Subsidizing The Sun -
Solar Subsidies
What Do They Mean?
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Solar Subsidies
What Do They Mean?

I wonder what the arguments and discussions were
concerning the first subsidies to fossil fuels. How did
the oil and coal producers convince the public that they
should be given an edge over solar energy? It must have
had something to do with the first machines that used
fossil fuels being clumsy, inefficient mechanical
foundlings that needed help in competing with
conventional solar powered horses, wood fires and
tallow candles. The first machines introduced into a
world of organisms gained our sympathy. Today, it is
hard to imagine such a situation; the world has been
transformed by fossil fuel burning machines, but the
subsidies—a habit left over from our days of sympathy
for the mechanical newcomers—continues. The
subsidies tilt the competition between solar energy and
fossil fuels: prices are distorted so that people will burn
gasoline in their cars’ engines rather than solar fuel in
their own legs, and install electric lights rather than use
natural light. Solar energy still doles out unearned aid to
fossil fuels.
The size of the subsidy is not as serious a problem as
the misunderstanding. No one remembers that the
organic world subsidized the machines. We arranged the
economy so the machines could get extra help. Can
anyone believe it now, when the agents of the machines
begin talking about a subsidy to solar energy? It’s as if
Junior knew you were about to cut off his allowance,
but before the idea becomes clear to you, the brazen kid
proposes that he solve your financial problem by giving
you an allowance. Go along with this plan, and you find
that it is hard to earn your own money back.
Solar powered Mother Nature produced and nurtured
the oil powered machine. Recently, the oil powered
machine and its agents decided to return the favor.
If solar energy is to get back part of its subsidy to
machines, solar energy must be used mechanically.
Planting a shade tree isn’t quite what the machines
meant by using solar energy to provide cooling. Another
kind of tree, a metal rack with glass covered silicone
leaves that sends electricity to a mechanical chiller is
what the machines mean by solar energy, so the latter is
eligible for subsidy, but the tree isn’t. (For an interesting
essay from the 1840s on competition between daylight
and candles, see Frederic Bastiat’s “A Petition” in
Economic Sophisms.
In New Mexico, the most successful of the solar heating
companies is Solar Age Manufacturing, which makes an
air collector. Their prices, divided by their yearly
energy yield, are at least as favorable as the average
piece of solar equipment sold today. Their collectors
are 37 sq. ft., and yield an average of 30,500 Btu/day in
sunny Albuquerque; their installed price is $1,595. I
have taken these figures from their salesmen. In
Albuquerque you can use such a system for 200 days a
year. At 30,500 Btu/day, this would then be 6.1 x 106
BtuJyear. A therm of natural gas costs $.70; the solar
heater saves $42.70 per year in gas, but the 90W fan
operating six hours a day, 200 days a year uses 108
kWhJyear, which at $.085/kWh costs $9.18 per year.
The net savings is then $33.52 per year. With the tax
credits paying 65% of the $1,595, the customer only
pays $558.25 while the rest of the taxpayers pay the
other $1, 036.75. Dividing $558.25 by $33.52, the
simple payback is 16.65 years to the customer. When
every house has such a heater, then despite tax credits,
every household will have paid the full $1,595. The
simple payback is then $1,595 divided by $33.52, or
47.6 years. These figures assume that the heaters are
displacing natural gas which is widely distributed in
New Mexico. If we use electricity, the payback is 3.56
times faster, or 13.37 years, and again, the customer’s
simple payback is 4.67 years.
Without tax credits, I think it is safe to assume that
anyone using natural gas would never consider making
such a buy, and probably very few people using
electricity would do so. Of course, by assuming
different rates of escalation of fuel prices, you can make
these figures say anything you want.
One of the worst features of the tax credits is that the
public is not investing its money in efficiency such as
using better insulation or more carefully designed
homes. The only guardian of the public’s wealth is the
homeowner who spends $.35 of his own for every $.65
of the public’s money. He is tempted to be careless
because of this arrangement, and is also likely to buy
more than necessary; since it isn’t often you can buy
something that costs $1,000 for $350.
In another field I don’t understand, third party financing,
I read about the UEC Corporation, which is building
huge PV power plants with investors ready to finance
more. The investors are evidently making money. The
PV plants cost $16/watt. I calculate that each watt might
produce 2.5 kWh/year at $.10 per kwh; that is a return
of $.25 per year on an investment of $16—a simple
payback of 64
years. Soon we will see other amazing investments such
as a 1,000 watt solar bio-machine. If I sell it to you for
$18,000, you pay $6,000 down and the non-recourse
installment note is $12,000 payable in semi-annual
payments of $60 for 100 years at 1% simple interest,
the tax credits are:
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