Opinion

Rooftop Solar and the Free Market – What the Taxpayers Protection Alliance Gets Wrong

There are misconceptions about rooftop solar, and then there are intentional obfuscations made by those who are determined to see rooftop solar fail. Whichever best describes the views of Taxpayers Protection Alliance President David Williams, his Sept. 30 opinion piece in Morning Consult demands a response.

Putting aside for a moment the fact that the Taxpayers Protection Alliance is a Koch-funded front group, the organization is simply wrong.

The group calls net metering — the policy that allows solar customers who produce surplus energy to sell that energy back to the grid — a subsidy. I would hope an organization that claims to protect taxpayers would be able to recognize a subsidy for what it is, and net metering is not one.

Utilities are all subsidy, they have been insulated from any competition for a century. They do not need to make an effort to attract customers by striving to deliver the best product. If they faced competition they would not earn the 10 percent returns they are guaranteed today. Their returns would drop to market rates closer to 6 percent. The difference between these numbers is a massive subsidy.

Guaranteed profit removes any incentive to cut costs, improve efficiency, improve service, or develop innovative products and services. Telecommunications is another example of an industry that stagnated for decades under cost of service regulation: It wasn’t until competition was introduced that we got the innovations that ultimately brought us the iPhone, the app economy and better products than we could have ever imagined.

The Taxpayers Protection Alliance describes net metering using the metaphor of a highway, where solar customers get to travel without paying tolls. A more accurate way to think about this is that solar customers are analogous to drivers who get to use a carpool lane. They’re being rewarded for reducing the stress posed by additional traffic on the road (the grid) while doing something good for the environment, to the benefit of all drivers (ratepayers).

Let’s return to the difference between a utility’s guaranteed rate of return today, which is often around 10 percent, with the returns it would get if it competed like a normal business, which would be closer to 6 percent. The difference between those numbers is not only a subsidy, but it’s like a tax on the ratepayer. These are ratepayer costs which they should not have to cover. Yet the government mandates it, and the utilities are incentivized to maximize that cost, so they can earn an ever-larger return on their investment.

Meanwhile, rooftop solar is one of the most free-market developments in the history of the U.S. electricity industry, and according to a March Gallup poll, more Americans believe that the U.S. should focus on solar power than any other energy source. In a poll released last week by three prominent Republican pollsters (Echelon Insights, North Star Opinion Research and Public Opinion Strategies, on behalf of ClearPath), 87 percent of respondents who described themselves as conservative Republicans support policies that promote the use of rooftop solar panels and allow homeowners to save money through net metering.

Rooftop solar has offered American consumers one of the first meaningful choices they’ve ever had when it comes to electricity. That consumer choice has driven the creation of more than 174,000 solar jobs in the United States. Does the Taxpayer Protection Alliance support more consumer choice and market forces, so that taxpayers can take control of government spending, or do they support utilities crushing consumer choice through regulation, in order to maintain subsidies for their business?

 

Lyndon Rive is founder and CEO of SolarCity.

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