Research & Commentary: Are Solar Subsidies Leading to a New Bubble?

Published August 3, 2015

Although many industries in the United States have received substantial subsidies from the federal government, few have drawn as much criticism as the solar energy industry. Billions of dollars have been spent through tax credits and direct subsidies to develop solar energy products and technologies across the country. While the renewable power industry as a whole is dependent on subsidies and laws requiring consumers to purchase their product, the solar power industry is more reliant on the government than even wind power. 

This month, the Taxpayers Protection Alliance (TPA) released a report finding the solar industry’s reliance on government handouts and risky financing schemes is creating conditions similar to previous artificially created asset bubbles. The results of these subsidies have been far from positive. The TPA report finds billions of taxpayer dollars wasted, billions more in financial investment and misallocated capital lost, homeowners unable to sell their homes due to bad solar lease contracts, and solar technology companies facing financial ruin if sales do not improve, leading to investor losses.
The TPA report concludes, “Much like the government-created housing bubble, the policymakers’ goal to increase renewable energy production is arbitrary and unnecessary. And much like the housing bubble and subsequent financial crisis, handouts at the federal and state level are creating a solar bubble that taxpayers are propping up, and it will be the taxpayers and investors who take the hit when the industry comes crashing down.”
According to the U.S. Energy Information Administration, the solar and hydropower industries receive more preferential subsidies than all conventional energy sources combined. The solar industry currently receives an exclusive 30 percent taxpayer subsidy on solar power equipment purchased and put into operation. In a majority of states, renewable energy companies are given a competitive advantage through state laws requiring consumers to purchase their products.
Despite the many advantages provided through state laws and subsidies, renewable power is significantly more expensive than conventional power. Forcing consumers to pay more for energy has a ripple effect throughout the economy, as businesses have higher operating costs, the overall cost of doing business increases, and consumers pay for it through higher prices.
The Brookings Institution found in 2014 that wind power is twice as expensive as conventional power, and solar power is triple the cost of conventional power. The U.S. Energy Information Administration concludes this disparity will remain for many years to come.
Renewable power is not yet a viable replacement for conventional power, and solar power in particular is viable today only because of myriad laws and subsidies supporting it. States should reduce and ultimately eliminate all subsidies and renewable power mandates and allow a truly free, consumer-friendly energy market where all utilities and small-scale power providers have the right to compete for customers.
The following documents provide additional information about renewable power and the debate over renewable power subsidies.
From Washington to Wall Street: How Government Policies Are Skewing Solar Investments 
The Taxpayers Protection Alliance analyzes the impact of government solar subsidies and preferential treatment on taxpayers and consumers. TPA concludes Big Solar’s heavy reliance on risky financing schemes, combined with government handouts, could generate a “bubble” in the solar market just as federal government policy produced the housing and financial industries’ collapse.
Greg Walcher: Solar Still Too Expensive, Unreliable and Inefficient 
In this edition of the Heartland Daily Podcast, Research Fellow H. Sterling Burnett speaks with Greg Walcher, president of the Natural Resources Group. Walcher discusses his paper, “Not Ready Yet: Why Homeowners Still Find Solar Power Too Expensive, Unreliable, Inefficient, and Undependable.” He addresses the high costs of solar power installations, the subsidies non-solar users pay through net-metering laws to people who install solar power facilities on their homes, and the unreliability of solar power.
Renewable Energy: Not Cheap, Not “Green”
A multibillion-dollar government crusade to promote renewable energy for electricity generation, now in its third decade, has imposed major economic costs and unintended environmental consequences. The Cato Institute examines the various sources of renewable power and finds even improved new-generation renewable capacity is, on average, twice as expensive as new capacity from the most economical fossil-fuel alternative and triple the cost of surplus electricity. Solar power for bulk generation is substantially more uneconomical than the average; biomass, hydroelectric power, and geothermal projects are also less uneconomical.
Ten Principles of Energy Policy
Heartland Institute President Joseph Bast outlines the ten most important principles for policymakers confronting energy issues, providing guidance to help deal with ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography.
Americans for Prosperity: Proposed Solar Policies Are Not Free Market
Americans for Prosperity published a short statement explaining why it opposes special solar power favoritism in the form of monopoly carve-outs for small-scale electricity sales.
Why the Best Path to a Low-Carbon Future Is Not Wind or Solar Power
Charles Frank, a nonresident senior fellow at the Brookings Institution, finds natural gas combined cycle is the cheapest low-carbon-dioxide-emissions energy alternative, even cheaper per kilowatt hour than power from coal or gas simple cycle plants. The most expensive alternatives are solar and wind. Frank says gas combined cycle, nuclear, and hydroelectric are the most cost-effective options for transitioning to a low-CO2 future.
Direct Federal and Financial Interventions and Subsidies in Energy in Fiscal Year 2013
The U.S. Energy Information Administration reports solar power and other renewable power sources receive disproportionately large federal subsidies compared to conventional energy sources.
2016 Levelized Cost of New Generation Resources from the Annual Energy Outlook 2010
The U.S. Energy Information Administration reports solar power and other renewable power sources will remain substantially more expensive than conventional power sources for many years to come.
How Wind and Solar Power Are Polluting the Commons
Lawyer and accountant John Petersen states the nation’s electricity grid is an essential commons no less important to an industrial society than our air or water. Regarding renewable power sources, he writes, “the electric current they generate is inherently unreliable and intermittent, which makes it fundamentally destabilizing to the grid. That introduction of massive intermittency into a system that requires absolute stability is, by definition, pollution.”
Hot on the Horizon
This January 2014 article from the National Conference of State Legislatures discusses emerging state legislative trends including “affordable solar energy.”
Stimulating Green Electric Dreams: Lobbying, Cronyism and Section 1705
The Reason Foundation examines the fiscally unwise and ostensibly virtuous process by which the U.S. Department of Energy systematically made loan guarantees to several failed renewable energy companies, primarily solar. Further investigation by the Reason Foundation found the DOE allocated funds in proportion to each recipient’s lobbying expenditures, revealing merit was never considered before making poor “investment” decisions using taxpayer dollars.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the website of Environment & Climate Newsat, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database, at
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