The Solar Energy Racket

If solar energy were not propped up by various government policies and subsidies, no utility would buy it.  Not only does solar not work at night, but it does not work if it is cloudy or if a cloud passes in front of the sun.

Utility-scale solar requires a large solar farm consisting of photovoltaic panels.  For $100 million, one can buy a solar farm capable of generating about 80 megawatts of electric power when the sun is squarely shining on the panels.  Depending on the geographical location and the climate, the average power generated will be about 18 megawatts, more during the day and nothing at night.  More in summer and less in winter.  If the power can be sold for $50 a megawatt-hour, about the cost of wholesale electricity generated by natural gas, the annual revenue earned by the plant would be $7.8 million.  But why would anyone want to pay $50 per megawatt-hour for electricity that does not work at night or when the weather is bad?  Better to buy it from a natural gas plant that one can count on.

How much would a utility really be willing to pay for erratic electricity from a solar farm?  The answer is $20 per megawatt-hour or less.  The reason is as follows.  No utility would ever incorporate a solar plant to reliably provide electricity.  Solar electricity is unreliable.  But solar electricity, if it is cheap enough, could be used as a supplement to save fuel in a utility's main natural gas plants.  When the solar was working, some of the utility's gas plants could be throttled back to save fuel.  The fuel to generate a megawatt-hour of electricity in a modern natural gas plant costs about $20.

How much does the electricity from a $100-million solar plant cost?  The biggest cost is the $100 million spread over the 25-year life of the plant.  If you take out a 25-year, $100-million mortgage, the annual payment will be between about $7 million and $9 million depending on the interest rate of between 5 percent and 8 percent.  A 5% interest rate is what a corporation with excellent credit might get.  With fair credit, a corporation might get 8%.  If a corporation has a poor credit rating, nobody is likely to loan it $100 million.  The plant will produce about 157,680 megawatt-hours of electricity per year, 18 megawatts per hour average times 8,760 hours per year.  The cost of the electricity, counting only the contribution from the construction cost of the plant, will be between $45 and $60 per megawatt-hour.  If you sold this electricity to a utility for $20 per megawatt-hour, you would lose millions every year.  If all costs are taken into account, the real cost of utility-scale solar power, where there is excellent sunshine, is about $70 per megawatt-hour.

Solar electric plants are being built because there are two subsidies and one mandate.  The mandate is provided by laws in about 30 states, requiring electric utilities to source some percentage of their power from "renewable" sources.  These laws are called "renewable portfolio standards."  By forcing utilities to develop sources of renewable power, mostly solar or wind, a ready market for solar power is created with creditworthy utilities willing to sign long-term contracts and pay whatever it takes to get solar power.  These laws are special-interest legislation tailored to provide shelter for wind and solar developers.  The "whatever it takes" cost is passed on to electricity customers.

The first of the two direct subsidies is the solar investment tax credit or the solar ITC.  This is a federal subsidy for the construction of solar facilities, currently at 30% of the cost and set by current law to gradually decline to 10%.  The second subsidy is less transparent.  It consists of modifications to tax laws that make possible a scheme called tax equity finance.  Tax equity finance uses a highly taxed corporate partner that can reduce its federal income tax by utilizing special accelerated depreciation available for solar energy facilities. The bottom line from the complicated shenanigans is that money that would have gone to the federal treasury as income tax payments instead goes to the developer of solar power and to the tax partner.  The tax-writers in Congress knew they were doing a favor for solar and wind developers when they created this scheme.  The net result of the mandate and subsidies is that about 70% of the cost of utility-scale solar plants is subsidized by electricity consumers and the federal government.

What is the justification for these laws bilking the public and subsidizing solar energy?  It is claimed that solar energy will prevent global warming by reducing CO2 emissions.  The problem is that building solar energy plants to reduce CO2 emissions ends up costing the government and electricity-consumers about $140 for each metric ton of CO2 emissions avoided.  But you can buy a "carbon offset" that does the same thing in the carbon offset market for $10.  The most prominent believers in global warming catastrophe — for example, James Hansen — advocate using nuclear energy to reduce CO2 emissions, not solar.  It is useful to remember that 86% of CO2 emissions come from outside the United States, where they are increasing.  But U.S. emissions have been decreasing due to substitution of natural gas for coal and due to energy conservation.

The other justification for solar is that we will run out of fossil fuels.  The sun won't run out of sunshine for around 10 billion years.  There is no prospect for running out of fossil fuels anytime soon.  Fracking has just unleashed a 100-year supply of natural gas and oil.  The U.S. has coal for 500 years.  The supply of nuclear fuel is, for practical purposes, unlimited.

What we have is an alliance among hysterical environmental groups, profit-making solar developers, and politicians eager to make important friends.  The environmental groups need a stream of impending catastrophes for which they propose impracticable or crackpot solutions.  That's how they excite interest and stay in business.  The Sierra Club and other groups are against all energy sources except wind and solar and some niche energy sources.  The media, probably out of ignorance, go along with the propaganda in favor of solar energy.  Rational, fact-based analysis appears to be politically incorrect.

Norman Rogers is the author of the book Dumb Energy: A Critique of Wind and Solar Power.

