The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
Henry Hazlitt, Economics in One Lesson
This weekend The News & Observer reported on a newly built “gigantic solar water heating facility” used by a turkey processing plant. Prestage Farm’s solar facility — built by FLS Energy* — is the “nation’s Goliath when it comes to solar thermal technology”:
Solar thermal energy has emerged as the one area where North Carolina stands out for the sheer size of its projects. That’s largely due to FLS Energy’s creative financing strategy that doesn’t burden customers like Prestage Farms with down payments or other upfront costs. The limiting factor on these giant solar thermal projects is finding industries that use more water in a day than a family uses in a year.
What kind of creative financing strategy? Oh, that kind again (emphasis added):
The facility cost FLS more than $15 million, but Prestage Farms pays FLS only for the energy it takes to heat the water and keeps a propane tank for backup heat if necessary. Prestage saves more than $200,000 a year in water heating costs – a savings of about 35 percent – said Michael Pope, the Prestage plant manager. …
FLS and the other backers expect to recoup their investment within five years, said Josh Beck, a field engineer for FLS.
Government incentives play a key role in solar economics. Developers benefit from a 35 percent state tax credit plus a 30 percent federal tax credit that combined cover more than half the cost of building the facility. In exchange for the energy output, which offsets electricity demand in the state, FLS sells renewable energy certificates to Duke Energy, which the Charlotte utility must buy to meet mandates for green energy under North Carolina’s 2007 energy law.
Government meddling compounded upon government meddling, and we’re supposed to cheer the new Goliath? Extra-market boosterism of green energy may produce Goliaths of crony capitalism, but if not reined in, it’ll consign the American economy to the fate of Ozymandias. Look upon our green works, China, and despair!
* Note: If that name sounds familiar, it’s probably because FLS has been involved in several recent projects in North Carolina, including partnerships with the Town of Cary, Haywood Community College, and Buncombe County Schools. And why not? As another solar-farm owner (Abel Zalcberg of OFM in Holly Springs) put it, “If [businesses] really knew about tax credits and depreciation, if they could subsidize it, the return is tremendous. … It’s paying for itself. Nothing really comes out of pocket.”
Government propping up an industry with special regulations and tax breaks and forcing citizens rather than the favored company to bear market risks is the epitome of crony capitalism.