Schwarzenegger Misfires With Solar Subsidy

California Gov. Arnold Schwarzenegger (R.) is fighting the good fight on union power, taxes and government reform, so we can forgive him when he occasionally misfires, as he has with his “Million Solar Roofs Initiative” to subsidize photovoltaic (PV) systems.

PV systems convert sunlight into electricity. This is great, but for a few problems: They are costly, they rarely produce the electricity claimed, and, even with subsidies, PV does not pay for itself.

Senate Bill 1 is the legislative vehicle for the governor’s initiative. It passed out of the California Senate on a 30-to-5 vote with only Republican opposition. The next stop is the Assembly, then the governor’s desk.

California has about 12,000 PV systems producing 93 megawatts (MW) of power. The initiative aims to install one million PV systems by 2018 to produce about 3,000 MW (one unit at San Onofre Nuclear Generating Station produces 1,100 MW). Because PV costs $9,000 per kilowatt to install, several times the cost of other power sources, it requires what über-Schwarzenegger economics adviser Milton Friedman would call a free-market distorting subsidy just to make it attractive.

How much of a subsidy? The plan’s supporters predict up to $2.5 billion over 10 years, while one utility estimates $7 billion. This taxpayer support reduces the cost of a typical residential PV installation from $27,000 to $17,205. If the system performed as claimed (a 2004 study showed PV operated at only 39% of capacity during peak demand), the residential PV system owner would save $371 a year on his electric bill—less than 2.2% of the subsidized cost, making a return on investment impossible.

California homeowners already pay 55% more for their electricity than the national average. California businesses pay 94% more, while the most endangered of California species—industry—forks out 146% more for their electric bill than their out-of-state competitors.

The solution to our energy problem is not a million solar roofs. Rather, we should remove the outdated political roadblocks to building more nuclear power plants. Nuclear power is the one source of non-greenhouse emitting energy we Americans can build and fuel ourselves. San Onofre alone each year saves 188 billion cubic feet of natural gas. Furthermore, technical advances have made nuclear power much safer. While we don’t seem to find much about the French worth emulating, it is of note that nuclear power produces 80% of the electricity on France’s power grid.

Is it sound public policy to allow a homeowner with a BMW and a Mercedes in his garage the pleasure of assuaging his environmental guilt by wasting $27,000 on a PV system while passing $10,000 of his costs to John Q. Public through generous tax breaks and a $15-per-year hike in his electric bill? No. When Democrats representing working-class constituents realize this and link up with Republicans, this bill may be stopped in the Assembly.