Why mandate and subsidize the same thing (solar)?

Legislation is moving through both New Mexico’s House and Senate that would provide a 10% state tax credit for rooftop solar installations for eight years with that tax credit reduced to 5% after that and the total credits offered by the state limited to $5 million annually.

This is bad policy for several reasons.

1) It is a special-interest subsidy that complicates New Mexico’s broken tax code and will push additional tax burdens onto those who rent or can’t afford a solar installation on their roof. The state tax credit would be on top of a recently-extended 30 percent federal tax credit on the value of solar projects;

2) With oil and gas revenues declining, New Mexico shouldn’t be offering $5 million subsidies to particular industries. It needs to be fiscally-responsible;

3) Most importantly, New Mexico law already mandates solar. The “renewable” mandate requires solar for 20% of all “renewables” while “distributed renewables” (almost entirely solar) account for 3% of RPS requirement.

In general, governments at all levels need to get out of the game of mandating and subsidizing various energy sources. If solar is really cost-competitive with other sources, by all means let it compete.

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2 Replies to “Why mandate and subsidize the same thing (solar)?”

  1. I bought solar panels for my house last year, because if the government is dumb enough to offer me free money I am smart enough to take it. I also went solar as a hedge against rising electricity rates resulting from renewable energy mandates (which is what happened in Germany).

    This means I am being subsidized by my less fortunate neighbors who cannot afford the major investment of solar panels. Their taxes paid for 40% of my solar system, and their electricity rates are covering the cost of my access to the power grid. That looks like class warfare to me, and it’s odd behavior for politicians who claim they’re helping the middle class.

    The 30% federal tax credit is a generous incentive to go solar. The additional 10% state tax credit is frosting on the cake: It did not influence my decision to go solar, and is a windfall for solar companies that already take advantage of federal largess.

    Renewable mandates, subsidies and bankrolling inefficient solar companies are a clumsy way to make solar cost-competitive. A better way is for government to use its vast purchasing power to bid out long-term contracts to convert government buildings to solar power. The winning bidders then could raise private capital for volume production that would lower the unit cost of solar panels under the due diligence of investors. (This is what the telecommunications industry did in the 1990s to make fiber-optic cable cost-competitive with copper.)

    If the state wants to encourage people to generate their own electricity, the Public Utilities Commission needs to allow utility companies to change their pricing model by unbundling rates for consumption and grid access. Charging solar panel users a monthly fee for access to the grid is still a good deal for them, and would remove the cross-subsidy that now burdens ordinary ratepayers.

  2. We spent over $30,000 adding solar to our new home, and received a tax credit (total) of about $13,000 (40% – 30 Fed, 10 State)
    Last month I had a small credit for electric, which was nice. But we keep our home at 66 winter and use swamp coolers for all but about 30 days when we use ref air.
    When outside temp rises above about 58 we open the doors (We have 5 screened doors and many operable windows); when windy, or at 70 to 75 we shut it down tight. No direct sun into the house from 9 AM to 6 PM except through 20 treated skylights.
    But you gotta start with a lot of money to do this; it’s a tax credit, not a discount.
    And we cannot afford to subsidize the country to a junk electric car, too, that will need an unsubsidized battery replacement sooner than they told you.
    (70% of hybrid/electric owners do not replace them with one)

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