering” subsidies. Net metering is a deliberately vague term used by the solar power industry to describe laws that require non-solar power customers to purchase electricity from small-scale power equipment at above-market prices, even when non-solar power customers have no need for the solar electricity.
Whenever a person or business produces more electricity than they use from their on-site solar power equipment, the local utility is required to purchase that excess solar power at full retail electricity rates. Sometimes the utility has no need for the electricity, so it is effectively paying something for nothing. Even when the utility can use the electricity, it is being forced to enter a negative economic transaction, because electricity from other sources can be purchased at lower wholesale prices. By being required to purchase solar power at full retail prices, the utility gets stuck having to pay labor, overhead, and grid maintenance costs out of thin air. Without exception, those costs of purchasing often unnecessary electricity at artificially high prices get passed on to Louisiana’s utility customers, who must then pay higher-than-necessary prices for electricity.
A study released earlier this year by the Louisiana Public Service Commission documented just how much the state’s net metering program is costing Louisiana electricity customers. According to the report, Louisiana taxpayers are currently paying $42 million per year to sustain net metering subsidies to small-scale solar power providers. The program’s $125 million to $488 million in net economic harm far outweighs the $89 million in net benefits. The solar power industry has howled in protest at the objective study’s findings, yet it has not been able to produce a single piece of evidence to substantiate its claim the study is inaccurate.
Rather than howling about an objective state government study pointing out the economic pain brought about by Louisiana’s net metering program, the solar power industry should instead be falling to its knees and thanking Louisiana taxpayers for the wide range of expensive federal, state, and local subsidies that keep the failed, uneconomical solar power industry in existence.
The left-of-center Brookings Institution, which is generally supportive of solar power and other renewable energy sources, nevertheless reports solar power is three times as expensive as conventional power. The U.S. Energy Information Administration (EIA) reports even with all of solar power’s much-ballyhooed claims of recent cost reductions, new solar power systems built and put into operation in 2016 will still produce electricity at five times the cost of conventional power.
Perhaps the most striking aspect of these prohibitive solar power costs is they occur despite federal, state, and local governments bestowing all sorts of disproportionate subsidies, market guarantees, and favoritism on solar power.
In a report released in April, EIA documents solar power receives more federal subsidies than coal, oil, natural gas, and all conventional energy sources combined. When these subsidies are viewed per unit of energy produced, the subsidies are even more striking. Solar power receives more than 25 times more subsidies per unit of energy produced than conventional energy sources. Notably, these numbers only apply to federal subsidies. State and local subsidies add disproportionate taxpayer dollars to the solar power industry’s trough.
The motivations behind Louisiana’s net metering program and other solar power subsidies may have been noble, but the programs have proven to be a costly failure. It is time for Louisiana policymakers to relegate net metering to the state’s past.