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Solar Pink Slip

Election politics portend painful cutbacks.

Fortnightly Magazine - December 2011

exchange, the Solyndra debacle probably won’t expand to become anything more than a stump-speech talking point—which it already is. Republican presidential hopefuls are using the controversy mostly as ammunition to attack Pres. Obama in general, rather than to target green energy funding specifically. Rep. Michelle Bachmann (R-Minn.) told Fox News that it’s an example of “crony capitalism at its worst… It makes Watergate look like child’s play.”

Nevertheless, beyond its effect on election politics, the controversy inevitably affects the prospects for continued green energy subsidies, especially those that directly finance R&D and commercialization at technology companies like Solyndra. The debacle has turned the idea of green jobs into a liability for Democratic lawmakers and candidates. For Republicans, Solyndra is now the poster child of “wasteful” government spending on things like renewable energy subsidies. No matter whom voters send to Washington in the November elections, green energy spending will suffer in the polls—and that translates into less federal funding, especially in the current incendiary budget climate.

Going Mainstream

Cutbacks would be bad news for renewable energy proponents—especially solar advocates who point to a precipitous decline in PV module costs as evidence that R&D funding is paying off, and that America stands to gain millions of green energy jobs if only it continues supporting technology development and manufacturing (see “ Going, Going ... ”). Renewable energy supporters argue that green energy resources can’t compete without subsidies because fossil fuels are artificially cheap; their environmental damage shifts external costs onto society at large. Plus imported oil costs America billions of dollars, ballooning the trade deficit and driving military spending. Then the government spends billions more on the oil, gas, and coal industries, via tax support for exploration, mining and production, refinement, and even sales of fossil fuels.

Such arguments have merit, but they tend to fall down in one key respect. Namely, fossil fuels would be competitive even without government support. Although subsidy totals for fossil fuels reach into the billions of dollars each year, 1 they’re modest compared to the value of the resource in our high-octane economy—depending on how you allocate things like military spending and external costs. By comparison, as a percentage of solar energy’s share of the market, it enjoys a veritable gravy train of government support—exceeding 20 percent of its overall value, by some calculations. 2 And in recent years, solar has received more sustained and generous support than most energy resources, from bonus tax credits to special feed-in tariffs.

Arguably solar deserves that gravy train, given its real potential to transform our fossil-dependent economy into something more sustainable, peaceful, and environmentally friendly. But whether it deserves it or not, solar can’t count on continued government largess, thanks to the Solyndra mess. Like my friend Reggie, solar companies must face the unfortunate reality that cutbacks are coming. And in the end, Solyndra’s demise might turn out to be exactly what the solar industry needs in order to wean itself off heavy subsidies and mature into a mainstream energy resource.

 

Endnotes:

1. “Inventory of Estimated Budgetary Support and Tax