How can your ‘almost there’ industry STILL need several decades’ worth of tax credits?

Let’s take you back to the time of disco dancing, bell bottoms, pet rocks, Farrah Fawcett posters, and popular music performed by artists who not only wrote their own songs, but also played their own instruments. This was, in short, a Long Time Ago.

It was also a time for believing solar and wind energy were a few short years away from being cost competitive with traditional energy sources.

This meant that, wonder of wonders, renewable energy was on the verge of being able to power the state and nation, and we’d no longer need traditional fuel sources for electricity.

We would just need to prop up solar and wind energy with generous tax credits and other government supports for just a few short years more before they can fully stand on their own.

Four decades later, solar and wind energy advocates are still making those same arguments And why not? They still work on new generations of credulous politicians and media.

Renewable energy receives an impressive tally of government favors. Its lobby in North Carolina openly boasts that much of the industry’s “success” here owes to state policies.

Despite the long march of decades, renewable energy is still unsustainable energy with a subsidy-based business model.

A headline in Forbes today cuts to the chase: “Renewable Energy Tax Credits — Forever?” The industry, despite everything it has going for it outside of government goodies, nevertheless finds that

tax credits are still critical in maintaining renewable energy’s expansion (see figure below). Whenever they expire, the industry stops and waits for them to be re-authorized.

Then there’s distributed generation, like the solar array on my own roof, which was made affordable only with tax equity provided by the State of Washington as well as the Feds.

Although large residential developers, such as SolarCity, Vivint Solar, and Sunnova, have secured hundreds of millions of tax equity finance dollars during the last several years, distributed generation projects struggle to get tax equity because most are so small, even if they have strong sponsors and buyers of their electricity. The shortage is most acute for projects needing less than $25 million.

‘While the utility scale renewable market is at a more mature stage, on-site generation is just scratching the surface,’ says Cohen. ‘There is a very bright future for the development of distributed generation projects and once storage really takes off, it might be hard to compete with cost of energy driven by solar and storage.’

Why, it’s almost there!

The moral of the story in Forbes is that:

So, with the help of tax incentives, renewables are here to stay. The real issue is how much they will penetrate the overall power market before the inherent problems with intermittency runs into our demand for a reliable grid.

Another question is — how long will taxpayers support these tax credits?

Renewable energy predictions over time

Here’s the conclusion from my 2015 newsletter entitled “Renewable energy has been ‘almost there’ since the 1970s“:

The following quotations are from Institute for Energy Research founder and CEO Robert L. Bradley Jr.’s twopart series on the long history of the solar industry and from IER’s six-year-old report “Will renewables become cost-competitive anytime soon?“:

  • “Mixed solar/conventional installations could become the most economical alternative in most parts of the United States within the next few years.” — Barry Commoner, The Poverty of Power (New York: Alfred A. Knopf, 1976), p. 151.
  • “The range of energy possibilities grouped under the heading ‘solar’ could meet one-fifth of U.S. energy needs within two decades.” — Robert Stobaugh and Daniel Yergin, “The End of Easy Oil,” in Stobaugh and Yergin, eds., Energy Future, Report of the Energy Project of the Harvard Business School (New York: Random House, 1979), p. 12.
  • In 1983, Booz, Allen & Hamilton did a study for the Solar Energy Industries Association, American Wind Energy Association, and Renewable Energy Institute. It stated: “The private sector can be expected to develop improved solar and wind technologies which will begin to become competitive and self-supporting on a national level by the end of the decade [i.e., by 1990] if assisted by tax credits and augmented by federally sponsored R&D.”
  • “In 1986, Amory Lovins of the Rocky Mountain Institute lamented the untimely scale back of tax breaks for renewable energy since the competitive viability of wind and solar technologies was ‘one to three years away.’ Over a decade later, the renewable energy lobby, pressured by a regulatory restructuring to allow customers to competitively procure electricity, is lobbying the U.S. Congress to enact a national quota for solar, wind, biomass, and small hydro out as far as the year 2020.” — Wells, K., ‘As a National Goal, Renewable Energy Has An Uncertain Future’ Wall Street Journal, February 13, 1986, pp. 1, 19.
  • In 1986, a representative of the American Wind Energy Association testified: “The U.S. wind industry has … demonstrated reliability and performance levels that make them very competitive. It has come to the point that the California Energy Commission has predicted windpower will be that State’s lowest cost source of energy in the 1990s, beating out even large-scale hydro. … We are not quite there. We have hopes. — Statement of Michael L.S. Bergey, American Wind Energy Association in Renewable Energy Industries, Hearing before the Subcommittee on Energy Conservation and Power of the Committee on Energy and Commerce, House of Representatives, 99th Cong., 2nd sess. (Washington, D.C.: Government Printing Office, 1986), p. 129.
  • “I think … the consensus … is after the year 2000, somewhere between 10 and 20 percent of our energy could come from solar technologies, quite easily.” — Scott Sklar, Solar Energy Industries Association. Quoted in Solar Power, Hearing before the Subcommittee on Energy and Power of the Committee on Energy and Commerce, House of Representatives, 100th Cong., 1st sess. (Washington, D.C.: Government Printing Office, 1987), p. 12.
  • In 1990, two energy analysts at the Worldwatch Institute predicted an almost complete displacement of fossil fuels in the electric generation market within a couple decades [i.e. 2010]: “Within a few decades, a geographically diverse country such as the United States might get 30 percent of its electricity from sunshine, 20 percent from hydropower, 20 percent from wind power, 10 percent from biomass, 10 percent from geothermal energy, and 10 percent from natural-gas-fired cogeneration.” — Christopher Flavin and Nicholas Lenssen, Beyond the Petroleum Age: Designing a Solar Economy (Washington: Worldwatch Institute, 1990), p. 47.
  • “Federal officials, aware that solar power breakthroughs have shined and faded almost as often as the sun, say the Enron project could introduce commercially competitive technology without expensive Government aid.” — Allen Myerson, Solar Power, for Earthly Prices, New York Times, November 15, 1994.
  • “Before maybe the end of this decade, I see wind and solar being cost-competitive without subsidy with new fossil fuel.” — DOE Secretary Stephan Chu, Address to Pew Charitable Trusts, March 23, 2011.

The years come and go, but the song remains the same — because the business model remains the same.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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