If solar energy were not propped up by various government policies and subsidies, no utility would buy it.  Not only does solar not work at night, but it does not work if it is cloudy or if a cloud passes in front of the sun.

Utility-scale solar requires a large solar farm consisting of photovoltaic panels.  For $100 million, one can buy a solar farm capable of generating about 80 megawatts of electric power when the sun is squarely shining on the panels.  Depending on the geographical location and the climate, the average power generated will be about 18 megawatts, more during the day and nothing at night.  More in summer and less in winter.  If the power can be sold for $50 a megawatt-hour, about the cost of wholesale electricity generated by natural gas, the annual revenue earned by the plant would be $7.8 million.  But why would anyone want to pay $50 per megawatt-hour for electricity that does not work at night or when the weather is bad?  Better to buy it from a natural gas plant that one can count on.

How much would a utility really be willing to pay for erratic electricity from a solar farm?  The answer is $20 per megawatt-hour or less.  The reason is as follows.  No utility would ever incorporate a solar plant to reliably provide electricity.  Solar electricity is unreliable.  But solar electricity, if it is cheap enough, could be used as a supplement to save fuel in a utility's main natural gas plants.  When the solar was working, some of the utility's gas plants could be throttled back to save fuel.  The fuel to generate a megawatt-hour of electricity in a modern natural gas plant costs about $20.

How much does the electricity from a $100-million solar plant cost?  The biggest cost is the $100 million spread over the 25-year life of the plant.  If you take out a 25-year, $100-million mortgage, the annual payment will be between about $7 million and $9 million depending on the interest rate of between 5 percent and 8 percent.  A 5% interest rate is what a corporation with excellent credit might get.  With fair credit, a corporation might get 8%.  If a corporation has a poor credit rating, nobody is likely to loan it $100 million.  The plant will produce about 157,680 megawatt-hours of electricity per year, 18 megawatts per hour average times 8,760 hours per year.  The cost of the electricity, counting only the contribution from the construction cost of the plant, will be between $45 and $60 per megawatt-hour.  If you sold this electricity to a utility for $20 per megawatt-hour, you would lose millions every year.  If all costs are taken into account, the real cost of utility-scale solar power, where there is excellent sunshine, is about $70 per megawatt-hour.

Solar electric plants are being built because there are two subsidies and one mandate.  The mandate is provided by laws in about 30 states, requiring electric utilities to source some percentage of their power from "renewable" sources.  These laws are called "renewable portfolio standards."  By forcing utilities to develop sources of renewable power, mostly solar or wind, a ready market for solar power is created with creditworthy utilities willing to sign long-term contracts and pay whatever it takes to get solar power.  These laws are special-interest legislation tailored to provide shelter for wind and solar developers.  The "whatever it takes" cost is passed on to electricity customers.

The first of the two direct subsidies is the solar investment tax credit or the solar ITC.  This is a federal subsidy for the construction of solar facilities, currently at 30% of the cost and set by current law to gradually decline to 10%.  The second subsidy is less transparent.  It consists of modifications to tax laws that make possible a scheme called tax equity finance.  Tax equity finance uses a highly taxed corporate partner that can reduce its federal income tax by utilizing special accelerated depreciation available for solar energy facilities. The bottom line from the complicated shenanigans is that money that would have gone to the federal treasury as income tax payments instead goes to the developer of solar power and to the tax partner.  The tax-writers in Congress knew they were doing a favor for solar and wind developers when they created this scheme.  The net result of the mandate and subsidies is that about 70% of the cost of utility-scale solar plants is subsidized by electricity consumers and the federal government.

What is the justification for these laws bilking the public and subsidizing solar energy?  It is claimed that solar energy will prevent global warming by reducing CO2 emissions.  The problem is that building solar energy plants to reduce CO2 emissions ends up costing the government and electricity-consumers about $140 for each metric ton of CO2 emissions avoided.  But you can buy a "carbon offset" that does the same thing in the carbon offset market for $10.  The most prominent believers in global warming catastrophe — for example, James Hansen — advocate using nuclear energy to reduce CO2 emissions, not solar.  It is useful to remember that 86% of CO2 emissions come from outside the United States, where they are increasing.  But U.S. emissions have been decreasing due to substitution of natural gas for coal and due to energy conservation.

The other justification for solar is that we will run out of fossil fuels.  The sun won't run out of sunshine for around 10 billion years.  There is no prospect for running out of fossil fuels anytime soon.  Fracking has just unleashed a 100-year supply of natural gas and oil.  The U.S. has coal for 500 years.  The supply of nuclear fuel is, for practical purposes, unlimited.

What we have is an alliance among hysterical environmental groups, profit-making solar developers, and politicians eager to make important friends.  The environmental groups need a stream of impending catastrophes for which they propose impracticable or crackpot solutions.  That's how they excite interest and stay in business.  The Sierra Club and other groups are against all energy sources except wind and solar and some niche energy sources.  The media, probably out of ignorance, go along with the propaganda in favor of solar energy.  Rational, fact-based analysis appears to be politically incorrect.

Norman Rogers is the author of the book Dumb Energy: A Critique of Wind and Solar Power.